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Welcome to the twenty-eighth 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. Sample engagement documents released
The Institute has released two sample engagement documents to assist members in complying with the professional
standard APES 305 Terms of Engagement. These provide sample wording that can be adapted by members for use in
documenting the terms of an engagement. A sample letter format and a sample
brochure format have been provided. Members can download and adapt these as necessary to their own
situation. Note that these samples are in the nature of guidance, not prescriptive requirements. If members prefer
to adopt other wording which adequately documents the terms of an engagement, they are free to do so.
2. Institute auditing manual and auditing toolkit now available
Auditing Manual
The Institute has launched its Australian Auditing Manual, which is based on the Guide to Using International
Standards on Auditing in the Audits of Small- and Medium-sized Entities issued by the International Federation
of Accountants (IFAC) Small and Medium Practices Committee.
The Manual is freely available from our website. It is designed to assist audit practitioners, particularly those
who deal with small- to medium-sized entities (SMEs), in applying the current Australian Auditing Standards (ASAs).
It provides a detailed analysis of the ASAs with an illustrative case study to further explain how the requirements
apply to the audit of an SME. An accompanying toolkit, complete with forms, checklists and programs necessary for
conducting an audit, is also available for purchase to supplement the manual.
In September, the Institute will be holding training sessions nation-wide to support the manual’s implementation.
Training dates are as follows:
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Sydney – Tuesday 2nd September 2008
- Brisbane – Wednesday 3rd September 2008
- Melbourne – Friday 5th September 2008
- Perth – Wednesday 10th September 2008
- Adelaide – Friday 15th September 2008
For more information or to access a copy of the manual, please visit http://www.charteredaccountants.com.au/A121542159.
Auditing Toolkit
The Australian Auditing Toolkit is a comprehensive Toolkit designed to supplement the Australian Auditing Manual and
is to be used as a practical tool to help you apply the Australian Auditing Standards. The Toolkit can be either
tailored to suit individual practices or left as is. The flexible Toolkit is aimed at helping practitioners conduct
high quality and cost effective audits.
Cost of Toolkit: $250 (members), $350 (Standard)
More information is available at http://www.charteredaccountants.com.au/A121542159.
3. AASB meeting agenda – 30-31 July 2008
The AASB’s agenda for its 30-31 July 2008 meeting is now available from the AASB website (pdf). Key items
for discussion include:
-
Conceptual Framework Projects
- Policy for Modifying IFRSs (International Financial Reporting Standards)
- Revenue Recognition – Exchange and Non-exchange Transactions
- Long-term Fiscal Sustainability – education session
- Not-for-Profit Entities and Business Combinations
- Emission Trading Schemes – consider status report
- Service Concession Arrangements – consider ITC 16 submissions
- Financial Statement Presentation: Phase B – education session
- Reporting Frameworks for SMEs (Small and Medium Enterprises)
4. IFRIC meeting highlights – 10-11 July 2008
The most recent meeting of the International Financial Reporting Interpretations Committee (IFRIC) was held in
London on 10-11 July 2008.
The meeting discussed:
D23 Distributions of Non-cash assets to owners
Despite many respondents to the ED (Exposure Draft) expressing criticism over the scope and nature of the proposals,
the IFRIC decide to continue with this project due to the lack of existing guidance in this area and its concern
that these transactions do not fit within the scope of IFRS 3 Business Combinations.
It decided to clarify the requirements for the measurement and recognition of the dividend payable and to require
any gain on distribution to be taken to profit and loss rather than equity.
D24 Customer Contributions
Respondents to D24 were more supportive of the IFRIC’s need to produce an interpretation on this issue, but raised a
number of related revenue recognition issues which they requested the IFRIC clarify. Discussions on these issues
will continue at the next meeting
IFRS 2 Share-based Payment and IFRIC 11 IFRS 2 Group Treasury Share Transactions – Group Cash-settled
Share-based Payment transactions
The group continued its discussions on these proposals and will make a number of recommendations to the IASB for the
amendment of IFRS 2.
For more details, the IFRIC
Update is available on its website. It also includes an overview of IFRIC’s work programme and an IFRIC
rejection statement on the application of the effective interest method under IAS 39.
5. IPSASB meeting highlights – 16-19 June 2008
Meeting highlights from the
International Public Sector Accounting Standards Board’s (IPSASB) most recent meeting in Moscow, Russia are now
available. At the June meeting, the IPSASB discussed the following topics:
-
Public Sector Conceptual Framework - a consultation paper on the Conceptual Framework dealing with the objectives
and scope of public sector general purpose financial reporting, qualitative characteristics of financial information
and the definition of the reporting entity is expected to be released in September 2008, with a six-month
consultation period
- Financial instruments – IPSASB reaffirmed its intention to converge IPSAS with the financial instruments
standards
- Convergence of IFRSs with IPSASs and the status of interpretation statements from IFRIC
- Entity combinations – convergence with IFRS 3 is possible for public sector acquisitions of entities whose
underlying assets encompass predominantly economic benefits but a separate project should be commenced to address
public sector combinations which are non-exchange transactions
- Updating IPSAS 5 Borrowing Costs – for the requirement to expense borrowing costs except where they are
specifically incurred for the acquisition, construction or production of a qualifying asset
- Intangible assets – convergence project approved.
Highlights and background papers for all past IPSASB meetings can be viewed at http://www.ifac.org/PublicSector/Meetings.php.
Auditing & Assurance News | |
6. AUASB meeting highlights – 21-22 July 2008
The Auditing and Assurance Standards Board (AUASB) met in Melbourne on Monday and Tuesday 21 and 22 July. Matters
covered included:
7. IAASB revises ‘Related Parties’ audit standard
The International Auditing and Assurance Standards Board (IAASB) has progressed its clarity project with the release
last week of four new standards (refer ANT27/2008).
Of these four, only one (ISA 550 (Revised and Redrafted) Related Parties) was significantly revised. The other
three, dealing with laws and regulations, opening balances and going concern, were only redrafted in the new
“clarity format” wording.
The revisions to ISA 550 were prompted by the involvement of related parties in major international corporate
scandals and the revised standard is aimed at ensuring auditors adequately focus on and understand the related
party relationships that exist for their clients and the risks inherent in them. The amended standard:
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Clarifies the meaning of ‘related party’ for audit purposes
- Clarifies the auditor’s responsibility to obtain sufficient evidence about the required accounting and
disclosure of related party relationships and transactions
- Enables auditors to better understand how such relationships and transactions affect the view given by the
financial statements.
ISA 550 is effective for audits of financial statement for periods beginning on, or after, 15 December 2009.
In releasing the 4 new ISA’s the IAASB has also advised that it remains on track to meet the December 2008 deadline
for the revision of all their standards under its clarity programme.
These international revisions are expected to be incorporated into the Australian standards as part of the
Australian clarity review programme which the AUASB has commenced.
8. IAASB releases strategy and work program 2009-2011
Following extensive consultation, the IAASB has now also released its strategy and work program for 2009-2011. The
three year strategy places emphasis on the development of standards that promote capital market efficiency and
addresses the needs of SMEs and SMPs.
A Basis for Conclusions: IAASB Strategy and Work Program, 2009-2011
is also available summarising the IAASB’s conclusions on significant matters raised during the consultations.
9. Senate enquiry into not-for-profits
The Senate Standing Committee on Economics is conducting an enquiry into disclosure regimes for charities and not
for profit organisations. It will examine:
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The relevance and appropriateness of current disclosure regimes for charities and all other not-for-profit
organisations
- Models of regulation and legal forms that would improve governance and management of charities and
not-for-profit organisations and cater for emerging social enterprises
- Other measures that can be taken by government and the not-for-profit sector to assist the sector to improve
governance, standards, accountability and transparency in its use of public and government funds
Comments are due to the Committee Secretary, Senate Economics Committee by 29 August 2008 and further details can be
found at http://www.aph.gov.au/SENATE/COMMITTEE/economics_ctte/charities_08/info.htm. Background papers
can be downloaded from http://www.aph.gov.au/senate/committee/economics_ctte/charities_08/index.htm.
10. Release of information on greenhouse reporting
The Greenhouse and Energy Reporting Taskforce of the Department of Climate Change has been running a series of
public information sessions on the release of the Carbon Pollution Reduction Scheme Green Paper and the National
Greenhouse and Energy Reporting (NGER) System.
The Carbon Pollution Reduction Scheme Green
Paper, outlines options for the design of an emissions trading scheme including the Government’s preferred
approach.
The Department of Climate Change has also now released the National Greenhouse and Energy Reporting Technical
Guidelines.
The Technical Guidelines accompany the National Greenhouse and Energy Reporting (Measurement) Determination –
subordinate legislation to the National Greenhouse and Energy Reporting Act (2007). This guideline along with
recently released National Greenhouse and Energy Reporting (NGER) System Guidelines aim to assist
corporations interpret and understand their obligations to meet the mandatory requirements of reporting under the
NGER System. The Technical Guidelines will be available at http://www.climatechange.gov.au/reporting.
Corporations which might meet or exceed reporting thresholds and are not already collecting greenhouse gas emissions
and energy production and consumption data should begin collating that information and keeping records now. An
Online Calculator is also available on the Department's website to assist corporations self-assess whether
they might meet or exceed the thresholds for reporting.
If you have any queries about the NGER System, please visit http://www.climatechange.gov.au/reporting,
email reporting@climatechange.gov.au or call
the toll free helpline on 1800 018 831.
Professional & Ethics News | |
11. Compiled Code of Ethics released by APESB
The Accounting Professional and Ethical Standards Board (APESB) has compiled APES 110 Code of Ethics for
Professional Accountants, incorporating all relevant amendments issued up to 15 February 2008. It includes the
revised definition of network firms and amendments to the auditor independence requirements to bring them in line
with the Corporations Act amendments implemented in June 2007 by the Simpler Regulatory System legislation.
The compiled version of APES 110 is effective from 15 February 2008, except for paragraphs 290.14 to 290.26, which
are effective for assurance engagements for periods commencing on or after 1 July 2008.
APES 110 is mandatory for all members of the three professional accounting bodies.
Issued but not operative disclosures
Q: My financial year is 30 June and for 30 June 2008, I do not intend to adopt any standards or interpretations
earlier than the application date. What standards/interpretations or amendments do I need to consider when assessing
the possible impact of new/revised standards that have been issued but not yet effective as required by paragraph 30
of AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors?
A: As noted above, Paragraph 30 of AASB 108 requires an entity to disclose the existence and impact of all
applicable Australian Accounting Standards (including interpretations) that have been issued but which are not yet
effective or have not yet applied by the entity. Paragraph 31 goes on to provide more details on the factors
entities should consider in making these disclosures, including a comment that if the impact of a standard is not
known or reasonably estimable a statement to that effect should be made.
The standard is not clear on a number of specific issues in relation to these disclosures and consequently
professional judgement is required to ensure adequate disclosure in each particular client’s circumstances.
There are three main areas of concern:
-
What standards are relevant
- Whether the requirements apply to disclosure issues as well as to changes to recognition and measurement
- The application of materiality
What standards are relevant
AASB 108 does not specify whether the disclosures required are limited to those standards (and
interpretations) issued at the end of the financial year (ie. 30 June 2008) or those issued up to and including the
date of signing the financial report. This latter option complies with the spirit of the standard covering post
balance date events, AASB 110, and is generally adopted in practice. However it has potential practical difficulties
for the timely completion of the financial report if the quality of the disclosures is not to be impaired. Therefore
care needs to be taken to ensure that later developments are monitored and if necessary disclosed with a comment
that their effect has yet to be assessed.
A further factor to consider is whether your entity is making the statement in their financial statements about
compliance with IFRS (AASB 101 paragraph 14). If so the entity will also need to consider the impact of IASB
standards (including interpretations) which have been issued by the IASB but not as yet issued by the AASB in order
to comply with paragraph 30 of IAS 8 and maintain its IFRS compliant status.
What requirements of the standards need to be considered?
Paragraph 31 of AASB 108 states that in disclosing the impact of the standard, an entity should disclose the nature
of any impending change in accounting policy. It is therefore unclear whether the paragraph applies only to
standards making changes to recognition and measurement issues or whether it also covers standards that only
introduce disclosure requirements. In practice, disclosure relating to ALL requirements is encouraged although again
practical difficulties can be encountered and it may only be possible to disclose that there is no financial impact
anticipated from the changes to standards affecting disclosure only.
Materiality
The standard is also unclear on the way materiality is to be applied in relation to this requirement. As a result
some practitioners apply a strict materiality based approach and disclose only those changes that will or could have
a material effect on the financial report. Others prefer to list all the changes that have occurred and note their
impact (if any) on the financial report even if it is only minor or the standard is not relevant to the entity in
its normal course of business.
To assist members with the form and content of these disclosures the following guidance is available:
-
Our website includes a table which contains a complete list of standards/interpretations/amendments issued and not
yet effective http://www.charteredaccountants.com.au/A121512367. The table includes references to the ANT
edition/Charter articles where the changes were initially discussed
- Specimen wordings for the AASB 108 paragraph 30 disclosures can be found in the accounting policies notes of the
specimen accounts of the various firms. These documents can be accessed via our website
.
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.
1 August 2008
AASB ED 163 Proposed Amendments to AASB 1049 for Consistency with AASB 101
22 August 2008
AASB IASB Discussion Paper on Reducing Complexity in Reporting Financial Instruments
25 August 2008
AASB ED 164 An improved Conceptual Framework for Financial Reporting: The Objective of Financial Reporting and
Qualitative Characteristics and Constraints of Decision-useful Financial Reporting Information.
AASB ITC 17 Request for Comment on IASB Discussion Paper Preliminary Views on an improved Conceptual Framework
for Financial Reporting: The Reporting Entity
Parliament of Australia Senate Economics Committee: Inquiry into the Disclosure regimes for charities and
not-for-profit organisations
29 August 2008
AASB IASB Discussion Paper on Preliminary Views on Amendments to IAS 19 Employee Benefits
APESB ED 04/08 Forensic Accounting Services
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.
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
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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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