|
Welcome to the forty-third 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. What’s new in November Charter
This month’s Technical Focus section of Charter contains our usual roundup of news in the financial reporting and audit and assurance spheres. As well as The Panel, it contains:
- an article explaining the International Accounting Standards Board (IASB) conceptual framework project, reviewing and revising the conceptual framework both to remove inconsistencies and to provide a common framework with the United States standards. Included in this article is an analysis of this project’s potential impacts on accounting standards – by Kerry Clark of Ernst & Young
- an article on the new segment reporting standard AASB 8 explaining why members should be considering its early adoption and the standards practical implications – by Kim Heng and Ceri-Ann Banwell of KPMG
- Aubrey Joachim considers the potential mayhem caused by the credit squeeze and explains how with some good financial management acumen and using leading edge management accounting tools, organisations should survive the credit crunch
These articles can be found on pages 60-71 of November Charter.
Other pages in Charter having significance to reporting and assurance include:
- bbbr…the winds of change (pg 28) where the Institute’s manager for Chartered Accountants in Business, Karen McWilliams, and Ben McAlary explain how Broad Based Business Reporting is fast becoming essential to investors to understand how the fundamental future needs of an organisation will be met
- streamlining data reporting (pg 36) which explains the government’s Standard Business Reporting program and identifies the benefits to business once it is introduced in 2010
- wine’s carbon footprint (pg 20) which explains how the Australian wine industry has become a leader in carbon footprint reporting.
2. Leadership paper
The Institute’s latest thought leadership project Broad Based Business Reporting – Increasing stakeholders understanding of business reporting is focused on providing stakeholders, including investors, employees, government, regulators and management with a much greater understanding of business performance.
The paper was prepared in conjunction with the Institute’s Broad Based Business Reporting (BBBR) advisory panel, which consists of representatives from KPMG, PricewaterhouseCoopers, governance research company Regnan and the Australasian Investor Relations Association.
Unlike triple bottom line, sustainability reporting and social responsibility reporting, BBBR also encompasses operational and financial reporting.
The paper is positioned to both members and the wider business community to influence industries on how to communicate effectively on financial, environmental and social issues impacting a business. It is aimed at stimulating interest and discussion with businesses to adopt standardised methods of using key performance indicator (KPI) reporting.
3. Melbourne Corporate Reporting Discussion Group – 13 November 2008
As announced in last week’s ANT, the Institute is hosting the Melbourne Corporate Reporting Discussion Group meeting on Thursday, 13 November 2008 at its Melbourne office at Level 3, Bourke Place, 600 Bourke Street, Melbourne between 12.30 and 2pm.
The meeting will discuss the recent changes to the financial instruments standards as a result of current economic conditions, including the rationale behind the IASB’s recent retrospective changes to the standards. It will be chaired by Lincoln Tong, Group Financial Controller of Austock Group Limited and the guest speaker will be Patricia Stebbens, Accounting & Advisory Partner at KPMG specialising in Financial Instruments.
If you wish to attend this forum, members can register online at the Institute website by Monday 10 November 2008. If you have any questions regarding the forum, please email crdg@charteredaccountants.com.au.
4. Institute hosts IASB member visit
This week IASB members, Tatsumi Yamada and Warren McGregor, visited Australia for events in both Sydney and Melbourne. The Institute hosted a Sydney event with these two IASB members, featuring interactive discussions with accounting technical specialists predominantly from practice.
A number of interesting topics were discussed, with particular interest shown in the reasons for the recent retrospective changes to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures. The changes were made to ensure consistency between the United States and international accounting standards in the area of reclassification of financial assets (as identified in ANT 42).
Never before has an accounting standard been developed and issued in one day, without ‘normal’ due process. However pressure exerted by the European Commission on the IASB and the IASC Foundation Trustees for the changes to these standards was such that this seemed the best option taking into account wider public interest. The IASB members expressed their reservations about amending standards in this manner and were concerned that this should not set a precedent for the future. As mentioned in item 9 below, consultation with the wider community will take place at roundtables over the next month.
5. November issue of AASB Transparency has been released
The November issue of the AASB newsletter Transparency has been released which contains a farewell from the recently retired chairman of the AASB, Professor David Boymal. In the newsletter he communicates the achievements of the AASB and is proud to say that the AASB remains a relevant standard-setting organisation in Australia.
The newsletter also highlights the improved searching ability on the AASB website, the role of accounting standards in the credit crunch, news from the world standard setters’ conference, an update on the progress of the superannuation exposure draft and the expected discussion paper on accounting for extractive industries.
The newsletter is available on the AASB website.
6. AASB Discussion Paper on measuring intangible assets
The AASB has released a discussion paper advocating consistent fair value measurement in the initial accounting for internally generated intangible assets. Current accounting standards treat internally generated intangible assets acquired through a business combination differently from the same kind of assets that are internally generated.
Authored by staff of the AASB with the support of the group of National Standard Setters (NSS), this paper is designed to encourage international debate on this topic with the ultimate aim of contributing to improvements in the IASB’s standards on intangible assets. This is intended to be the first in a number of papers addressing intangible asset measurement issues.
The full discussion paper is available on the AASB website (PDF).
The closing date for comments on to the AASB on this discussion paper is 15 May 2009. The Institute will also be preparing a submission and will take comments from interested parties up until 8 May 2009. Comments should be directed to
techsubmissions@charteredaccountants.com.au.
7. AASB issues Consultation Paper on IPSASB’s Conceptual Framework
The AASB has issued the International Public Sector Accounting Standard Board’s (IPSASB) on Phase 1 of its Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities. Comments are due to the AASB by 13 Feb 2009.
The consultation paper is available on the AASB website (PDF).
8. IASB announces roundtables on financial crisis
The IASB and the FASB (the Boards) have announced holding roundtables in London, Norwalk (US) and Tokyo to gain input from a wide range of stakeholders including users and preparers of financial statements, governments, regulators and others. The Boards want to identify any accounting issues that may require their urgent and immediate attention to improve financial reporting and help enhance investor confidence in financial markets.
The first roundtable will be in London on 14 November 2008 and will also be webcast. For further details, go to the IASB website.
9. IASB web presentation on financial statement presentation
Stephen Cooper, IASB member, and Denise Gomez, project manager, will introduce the joint IASB/FASB discussion paper Financial Statement Presentation as a webcast with the facility for viewers to submit questions. To find out more and to register to participate, go to the IASB website.
Auditing & Assurance News | |
10. AUASB releases guidance for auditors of self managed superannuation funds
The AUASB has released a comprehensive Guidance Statement GS 009 Auditing Self Managed Superannuation Funds (SMSFs), providing guidance on both the audit of a SMSF’s special purpose financial report and the audit of a SMSF’s compliance with the Superannuation Industry (Supervision) Act 1993 and the Superannuation Industry (Supervision) Regulations 1994 (compliance audit).
Contained in the guidance note is practical commentary on how the auditing standards should be applied in the audit of a SMSF, as well as guidance on the compliance aspect of auditing a SMSF. This guidance replaces the old Audit Guide No.4.
The Guidance Statement can be downloaded from the AUASB website (PDF).
11. Treasury climate change modelling released
The Australian Government’s long awaited report Australia’s low pollution future: the economics of climate change mitigation was released on 30 October. It contains Treasury’s detailed modelling of the costs and opportunities of acting decisively to meet the challenge of climate change. The green paper on the Carbon Pollution Reduction Scheme (CPRS) released in July provided the proposals for the design of the emissions trading scheme. This latest report provides modelling on the economic impacts of the different emissions ‘caps’ which might be chosen for the CPRS.
The report has three key conclusions:
- The Australian economy will continue to grow strongly as carbon emissions are reduced.
- The earlier Australia acts, the cheaper the cost of action. If action is delayed, catching up will be a sharper shock to the economy.
- Many of Australia’s key industries will become more, not less, competitive. Specifically, growth in low and negative emissions sectors will accelerate.
There are additional resources and information available online:
Professional and Ethics News | |
12. Liability Capping Arrangements
IMPORTANT MESSAGE TO PRACTICES FROM THE INSTITUTE
This week the Institute’s Professional Standards team has written to several hundred practices to secure vital information to help ensure that the liability capping schemes continue.
All firms need to supply insurance and claims data to the Institute. This information will be reported to the Professional Standards Council in an aggregated format to preserve confidentiality. This reporting is a legislative requirement for the liability capping schemes.
As advised in a recent email to all CPP holders, this information can be reported to the Institute using a simple online questionnaire. For more details, please visit the Institute website.
13. APESB meeting agenda – 10 and 11 November 2008
The next meeting of the Australian Professional and Ethical Standards Board (APESB) will be held over two days from Monday 10 November to Tuesday 11 November 2008 in the AASB offices located at Level 7, 600 Bourke Street, Melbourne, 3000. The items to be considered include:
- Proposed APES 215 Forensic Accounting Services
- Proposed APES 345 Reporting on Prospective Financial Information
- Twelve month review of APES 110, APES 210 and APES 320
- Proposed exposure draft on APES 320 Quality Control for Firms
- Proposed exposure draft on APES 310 Client Monies
- Proposed exposure draft on APES 335 Insolvency Services
To download the complete agenda, visit the APESB website (PDF).
Contingent Consideration Relating to Future Services
Q: Consider circumstances where the acquiree’s former shareholders become or continue to be key employees of the acquiree subsequent to the acquisition (and these employees have positions that may affect the financial results of the acquiree). The business combination agreements provide for an adjustment to the cost of the combination contingent on future profit levels. Must an acquirer identify contingent consideration that is, in substance, compensation for future services, and account for this separately from the cost of the combinations – under current AASB 3 Business Combinations and the revised AASB 3 that is effective from 1 July 2009?
A: Yes. The Framework for the Preparation and Presentation of Financial Statements states that in order for the information to represent faithfully the transactions, they should be accounted for in accordance with their substance, rather than their legal form, which may not be consistent with the substance and economic reality. Therefore, where a vendor is also a continuing employee it is necessary to determine whether payments made to them are in their capacity as vendor or as employee.
Until the revised AASB 3 was issued in March 2008 there was no specific guidance in IFRS to evaluate the substance of this type of transaction. However US GAAP, EITF 95-8 Accounting for Contingent Consideration Paid to Shareholders for an Acquired Enterprise in a Purchase Business Combination, was often referred to as it did not conflict with the IFRS Framework in this regard.
Paragraphs 51 and 52 of the revised AASB 3 Business Combinations specifically address these types of arrangements. The new standard was issued in March 2008 and while it is not mandatory until financial years beginning on or after 1 July 2009 it should be referred to as guidance even prior to the standard being formally adopted by the entity.
The revised standard requires an acquirer to evaluate the substance of the arrangements entered into by the parties, before, or at the time of, the combination. In this evaluation the nature and extent of pre-existing relationships are considered. Considerable application guidance has been included which indicates that, when there is a payment of ‘earn-out’ or other amounts conditional on continued employment by the acquirer, the payments are treated as compensation for future services rather than as consideration. Consequently it is critical for businesses to consider the accounting prior to the finalisation of acquisition agreements in order to avoid unintended ‘surprises’.
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.
Note – this email address should not be used for technical queries. For this purpose, use rahelpline@charteredaccountants.com.au.
14 November 2008
National Greenhouse and Energy Reporting Act 2007 and Carbon Pollution Reduction Scheme - External Audit Consultation Paper
1 December 2008
AASB ED 169 Improving Disclosures about Financial Instruments: Proposed Amendments to AASB 7
5 December 2008
AASB ED 167 Discontinued Operations: Proposed Amendments to AASB 5
AASB ED 168 Additional Exemptions for First-time Adopters: Proposed amendments to AASB 1
IASB Simplifying Earnings Per Share: Proposed Amendments to IAS 33
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.
Chartered Accountants Audit of Self Managed Super Funds Workshop
Throughout November in Melbourne, Sydney and Canberra.
With the increase in the number of reviews and audits of self managed super funds to 11,000 and new competency requirements in effect, here’s your chance to understand those requirements and ensure you comply.
Chartered Accountants Audit Essentials Workshop
Throughout November in Sydney, Parramatta, Melbourne, Adelaide, Perth and Brisbane.
Find out which hot spots ASIC will be targeting, ensure you can address them, and get the latest updates on auditing standards and regulatory requirements.
Chartered Accountants Accounting Update and Accounting and Audit of Registered Clubs
Throughout November and December in Sydney, Melbourne, Adelaide, Perth and Brisbane.
These seminars will bring you up-to-date for end of year reporting and the intricacies of accounting and auditing for registered clubs.
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. Please note that this email address should not be used for technical queries.
Accounting & Assurance News Today is an initiative of the Reporting and Assurance Team of the Institute of Chartered Accountants in Australia.
Disclaimer
This is an initiative of, and has been prepared by the Reporting and Assurance Team of the Institute of Chartered Accountants in Australia. While every effort has been made to ensure the accuracy of the information contained therein, neither the Institute nor its employees shall be liable on any grounds whatsoever in respect of decisions or actions taken as a result of using this publication. The information provided is a general guide only and should not be used, relied on or treated as a substitute for specific professional advice or referral to the relevant specific standard.
The information is this email is confidential to the named addressee and subject to copyright. No one else may read, print, store, copy, forward or act in reliance on all or any of this email or its attachments. If you are not he intended recipient, any use, reliance upon, disclosure or copying of this email is prohibited and unlawful. If you have received this email in error please notify the sender. The Institute of Chartered Accountants in Australia (ABN 50 084 642 571) does not warrant that this email and any attachments are error or virus free and recommends that all attachments be checked for computer viruses.
| 
The Institute’s education and training pathway is the preferred choice for industry professionals.
The Institute is leading the debate in the areas that matter most to business and the accounting profession. 
The Institute produces an invaluable suite of tools, guidance, products and services to help members in their work. 
Print this article
Email this Article
Back to Top
