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Welcome to the forty-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. Corporate Reporting meeting highlights – 8 December 2008
The Institute of Chartered Accountants’ Sydney Corporate Reporting Discussion Group met on Monday, 8 December 2008 to discuss ‘Financial instruments: Where are we up to?’. Andrew Gilder, Partner – Finance Services Division and Lee Roche, Executive Director – Financial Services Division at Ernst & Young, were the guest speakers for this forum.
The two presenters created some very lively discussion. Andrew started by comparing the risk spread on interest rates between Australia and USA over the last 18 months and exploring the impact that the increased risk spread was having on financial reporting. The main issue appeared to be the lack of liquidity in both debt and equity markets. Recently, there has been a significant movement of funds towards the four main banks, due to their credit rating and the Federal Government’s guarantee of deposits. There is still a reluctance to lend out funds.
As a result of the global economic downturn, there had been political pressure particularly in Europe to change the accounting for financial instruments to the extent that the normal due process associated with changes to accounting standards was ignored. Some commentators are arguing that the emphasis on what the assets are currently worth instead of what they can eventually be realised for when they mature is driving down the market. The recent changes to AASB 139 Financial Instruments: Recognition and Measurement bring the standard closer to US GAAP and allow entities to transfer assets out of ‘held for trading’ or ‘available for sale’ into the ‘available for sale’ or ‘hold to maturity’ category in certain circumstances.
Both Andrew and Lee were of the opinion that these market movements indicate that impairment would need to be seriously addressed for December year ends and interim reports. Lee also spoke about the recent G20 summit and noted that the majority of committed actions that were agreed to were already completed or in progress by the relevant parties.
2. Help for 31 December year reporting periods
The findings of the Australian Securities and Investments Commission’s (ASIC) review of June 30 2008 financial statements (refer to ANT 47, item 12) highlighted a number of areas of concern that need to be addressed by members preparing accounts at 31 December 2008.
ASIC recommends that entities focus on: - Going concern
- Impairment of assets
- Determining fair values
- Off balance sheet arrangements; and
- New financial instrument disclosures
The Institute has a dedicated web page that deals with the global economic downturn which provides access to a range of resources providing more detail and assistance to members, including those of concern to ASIC. Additionally, the Institute website contains a number of links to various sets of recently-issued Australian model financial statements that can assist members with the preparation of their 31 December year ends (see item 5 below).
There is also detailed commentary on the requirements of AASB 7 Financial Instruments: Disclosures, which came into force for financial years ending on or after 31 December 2007 on the AASB 7 section of the Institute website.
3. Financial Reporting Council Bulletin
The Bulletin from the recent Financial Reporting Council (FRC) meeting held on 26 November 2008 is now available. The principal matters dealt with at the meeting were: - An update on recent international and stakeholder meetings
- Outcomes of the public sector accounting workshop
- Appointments to the AASB and AUASB (to be announced soon)
For further details, see the FRC website.
4. Completion of FRC report on global financial crisis
The FRC has completed a report on accounting issues emerging from the global financial crisis. The report was presented at the joint IASB/FASB (Financial Accounting Standards Board) roundtable meeting in Tokyo on 3 December 2008.
The report is based on a survey of eight ADI’s, including four of Australia’s largest banks.
For further details and key findings, see the FRC website.
5. Recently issued Model Accounts
Attached below are links to various sets of recently issued Australian model financial statements that can assist members with the preparation of their annual financial statements for 31 December 2008 and 30 June 2009. These are freely available on the web for members to download. - Ernst and Young’s Endeavour (International) Limited has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards providing interpretive commentary on the disclosure requirements, where necessary. The edition is based on standards and interpretations on issue at 31 October 2008.
- KPMG's Example Public Company Limited - Annual Financial Report reflects AASBs on issue as at 31 August 2008 that must be applied by an entity with annual period beginning on or after 1 January 2008. AASBs that are not yet mandatory have not been adopted early in preparing these illustrative financial statements.
To view the complete set of specimen accounts that have been made available to the Institute, visit the Institute website.
6. IASB meeting agenda – 15-19 December 2008
The next meeting of the International Accounting Standards Board (IASB) will be held in London on 15-19 December 2008. The main items on the agenda: - Annual Improvements
- Conceptual Framework Phase A – discussion of submissions
- Derecognition
- Fair Value Measurement (including the measurement of liabilities)
- Financial Instruments – outcomes of roundtable meetings and application issues related to IFRS 7 Financial Instruments: Disclosures
- IFRS 2 Share-Based Payment – Group cash-settled share-based payment transactions
- IFRS for Private Entities
- Liabilities – Amendments to IAS 37 Provisions, Contingent Liabilities. and Contingent Assets
A copy of the agenda can be downloaded from the IASB website (PDF).
7. January IFRIC meeting cancelled
The IASB has announced that the International Financial Reporting Interpretations Committee (IFRIC) meeting scheduled for 8-9 January 2009 has been cancelled.
This is due primarily due to: - IFRIC making rapid recent progress on finalising draft interpretations issued in July 2007, meaning that very few new items have been added to the agenda
- At the November 2008 meeting, the IFRIC made tentative agenda decisions on all the issues submitted at that time. Items received thereafter will be ready to be considered at the March meeting
For further details, see the IASB website.
8. Review of IASB Foundation Constitution
The Trustees of the International Accounting Standards Committee (IASC) Foundation, the body that oversees the International Accounting Standards Board (IASB), today published for public comment a discussion document on the second part of the five-yearly review of the IASC Foundation’s Constitution.
The purpose of the discussion document is to seek comment on the full range of constitutional issues that were not addressed in the first part of the review, such as the possible need for emergency due process procedures, funding arrangements and the IASB’s agenda-setting procedures. The document also canvasses extending the IASB’s standard setting activities to include the not-for-profit sector.
While not limiting comment to any particular issue, the Trustees would especially welcome responses on the issues set out in the discussion document. The IASB closing date for comments and suggestions is 31 March, 2009. The Institute plans to prepare submissions and will take comments from interested members up until 13 March 2009. Comments should be directed to techsubmissions@charteredaccountants.com.au.
9. IASC Foundation appoints two successors for retiring trustees
The IASC Foundation has announced the appointment of two Trustees for a renewable term of three years starting on 1 January 2009: - Clemens Boersig – Chairman of the Supervisory Board, Deutsche Bank AG (Germany)
- Noriaki Shimazaki – Executive Vice President, Sumitomo Corporation, (Japan)
By appointing one Trustee from Europe and one Trustee from Asia-Oceania, the Trustees are maintaining the geographical representation in the group of Trustees, as required by the organisation’s constitution. The Trustees expect to announce a successor from the investment community for David Shedlarz, a retiring US-based Trustee, in due course.
To view the media release, go to the IASB website.
10. IASB publishes revised proposal to eliminate unnecessary disclosures for state-controlled entities
The IASB has published a revised proposal to simplify the disclosure requirements that apply to state-controlled entities under IAS 24 Related Party Disclosures.
The IASB would particularly like to hear from respondents whether the proposals would give investors and analysts the information that they need without imposing unnecessary burdens on preparers of financial statements. Comments on the exposure draft Relationships with the State (Proposed amendments to IAS 24) are due by 13 March 2009.
More details are available in the IASB press releases (PDF).
11. Global accountancy leaders address economic downturn
The International Federation of Accountants (IFAC) has released the results of its 2008 Global Leadership Survey (PDF). This year's survey sought the views of leaders of accountancy institutes worldwide on the current economic downturn and other top issues for the profession. Chief executives and presidents of 110 accountancy organisations worldwide responded to the survey.
Like IFAC, the Institute has been identifying and executing appropriate responses to the economic downturn, supporting members with a range of resources, which are summarised here. Meanwhile IFAC’s resources are summarised here.
Auditing & Assurance News | |
12. AUASB issues revised GS 001
The Australian and Assurance Standards Board (AUASB) has released an updated guidance statement GS 001 Concise Financial Reports.
The updates primarily comprise: - Changes in terminology in line with new terminology used in the recently-updated AASB 1039 Concise Financial Reports
- Guidance on how to refer to the Remuneration Report where applicable in an auditor’s report on a concise financial report
- Other editorial changes (e.g. schematic of the illustrative auditor’s reports in the appendix)
The Guidance Statement is available on the AUASB website (PDF).
13. AUASB releases next two Clarity format standard exposure drafts
The Auditing and Assurance Standards Board (AUASB) today released two exposure drafts of Australian Auditing Standards (ASAs) in Clarity form, with comments due by 23 January 2009.
They are: - Proposed Auditing Standard ASA 530 Audit Sampling, available here (PDF)
- Proposed Auditing Standard ASA 610 >Using the Work of Internal Auditors, available here (PDF)
14. APRA outlines approach on executive remuneration
The Government has announced that along with the Australian Prudential Regulation Authority (APRA), they will be examining what domestic policy actions on executive remuneration would prevent excessive risk from taking place in Australia’s financial institutions.
Further details are available in the media realise on APRA’s website.
Costs of operating a dividend reinvestment plan
Q: My employer, a listed company, operates a dividend reinvestment plan. To what extent can the costs of operating the plan be debited against issued capital?
A: This issue is covered to an extent by AASB 132 Financial Instruments: Presentation in paragraphs 35 and 37. These paragraphs require transaction costs incurred by an entity in issuing its own equity instruments to be accounted for as a deduction from equity, provided the costs are incremental costs directly attributable to the equity transaction that otherwise would have been avoided. This is usually interpreted to mean that the incremental costs of issuing the shares resulting from the plan are debited against issued capital.
Less clear is the issue of how to account for the costs of administering the plan. We understand that common practice is to expense these costs, as it is hard to argue they are incremental.
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.
15 December 2008
IASB ED Improving Disclosures about Financial Instruments (proposed amendments to IFRS 7
IAASB Matters to Consider in a Revision of International Standard on Review Engagements (ISRE) 2400 Engagements to Review Financial Statements
AUASB EDs
ASA 200 Overall Objective of the Independent Auditor and the Conduct of an Audit in Accordance with Australian Auditing Standards
ASA 250 Consideration of Laws and Regulations in an Audit of a Financial Report
ASA 320 Materiality in Planning and Performing an Audit
ASA 450 Evaluation of Misstatements Identified During the Audit
ASA 510 Initial Audit Engagements – Opening Balances
ASA 550 Related Parties
ASA 580 Written Representations
ASA 720 The Auditor’s Responsibility in Relation to Other Information in Documents Containing an Audited Financial Report
13 February 2009
IPSASB Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities
18 February 2009
SEC Roadmap for the potential use of financial statements prepared in accordance with International Financial Reporting Standards (IFRS) by US Issuers
This list does not represent a complete list of the exposure drafts on issue. For all other exposure drafts, refer to our dedicated exposure drafts website.
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Throughout 2009 in Sydney, Epping, Doncaster and LiveOnline.
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Business Performance Analysis Workshop
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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.
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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