Accounting and Auditing News Today (ANT) Issue No 49 - 14 December 2007

Welcome to the forty-ninth edition of Accounting & Auditing News Today for 2007. What follows is a brief update on changes and proposed changes in the financial reporting and auditing sphere.

1. AASB meeting highlights – 12-13 December 2007

The Australian Accounting Standards Board (AASB) meeting was held in Melbourne on 12-13 December. Highlights of the meeting included:

Review of AAS 27, 29 and 31
Approved the withdrawal of the above standards along with the following revised standards/interpretations with applicable dates of 1 July 2008:

• AASB 1050 “Administered Items”
• AASB 1051 “Land Under Roads”
• AASB 1052 “Disaggregated Disclosures”
• revised AASB 1004 “Contributions”
• AASB 2007-9 “Amendments to Australian Accounting Standards arising from the Review of AAS 27, AAS 29 and AAS 31”
• revised Interpretation 1038 “Contributions by Owners Made to Wholly-owned Public Sector entities”

IFRS for SMEs – field testing presentation
Kerry Hicks from the Institute, together with the other accounting bodies, and Rob McKay from Moore Stephens presented to the AASB the results of the Australian field testing of IFRS for SMEs that were submitted to the IASB last week.

Differential reporting – discussion of submissions
The Board has tentatively agreed to distinguish between full IFRS and a less onerous requirement based on the notion of public accountability. The less onerous requirement is likely to allow a choice between IFRS for SMEs, full IFRS and an Australian developed proposal based on full recognition and measurement of full IFRS with limited specified disclosures.

Superannuation – discussion of submissions
The Board tentatively confirmed its previous decision to require consolidation for superannuation funds, after consideration of submissions on this topic.

Business combinations – an update
The Board noted that the US version of the revised IFRS 3 (FAS 141 (revised)) has already been issued. The IASB version is delayed until January 2008. As a result of the delay the effective date has been amended to periods commencing 1 July 2009.

Not-for-profits definition – new ITC to be issued
The Board agreed to issue an invitation to comment on “Proposed Definition and Guidance for Not-for-Profits” which will re-use the work recently completed by the New Zealand Financial Reporting Standards Board in this area.

Joint arrangements – discussion of submissions
The Board tentatively concluded they will not support the proposed amendment of the IASB requiring the removal of proportionate consolidation in respect of joint ventures.

Hedges – discussion of submissions
The Board tentatively concluded they will support the IASB in clarifying the standard, although the AASB will highlight that a principles approach to this clarification would be preferable than providing a listing within the standard of the specific risks that can be hedged.

Annual improvements project – discussion of submissions
The Board tentatively concluded they will support the majority of the suggested improvements. However the Board will also highlight those areas that are not supported as minor improvements and warrant a more thorough due process.

Interpretations
It was agreed to highlight in the Action Alert two specific issues:

• franked dividends should be recorded on a net basis; and
• the adoption of AASB Interpretation 12 “Service Concession Arrangements” is not mandatory in respect of government grantors involved in these type of arrangements

The Auditing and Assurance Standards Board (AUASB) has released an exposure draft of a proposed new assurance standard for compliance engagements: ASAE 3100 “Compliance Engagements”.

This new proposed standard will be an adjunct to ASAE 3000 “Assurance Engagements Other than Audits or Reviews of Historical Financial Information” and will help promote consistency in the audit of an increasingly wide number of compliance engagements. ASAE 3100 will provide guidance on the audit or review of an entity’s compliance with requirements under specific criteria like legislation, other statutory requirements or company policies.

The exposure draft is available for download on the AUASB website and comments close 15 February 2008.

The Institute is keen to provide a submission to the AUASB on this issue incorporating member feedback and members are encouraged to send their comments to the Institute through email: techsubmssions@charteredaccountants.com.au.
Top

The Institute’s Sydney CABs AIFRS discussion group met on Monday 10 December to discuss practical implications of AASB 101 “Presentation of Financial Statements” (revised 2007) and ED 159 “Proposed Improvements to Australian Accounting Standards”. The presentation and discussion was led by Kim Heng from KPMG.

Kim led us through the changes from the current version of AASB 101. The main changes are that:

• all accounts must now prepare a statement of changes in equity
• there is a choice of preparing both an income statement and a statement of comprehensive income or just a statement of comprehensive income
• where there is any change arising from retrospective restatements the entity will need to present an additional balance sheet at the beginning of the earliest comparative period
• there are a number of presentation choices available under the standard and entities should consider which is the most appropriate to them and their industry
• the amendments are to be adopted for periods commencing on or after 1 January 2009

Chartered accountants in business who are interested in attending future meetings can register their interest by emailing benjamin.lau@charteredaccountants.com.au. Members of the group are encouraged to email suggestions for discussion topics to that address.
Top

Three standards released
The Accounting Professional and Ethical Standards Board (APESB) has released three revised standards:

• APES 205 “Conformity with Accounting Standards” – updated to reflect professional accountant responsibilities in preparing general and special purpose financial statements
• APES 305 “Terms of Engagement” replacing APS 2 – all professional accountants working in public practice must mandatorily document and communicate the terms of engagement when providing professional services
• APES 110 “Code of Ethics for Professional Accountants” – amended definition of network form in section 290

Two exposure drafts issued
The APESB has also released two exposure drafts:

• ED 06/07 Proposed amendments to Auditor Independence Requirements in APES 110 “Code of Ethics for Professional Accountants”

• ED 07/07 Proposed Standard APES 225 “Business Valuation”

The AASB has lodged to the IASB their submission on the Proposed IFRS for SMEs. The AASB’s concerns include:

• the Proposed IFRS for SMEs is not, but needs to be, a standalone document
• that there is a need to further simplify recognition and measurement requirements
• the disclosure requirements are too onerous and should be reduced based on a consideration of the needs of users
• the need to clarify how IFRS for SMEs might operate for the purposes of selecting accounting policies
• the need to address the general purpose financial statements of subsidiaries to enable them to apply full IFRS recognition and measurement requirements without the need to comply with full IFRS disclosure requirements
• the definition of a general purpose financial report and its application to SME’s needs to be reconsidered

The IASB has issued an exposure draft of proposed amendments to IFRS 1 “First-time Adoption of International Financial Reporting Standards” and IAS 27 “Consolidated and Separate Financial Statements”. This exposure draft entitled “Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate” is a response to feedback received to an earlier exposure draft on this topic released in January 2007 as part of an ongoing IASB project.

These proposals address concerns relating to the barrier that the need to retrospectively determine the cost of investment, a requirement of IAS 27, poses to an entities’ initial adoption of IFRS in their separate financial statements because of the undue cost or effort required. It also attempts to respond to enquiries received about the measurement of cost in separate financial statements of a new parent entity.

The ED will be available for download on the IASB website from 24 December 2007. Comments close on 26 February 2008.
Top

The International Accounting Standards Board (IASB) has also issued an exposure draft of proposed amendments to IFRS 2 “Share-based Payments” and IFRIC 11 “IFRS 2 – Group and Treasury Share Transactions”.

This exposure draft provides guidance on how a group entity, that receives goods or services from its suppliers which are linked to the price of the equity instruments of either the entity or its parent, should account for these transactions where it is the parent entity and not the entity itself that is obligated to make the required cash payments to the entity’s suppliers.

The ED proposes to clarify IFRS 2 to make it clear that it applies to these transactions and to amend IFRIC 11 to require the measurement of the goods or services involved in accordance with the requirements for cash-settled share-based payment transactions.

The ED will be available for download on the IASB website from 24 December 2007. Comments close on 17 March 2008.
Top

Q: I am a practitioner and compile financial reports for my clients. I understand that a compilation report must contain a statement that I am not independent of an entity when this is relevant as required by APS 9 ‘Statement on compilation of financial reports’ paragraph 32(h). Can the Institute provide sample wording for this?

A: You are correct that you do need to include a statement in the compilation report that you are not independent of the entity, when relevant. The wording will depend on your particular circumstances. As a starting point we suggest the following wording be expanded and included at the bottom of the compilation report, before the signature.

Independence (if required)
We are not independent of (the entity) because (reason why not independent, for example, the member is a close relative of the proprietor of the entity).
Top

Chartered Accountants SMSF Conference
Sydney - Friday, 22 February
As the number of Self Managed Superannuation Funds continue to grow, so do the number of opportunities. Build on your knowledge with exceptional speakers, case studies and examples.

Chartered Accountants Business Forum 2008
Throughout April, May & June in Brisbane, Melbourne, Sydney, Canberra, Adelaide & Perth
What’s your strategy for the year ahead? Join industry leaders and your peers as vital topics are addressed, key technical updates explored, and new ideas and options examined.

New Employees Workshop 2008
Throughout February in Brisbane, Melbourne, Sydney, Parramatta, Newcastle, Tamworth & Albury. Five day workshop.
Give your new employees the practical experience and real-life skills they need to deliver professionally at the New Employees Workshop.

Newcastle Convention 2008
Newcastle - Monday, 10 - Wednesday, 12 March.
Concise updates on industry issues to accounting and finance professionals in the Newcastle/ Hunter region to immediately apply in your workplace.

Audit of SMSF DVD
*NEW PRODUCT* If you were unable to attend the recent sell-out workshops in October/November, don’t miss out on this opportunity to view highlights plus added extras at your convenience.

Corporate Accountants Toolkit Series
Access the latest updates in accounting standards and the impact of these changes on financial reporting requirements by purchasing Module 1 and Module 2 of the Corporate Accountants Toolkit.

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.
Top

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 website: Financial Reporting EDs and Audit and Assurance EDs

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

11 January 2008
IASB ED Proposed Amendments to IAS 39 “Financial Instruments: Recognition and Measurement Exposures Qualifying for Hedge Accounting”
IASB ED 9 Joint Arrangements
IASB ED Proposed Improvements to International Financial Reporting Standards

18 January 2008
APESB ED 06/07 Proposed amendments to Auditor Independence Requirements in APES 110 “Code of Ethics for Professional Accountants”

15 February 2008
AUASB ED Proposed ASAE 3100 “Compliance Engagements”

26 February 2008
IASB ED Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate

17 March 2008
IASB ED Proposed amendments to IFRS 2 and IFRIC 11

4 April 2008
AUASB ED 07/07 Proposed Standard APES 225 “Business Valuation”

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.

Do you know someone interested in receiving ANT?
We welcome new subscriptions. To subscribe, unsubscribe or to update your mailing details, please visit the newsletters section of the Institute website.

More information is available at our Institute website: www.charteredaccountants.com.au.

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.