Tasman Resources Limited (Tasman) and Eden Innovations Limited (Eden) have written down their intellectual property assets by $9.3 million in their interim financial reports for the half-year ended 31 December 2022, after ASIC raised concerns. Tasman holds a controlling interest in Eden and, accordingly, Eden’s net assets are consolidated by Tasman.

Following a review of Tasman’s financial report for the year ended 30 June 2022, ASIC raised concerns that Tasman did not carry out impairment testing of its intellectual property assets of its EdenCrete business, on the basis that that there were no indicators of impairment. ASIC’s concern was that, on 30 June 2022, Tasman’s market capitalisation was significantly below its reported net assets, which is a clear indicator of impairment.

Tasman and Eden have subsequently performed an impairment test of its intellectual property assets using a discounted cash flow model and recorded the write down.

ASIC reminds preparers of financial reports and their auditors that a fundamental requirement for accounting for intangible assets is to assess at the end of each reporting period whether there is any indication that those assets may be impaired. Where a listed entity’s reported net assets exceed its market capitalisation, the recoverable amount of the asset must be estimated.

Background

ASIC conducts regular reviews on a risk-basis of the financial reports of selected listed companies and other significant public interest entities to monitor compliance with the Corporations Act 2001 and Australian Accounting Standards.

ASIC has previously highlighted asset values as a focus area for preparers and auditors (22-333MR), as companies may continue to face some uncertainties about future economic and market conditions. Assumptions underlying estimates should be reasonable and supportable.

Accounting standard AASB 136 Impairment of Assets sets out the requirements for identifying an asset that may be impaired.