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Welcome to the twenty-sixth edition of Accounting & Assurance News Today for 2008. What follows is a brief update on changes and proposed changes in the financial reporting and assurance sphere.
1. Institute lodges public sector submission on service commissions
The Institute together with CPA Australia and the NIA this week lodged, with the Australian Accounting Standards Board (AASB) and the International Public Sector Accounting Standards Board (IPSASB), its submission on ITC 16 Request for Comment on IPSASB Consultation Paper Accounting and Financial Reporting for Service Concession Arrangements.
Overall, the submission supports the IPSASB proposals, although some concerns were expressed about the absence of the accountability concept in the AASB Framework and the control criteria. The submission is available for download from the Institute website.
2. Institute lodges ‘Rethinking the AGM’
The Institute of Chartered Accountants in Australia has lodged its submission on the Chartered Secretaries of Australia (CSA) discussion paper, Rethinking the AGM.
The Institute agrees with CSA’s views that the role of the AGM has changed. In principle, the Institute agrees with the proposals for reform and prefers that this is provided through best practice guidance and encouragement to adopt, rather than by mandating the changes and creating additional legislation. The focus of the AGM to provide more accountability to shareholders regarding the board’s decisions is seen by the Institute as a positive approach to encourage shareholder engagement. The AGM is the key method for the board to engage with retail shareholders and proposed changes should improve the effectiveness of this engagement process.
The submission is available for download from the Institute website.
3. AASB releases IASB Conceptual framework EDs
In early June (refer ANT21/2008: 6 June 2008) the International Accounting Standards Board (IASB) and US Financial Accounting Standards Board (FASB) released two documents seeking public comment on the first two of the eight phases of their joint project to develop an improved conceptual framework. The two documents were: -
A Framework ED which covers the first two chapters of the conceptual framework dealing with an improved objective of financial reporting (Chapter 1) and the qualitative characteristics of information provided by financial reporting and the constraints on providing that information (Chapter 2).
- A Discussion paper on the Reporting entity concept settling out the Board’s preliminary views on this concept which is used but not addressed by the IASB framework. The Discussion paper seeks to identify the boundaries of an entity that is reporting, rather than what types of reports these entities should prepare.
The AASB has now released the Framework ED as ED 164 and the reporting entity discussion paper as ITC 17. Both include Australian prefaces.
Comments are open until 25 August 2008 to enable the AASB to meet the IASB deadline for submissions of 29 September 2008.
The Institute will be preparing submissions on both these documents and welcomes member input which should be emailed to techsubmissions@charteredaccountants.com.au. The AASB is also anticipating holding forums on these discussion papers. For more details visit the AASB website.
4. IFRIC meeting agenda – 10-11 July 2008
The next International Financial Reporting and Interpretations Committee (IFRIC) meeting is being held in London on 10-11 July 2008. Issues to be discussed include: -
A redeliberation of the issues included in the ED of proposed amendments to IFRS 2 Share-Based Payment and IFRIC 11 IFRS 2 – Group Treasury Share Transactions
- D23 Distributions of non-cash assets to owners
- D24 Customer Contributions
- Review of Tentative Agenda Decision published in March IFRIC Update
To download a copy of the agenda, go to the IASB website.
5. IASB publishes XBRL taxonomy
The International Accounting Standards Committee (IASC) Foundation has announced the release of the IFRS Taxonomy 2008.
The IFRS Taxonomy 2008 is a complete translation of International Financial Reporting Standards (IFRSs) as published in the IFRS Bound Volume 2008 into XBRL, an eXtensible Markup Language (XML) that is used to communicate information between businesses. The taxonomy is published in the same languages as the IFRS Bound Volume 2008 and includes support material such as the Taxonomy Architecture Paper and the Taxonomy Extenders Guide.
In accordance with the XBRL International policy the IFRS Taxonomy 2008 is freely available on the IFRS XBRL website.
6. Standard Business Reporting update
The Council of Australian Governments (COAG) has adopted the Standard Business Reporting Program (SBRP) implementation plan. Federal Treasurer Wayne Swan and the Minister for Finance and Deregulation Lindsay Tanner said in a joint media release said that the COAG meeting had seen the Commonwealth, State and Territory Governments strike an important agreement on Standardised Business Reporting (SBR). It aims to remove excess red tape and streamline various financial reporting requirements, saving businesses up to 800 million dollars each year once fully implemented.
SBR is working to an aggressive timetable aiming to introduce the new reporting regime by July 2010. The main features of the program will include: -
Removing unnecessary and duplicated information from government forms
- Using business software to automatically pre-fill government forms
- Adopting a common business language, based on international standards
- Aligning government reporting with natural business processes
- Providing a single online sign-on, form validation and confirmation of forms receipt
A Business Advisory Forum (BAF) has been established to assist with consultation, marketing and strategy implementation and ensure SBR stays in touch with the needs of Australian business and their intermediaries. The Institute’s Head of Reporting, Kerry Hicks, is a member of the BAF and more details about the Institute’s involvement in this forum were contained in ANT21/2008.
Further information about the COAG communiqué, the SBR Program and the SBR Business Advisory Forum can be found at the Institute’s SBR online resources and at http://www.sbr.gov.au.
Auditing & Assurance News | |
7. AUASB releases ASAE 3100
The Australian Auditing and Assurance Standards Board (AUASB) has released ASAE 3100 Compliance Engagements. This new assurance standard will assist with the audit or review of an entity’s compliance with requirements under legislation, regulation, company policies, statutory requirements, and enforceable contractual obligations.
The AUASB has previously provided subject-matter specific guidance to auditors on areas of compliance – but this is the first assurance standard on compliance engagements. ASAE 3100 provides an overarching compliance standard to which any future subject specific guidance will be linked.
Practitioners are required to use this standard for reporting periods or engagements commencing on or after 1 October 2008. Early adoption is permitted.
8. ASX revises Risk management disclosure guidance
The ASX has revised the supplementary guidance that supports Principle 7 of its Corporate Governance principles dealing with recognising and managing business risk. The changes have been made to assist entities to improve the ways they disclose their risk management policies as required by Principle 7 and includes improved and more user friendly frequently asked questions and answers to assist in the effective interpretation of the Principle 7 requirements.
The revised guidance should be read in conjunction with the Corporate Governance Principles and Recommendations (Revised Principles) 2nd Edition August 2007 and will assist entities wishing to early adopt these revised guidelines for their 2008 year ends. More information is continued in Companies Update 06/08 on the ASX website.
A copy of the Corporate Governance Principles and Recommendations (Revised Principles) 2nd Edition August 2007 is also available on the ASX website.
9. Directors’ share disclosures under review
The ASX has released a report on its recent review of the directors’ share interests and trading disclosures. The review involved the disclosures made by listed entities in their Directors’ Interest notices lodged during the first quarter of 2008.
The report indicates that the number of these disclosures that are either late or incomplete is of concern, particularly given the importance of these disclosures to ensure the markets are adequately informed about the activities of directors.
The ASX intends to monitor these disclosures closely in future and has released a new Companies Update 05/08 to assist listed entities in complying with their obligations. In particular it reminds entities that they have only 5 business days within which to lodge the notices as required by listing rule 3.19A. A copy of the ASX update is available on the ASX website.
Failure to correctly comply with listing rule 319A may also mean that the directors of a listed entity have not fulfilled their obligations under the similar provisions concerning directors’ interests and transactions contained in the Corporation Law. To assist here, ASIC has released a new Regulatory Guide 193 Notification of directors’ interests in securities – listed companies, which provides directors with information about their obligations under section 205G of the Corporations Act concerning disclosures of their interests in securities. A copy is available on the ASIC website.
10. Governance changes to AASB and AUASB
Following the passage of the Governance Review Implementation (AASB and AUASB) Bill 2008, the AASB and AUASB have now been brought within the scope of the Financial Management and Accountability Act 1997, which governs non-commercial boards. They are now directly accountable to Parliament, a move that frees up the Financial Reporting Council to concentrate on the strategic direction of the Boards rather than having to concern itself with administrative and financial issues. The changes should not have a significant effect on the operation of the Boards from the accounting community’s point of view.
For further details see the media release.
The AASB has also launched its new website at http://www.aasb.com.au. In response to research feedback, the site has been structured differently to make it easier to search for information. To access some of the popular links, go to http://www.aasb.com.au/Help.aspx. It is expected that the AUASB will launch their new website soon.
Professional & Ethics News | |
11. Draft IFAC guidance on costing and governance for members in business
The International Federation of Accountants (IFAC) Professional Accountants in Business Committee has released two new proposed International Good Practice Guidance documents for public comment.
Governance
The newly released exposure draft, Evaluating and Improving Governance in Organizations, sets out a framework, a series of fundamental principles, practical guidance, and references on how to evaluate and improve governance in organizations. The purpose of this guidance is to assist professional accountants and their organizations in creating a balance between conformance with rules and regulations and organizational performance.
Costing
The second proposed International Good Practice Guidance, Costing to Drive Organizational Performance, is designed to assist professional accountants in business in delivering useful cost information to support effective decision making and organizational performance. The proposed guidance sets out eight fundamental principles of costing that encourage a performance-based view of costing to help professional accountants in business to ensure that costing information supports forward-looking strategic and operational decisions.
The drafts can be downloaded from the IFAC website and comments are requested by 23 September 2008.
12. The Accountant’s role in mid-sized enterprises
The International Federation of Accountants (IFAC) has issued a publication which canvasses the important roles professional accountants play in mid-sized enterprises, entitled ‘The Crucial Role of Professional Accountants in Business in Mid sized enterprises’. The paper also examines how accountants look for different opportunities to enhance their skills outside the traditional boundaries of the finance and accounting department. Members may find that the paper highlights practices that other professional accountants in business might find useful in addressing issues within their own organisations.
For a more detailed summary visit the Institute website. To access the entire report see the IFAC website.
Current/Non-current liabilities
Q: In recent weeks there has been discussion in the financial press about the significance of the classification of current and non current liabilities in the current economic climate. Has there been a change to the accounting standard on this issue?
A: No. The relevant paragraph is AASB 101 paragraph 69 which sets out the conditions for classifying a liability as current. While this paragraph has been subject to some minor redrafting in the interest of clarity when AASB 101 was recently revised it has not changed in substance.
What has changed is the economic climate this reporting season which has had a significant effect on the availability of credit. As a result, the requirements in paragraph 69(d) may prove of more significance than in previous years in assessing this classification. This paragraph requires, as one of the conditions for a “current” classification, that "the entity does not have an unconditional right to defer settlement of a liability for at least twelve months after the reporting date".
The current liquidity crisis may have made the renegotiation of existing facilities less automatic than in previous years and there may be delays in obtaining documentation that proves the rollover of facilities. There is also the possibility that current market conditions have so dramatically reduced asset values that the entity is in breach of debt covenants which may make the loans callable at any time.
Without an “unconditional right to defer settlement” such balances would have to be classified as current at balance date, regardless of any intentions to renegotiate facilities or rectify any breaches of covenants and any history of so doing.
Further guidance on the current / non current classifications with respect to loans is contained in paragraphs 72-76 of AASB 101. In particular paragraph 76 says that if a loan is refinanced, a breach of a covenant is rectified or the lender grants a twelve month grace period between the balance date and the date the financial statements are authorised for issue, this fact is disclosed as a non-adjusting post balance date event.
In addition paragraphs 18 and 19 of AASB 7 requires Financial Instruments Disclosures requires an entity to provide additional disclosures about loans payable or loan agreements existing at the reporting date where there have been breaches or defaults on those loans during the reporting period.
Members should also note that this is one of the areas ASIC have announced that they will be looking at in their oversight of this year's reporting season - see ASIC website.
For further articles on the impact of the credit crunch on this year’s reporting season, go to this month’s Charter article ‘Changing markets make an impact’ by Patricia Stebbens.
Listed below are the notable upcoming open domestic and international accounting and assurance exposure drafts. Members are encouraged to prepare their own submission on each document and submit them to the Institute (techsubmissions@charteredaccountants.com.au) no later than one week before the closing date shown.
15 July 2008
IPSASB ED 34 Social Benefits: Disclosure of Cash Transfers to Individuals or Households and IPSASB Consultation Paper Social Benefits: Issues in Recognition and Measurement
16 July 2008
APESB ED 02/08 Reporting on Prospective Financial Information Included in a Disclosure Document
1 August 2008
AASB ED 163
Proposed Amendments to AASB 1049 for Consistency with AASB 101
25 August 2008
AASB ITC 17 Request for Comment on IASB Discussion Paper Preliminary Views on an improved Conceptual Framework for Financial Reporting: The Reporting Entity"
AASB ED 164 IASB Exposure Draft on Conceptual Framework Objective and Qualitative Characteristics
This list does not represent a complete list of the exposure drafts on issue. For all other open exposure drafts, refer to our dedicated exposure draft website.
CFO of the Future Series
Throughout July, August, September, October, November, December in Sydney and Melbourne.
An invaluable opportunity for current CFO’s or aspiring CFO’s, to hear the latest, including updates on GST, stamp duties, CGT, property finance and risk management plus much more.
Australian Audit Manual Training
Throughout September in Sydney, Melbourne, Parramatta, Adelaide, Perth and Brisbane.
A step by step guide on how to use the Institute’s new Audit Manual and walk away with a practical understanding of your auditor responsibilities.
CFO of the Future Intensive Program
Throughout September in Adelaide, Perth and Brisbane.
This two-day program supports aspiring and existing CFOs in their pursuit of professional excellence focusing on a combination of concepts and practical applications.
Audit Conference 2008 DVD
Recorded at the conference in April 2008, view highlight sessions at your convenience, including fraud, audit sampling, quality control, problem audit opinions and more.
Please continue to help us to improve the newsletter by sharing your comments on articles featured in this newsletter, or any financial reporting and auditing issues and experiences that might be of interest to other members. Responses should be emailed to "Your Input" (techsubmissions@charteredaccountants.com.au) and may be published in future editions of ANT.
We welcome new subscriptions. To subscribe, unsubscribe or to update your mailing details, please visit the newsletters section of the Institute website. Alternatively, you can email ant@charteredaccountants.com.au.
Accounting & Assurance News Today is an initiative of the Reporting and Assurance Team of the Institute of Chartered Accountants in Australia.
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