3. AIFRS Discussion Group

The Institute’s Sydney CABs discussion group met on Monday 22nd October to discuss practical implications of AASB 3 Business Combinations and the soon-to-be released changes to that standard.

Debbie Hankey from Deloitte took the group through a step by step process in applying the standard, focussing on practical issues at each stage:

1. Determine whether the transaction falls within the scope of AASB 3 (and consider what to do if it doesn’t)
2. If it does, apply the purchase method
3. Identify the acquirer
4. Determine the cost of the combination
5. Allocate the cost to assets, liabilities and contingent liabilities
6. Recognise the goodwill or excess

Chartered accountants in business who are interested in attending future meetings can register their interest by emailing jane.ma@charteredaccountants.com.au. Members of the group are encouraged to email suggestions for discussion topics to that address.
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4. IAESB’s new strategy

The International Accounting Education Standards Board (IAESB), an independent standard setting body operating under the auspices of the International Federation of Accountants (IFAC), has issued its 2007-09 Strategic and Operational Plan, which seeks to advance worldwide accounting education. By committing to accounting education and ongoing professional development, accountants are able to develop and maintain their competency in serving the public interest. The IAESB’s strategy is to focus on:

• Reviewing the Framework for International Education Statements, which accounts for recent developments in accounting education and the accountancy profession
• Developing guidance for IFAC members, associates and others in achieving measurable implementation of the IESs
• Reviewing existing IESs to clarify, improve and add to these as required

The entire IAESB 'Strategic and Operational Plan, 2007-2009' can be downloaded from the IFAC online bookstore.
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5. New appointments to ASIC and the FRC

Ms Belinda Gibson is the proposed new Australian Securities and Investments Commission (ASIC) Commissioner, to commence from 5 November 2007. She will replace outgoing Commissioner Mr Jeffrey Lucy AM, who has held the position over the past four-and-a-half years.

Ms Gibson is currently a partner at Mallesons Stephen Jacques and has extensive legal and managerial skills and experience. She is expected to bring considerable commercial and practical expertise to the Commission.

Mr Lucy will retire from ASIC on 10 December and take up a a new position as the part-time Chairman of the Financial Reporting Council (FRC) for a term of three years commencing from 11 December 2007. Mr Lucy will replace current FRC chairman Mr Charles Macek. The FRC is the oversight body for the accounting and auditing standard setting arrangements in Australia and is also responsible for monitoring the effectiveness of the auditor independence requirements.

The full media release can be viewed here.
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6. ASIC updates guidance on licensee obligations

ASIC has released two regulatory guides regarding the general obligations of Australian financial services (AFS) licensees under s912A of the Corporations Act. They form part of ASIC’s Better Regulation initiatives, which seek to foster better and more transparent regulation. The guides include:

• Regulatory Guide 104 (RG 104) Licensing: Meeting the general obligations, which outlines ASIC’s:
  
  Criteria in assessing compliance with the general obligations

  Policy on particular obligations relating to compliance, risk management, representatives and resources

  Regulatory Guide 105 (Rg 105) Licensing: Organisational competence
  

  Outlines ASIC’s criteria in considering the organisational competence obligation of AFS licensees under s912A(1)(e)

  Consolidates ASIC’s guidance on this obligation, which was previously spread across a number of publications

These guides also include some minor adjustments to ASIC’s policy:

• RG 104 makes reference to numerous standards and principles – both Australian and international – so as to assist licensees in thinking through their obligations and designing measures for ensuring compliance
• RG 105 replaces the term “nominated responsible officers” (in RG 164) with ”responsible manager” to identify the category of people ASIC looks at when assessing organisational competence
• RG 105 clarifies the relevance of ASIC’s policy on organisational competence to licensees who are regulated by both the Australian Prudential Regulation Authority (APRA) and ASIC

More generally, the regulatory guides aim to:

• Communicate more clearly ASIC’s policy on the general obligations of licensees and organisation competence
• Clarify aspects of policy in light of ASIC’s regulatory experience
• Consolidate and harmonise ASIC’s policy on these obligations, which was previously covered by the (now superseded) RG 164 and RG 130

Changes are effective immediately. However, ASIC realises the potential delay in AFS licensees amending their internal policies and procedures. They therefore expect licensees to update these references the next time they amend their internal policies and procedures.

RG 104 and RG 105 can be downloaded from the ASIC website.
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7. AASB submissions to IFRIC

The AASB has lodged its submissions to International Financial Reporting Interpretations Committee (IFRIC) on draft interpretations

• D21 Real Estate Sales, and
• D22 Hedges of a Net Investment in a Foreign Operation

While it supported the issue of an Interpretation on the topic of real estate sales, it expressed reservations about the definition and features of a real estate contract contained in paragraphs 8 and 9 of the draft. In particular, the reservations relate to the area of customer design of the building work, where the AASB is concerned that the current wording will produce an accounting treatment that is not in line with general practice in Australia. It also suggested various other editorial amendments.

The AASB was more supportive of the various proposals in D22, agreeing that the Interpretation would assist users to apply the standards to the hedging of foreign operations.

Copies of both submissions are available on the AASB website.
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8. Query of the week – warrants

Q: What is a warrant and how do I account for it?

A: A warrant is a type of long-term put (sell) or call (buy) option which is tradable. The two most common forms of warrants are endowment and instalment warrants. At the cessation of a call warrant, the investor has acquired the underlying shares. The cost of the warrant will include interest and borrowing costs.

A Paper describing these instruments and explaining how to account for them can be found on the Institute website.

While the paper was designed for superannuation funds, the principles can be drawn upon for other entities.
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9. Training and development at the Institute

Audit of Self Managed Superannuation Funds Workshop
Throughout October and November in Adelaide, Sydney, Brisbane, Melbourne & Perth
Now that the new auditing standards apply to SMSF audits, don't miss out on ensuring your audits of SMSFs are compliant with the regulatory requirements.

Superannuation Day
Throughout November in Adelaide, Sydney, Brisbane, Melbourne & Perth
Explore essential SMSF updates and insights, now that 'Better Super' reforms are in place. Delve into the planning issues and pitfalls, focusing on how to identify the triggers.

National Future of Professional Practice
16 November 2007, Sydney
Identify key practice management issues and opportunities that impact your business.

Audit Day
Throughout December in Adelaide, Sydney, Brisbane, Melbourne & Perth
Highlighting key audit topics. Sessions include: Auditing update; Audit of Not for profit and Registered Clubs, Audit Quality Control and independence requirements.

National Audit Conference 2007 DVD
If you didn't attend the National Audit Conference in June 2007 - don't miss out on this opportunity to view the conference at your convenience informing you and your colleagues.
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Outlined below are the comment closing dates for all current exposure drafts. Members are encouraged to prepare their own submission on each document and submit them to the Institute no later than one week before the closing date shown.

For more information, refer to the Institute's Technical Standards' exposure drafts web page

Forward all ED submission/comment emails to techsubmissions@charteredaccountants.com.au.

31 October 2007
AUASB ASRE 2400 'Review of Financial Reports and Other Historical Information'
ISA 510 (redrafted) 'Initial Audit Engagements - Opening Balances'
ISA 530 (redrafted) 'Audit Sampling'
IASB proposed IFRS for SMEs field test questionnaires

16 November 2007
IASB Discussion Paper "Preliminary Views on Insurance Contracts"

30 November 2007
AASB EDs
ED 157: Joint Arrangements'
ED 158: 'Proposed changes to AASB 139'
ED 159: 'Proposed Amendments to Accounting Standards'
http://www.aasb.com.au/workprog/openeds.htm

AASB Consultation Paper on Consolidation of Subsidiaries by Superannuation Entities

IAASB Consultation Paper on Proposed Future Technical Strategy

ISA 700 (Redrafted) 'The Independent Auditor's Report on General Purpose Financial Statements'
ISA 705 (Revised and Redrafted) 'Modifications to the Opinion in the Independent Auditor's Report'
ISA 706 (Revised and Redrafted) 'Emphasis of Matter Paragraphs and Other Matter(s) Paragraphs in the Independent Auditor's Report'
ISA 800 (Revised and Redrafted) 'Special Considerations-Audits of Special Purpose Financial Statements and Specific Elements, Accounts or Items of a Financial Statement'
ISA 805 (Revised and Redrafted) 'Engagements to Report on Summary Financial Statements'

31 December 2007
ISQC 1 (Redrafted) 'Quality Control for Firms that Perform Audits and Reviews of Financial Statement, and Other Assurance and Related Services Engagements'
ED 33 'Amendments to IPSAS 4, The Effects of Changes in Foreign Exchange Rates'
ISA 220 (Redrafted) 'Quality Control for an Audit of Financial Statements'

11 January 2008
IASB's proposed amendments to IAS 39 - 'Exposures Qualifying for Hedge Accounting'
IASB ED 9 "Joint Arrangements"

Technical Query Service
The Institute's Reporting and Assurance Team responds to inquiries from members on auditing and financial reporting issues. This service provides general assistance and guidance only. Members have the responsibility to apply their own professional judgment. The service can be contacted on (02) 9290 5702.

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TECHNICAL/XFILES/ARTICLES/ANT/ ANT42_07_10_26.doc. The Reporting and Assurance team comprises, Jeanette Dawes CA, Roslyn Hatton CA, Kerry Hicks CA, Claire Locke CA, Stephanie Kemp CA, Andrew Stringer; Benjamin Lau, Jane Ma and Adrian Tam - Reporting and Assurance Assistants.