Accounting and Auditing News Today (ANT) Issue No 38 - 28 September 2007

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

1. AASB/NZFRSB meeting agenda – 3-4 October 2007

The Australian Accounting Standards Board (AASB) and New Zealand Financial Reporting Standards Board are meeting jointly in Sydney on 3-4 October 2007. Items to be discussed include:

• Australia/New Zealand convergence (not for profit paragraphs)
• IASB/FASB conceptual framework project
• Differential reporting/SMEs
• Insurance contracts
• IPSASB report and issues
• Non-exchange income

• Differential reporting/IFRS for SMEs
• GAAP/GFS harmonisation (ED 155 “Financial Reporting by Whole of Governments”)
• Review of AAS 27, AAS 29 and AAS 31 (ED 156 “Proposals Arising from the Short-term Review of the Requirements in AAS 27, 29 and 31”)
• Consider submissions to IFRIC on D21 “Real Estate Sales” and D22

The AASB has released for comment a consultation paper based on its review of AAS 25 “Financial Reporting by Superannuation Plans”.

The AASB has tentatively decided that superannuation entities should measure their assets at fair value. Logically, the AASB thus favours parent superannuation entities preparing consolidated financial statements in accordance with fair value. As this approach would potentially have far-reaching consequences, the AASB has published a consultation paper to gauge the views of constituents.

Constituent opinions are sought in relation to four consolidation approaches presented by the AASB.

Comments are sought by 30 November 2007.
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The Auditing and Assurance Standards Board (AUASB) has released for comment proposed ASRE 2400 “Review of Financial Reports and Other Historical Information”.

Under these proposals, assurance practitioners will no longer use AUS 902 “Review of Financial Reports” but will use ASRE 2400 (Part A or B) or ASAE 3000 “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information”.

ASRE 2400:

• Part A – to be used to review an interim financial report (by a practitioner who is not the auditor of the entity)
• Part A – to be used to review a financial report for a period of 12 months or more
• Part B – to be used to review historical financial information other than a financial report

• To be used for assurance engagements, including reviews, other than those of historical financial information

The AUASB has released “Bulletin: Auditing Small and Medium Sized Entities”, containing the Board’s response to issues identified by constituents in the AUASB Discussion Paper of the same name. The joint submission of the professional accounting bodies on this Discussion Paper is available here.

Upon consideration of the responses to the Discussion Paper, the AUASB has resolved to continue to:

• Actively monitor developments on the international level
• Promote awareness of the two distinct levels of assurance provided by an audit and a review
• Liaise with the professional accounting bodies to encourage training and self-help guides to be provided

How many new members did the Institute attract in the last financial year? What were the results of the Institute's lobbying? How are students being encouraged to join the profession? The answers to these questions, and more, can be found in this year's annual report. Members can read the entire report, or sections of the report, on the Institute's website. Alternatively, members can watch a three-minute summary, presented by Institute president Robert DiMonte.
http://www.charteredaccountants.com.au/annualreport
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On 12 September 2007 the Australian Taxation Office (ATO) issued a fact sheet on share capital tainting. This fact sheet explains the operation of some key concepts in the share capital tainting rules in Division 197 of the Income Tax Assessment Act 1997 including:

• What is share capital?
• What is the significance of the name given to an account in determining whether the account is or is (or is part of) a company's share capital account?
• When will a company's share capital account become tainted?
• Transfer-related issues including what constitutes a transfer between accounts, when a transfer takes place from option premium reserves

The United Kingdom Accounting Standards Board (ASB) has released a briefing paper identifying aspects of the IASB’s Discussion Paper “Preliminary Views on Insurance Contracts” that may have important consequences for financial reporting in sectors outside insurance.

The UK ASB believes the significance of the proposals is not just confined to insurance. Sectors with similar accounting issues may consider the potential impacts presented in the briefing paper and provide comments to the IASB to extend or restrict its potential future application. The ASB’s comments on the potential impact on areas of accounting other than insurance contracts are equally relevant in the Australian environment.

Members are encouraged to provide their comments to the Institute on either the impact of the IASB’s Insurance Discussion Paper on the insurance sector or entities in other sectors through email (techsubmissions@charteredaccountants.com.au) for inclusion in our submission to the AASB on ITC 13 of the same name, due 26 October 2007. Comments for the IASB’s Discussion Paper are due 16 November 2007.
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This month’s Technical Focus section of Charter features:

• Our regular roundup of financial reporting and auditing news in “The Panel”
• An update on the current developments in public sector reporting by Brett Kaufmann from the Department of Finance and Administration
• A discussion the accounting issues facing mining companies by Tim Goldsmith of PricewaterhouseCoopers

Q: Last week’s ANT referred to changes to directors’ and executives’ remuneration. Can you explain the nature of these changes in more detail?

A: One of the changes introduced by the Corporations Legislation Amendment (Simpler Regulatory System) Act 2007 was to ?incorporate in the Corporations Act the accounting standards requirements for executive and director remuneration disclosure for listed companies.

Under the old Law the remuneration disclosure requirements for individual directors and executives of listed companies was contained in both the accounting standards and the Corporations requirements. Listed companies were required to comply with both sets of requirements which resulted in both duplication and inconsistency.

The amending Act creates a new disclosure framework which transfers both sets of requirements into the Corporations Act and Regulations and aligns them to remove inconsistencies. It also introduces a new disclosure requirement in relation to executives and directors hedging their incentive remuneration. The amending Act is effective for financial years commencing on or after 1 July 2007.

The new changes:

• consolidate the remuneration disclosure requirements currently contained in section 300A of the Act and the accounting standards solely into the Corporations Act and Corporations Regulations. This means remuneration disclosures must now be made for any individual who falls within the definition of ‘key management personnel’, in addition to the existing directors and executives required to be disclosed under section 300A
• replace the terms of “directors, secretaries, senior management and other group executives” in section 300A with the term “key management personnel” which for the purposes of the Corporations Act will be defined as it is in the accounting standards to ensure consistency and ease of change as the accounting standards change
• modify the scope of all the remuneration disclosure requirements from listed companies to disclosing entities that are companies.
• require the remuneration information to be disclosed in the directors report rather than the audited financial report and require the company’s auditor to specifically express an opinion on the remuneration information. A strict liability offence in relation to the audit of the information in the directors’ report will be imposed
• require companies to disclose board policy in relation to directors and executives hedging their incentive remuneration and the mechanism that the company uses to enforce this policy
• clarify the disclosure requirement in section 300A(1)(e)(iv) concerning options lapsing to ensure that the policy intention of the requirement is achieved, and remove the requirement under subparagraph 300A(1)(e)(v) for companies to disclose the aggregate of options granted, exercised and that have lapsed during the year, on the grounds that is not being used by shareholders

Audit of Self Managed Superannuation Funds Workshop
Throughout October in Adelaide, Sydney, Brisbane, Melbourne & Perth
Now that the new auditing standards apply to SMSF audits, don't miss out on ensuring your audits of SMSFs comply with the regulatory requirements.

Technical Conference
Sydney 8 - 10 Oct, Melbourne 8 - 10 Oct
Day 2: Auditing. Examine force of law, AIFRS, APES 320 and the latest technical issues and developments. Take away timely and practical solutions for immediate implementation.

Regional Roadshow
Running in 12 key regional centres throughout October 2007, the Regional Roadshow is a two-day event that provides the very latest changes and strategies for tax, accounting and auditing.

Audit Day
Highlighting key audit topics. Sessions include : Auditing update; Audit of Not for profit and Registered Clubs, Audit Quality Control and independence requirements.

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.
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For more information, refer to the Institute's Technical Standards' exposure drafts web page

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

1 October 2007
IASB Exposure Draft of a Proposed IFRS for Small and Medium-sized Entities

5 October 2007
IFRIC D21 'Real Estate Sales'

12 October 2007
Draft Interpretation on Petroleum Resource Rent Tax

15 October 2007
IESBA ED "Proposed Revised Section 290 of the Code of Ethics for Professional Accountants, Independence - Audit and Review Engagements, and Proposed Section 291, Independence - Other Assurance Engagements"

18 October 2007
IFRIC D22 'Hedges of a Net Investment in a Foreign Operation'

19 October 2007
Exposure draft of APES 205 "Conformity with Accounting Standards"

26 October 2007
AASB ITC 13 'Preliminary Views on Insurance Contracts'

31 October 2007
AUASB ASRE 2400 ‘Review of Financial Reports and Other Historical Information’
ISA 510 (redrafted) ‘Initial Audit Engagements – Opening Balances’
ISA 530 (redrafted) ‘Audit Sampling’
IASB proposed IFRS for SMEs field test questionnaires

16 November 2007
IASB Discussion Paper "Preliminary Views on Insurance Contracts"

30 November 2007
AASB Consultation Paper on Consolidation of Subsidiaries by Superannuation Entities
ISA 700 (Redrafted) 'The Independent Auditor's Report on General Purpose Financial Statements'
ISA 705 (Revised and Redrafted) 'Modifications to the Opinion in the Independent Auditor's Report'
ISA 706 (Revised and Redrafted) 'Emphasis of Matter Paragraphs and Other Matter(s) Paragraphs in the Independent Auditor's Report'
ISA 800 (Revised and Redrafted) 'Special Considerations-Audits of Special Purpose Financial Statements and Specific Elements, Accounts or Items of a Financial Statement'
ISA 805 (Revised and Redrafted) 'Engagements to Report on Summary Financial Statements'

31 December 2007
ISQC 1 (Redrafted) 'Quality Control for Firms that Perform Audits and Reviews of Financial Statement, and Other Assurance and Related Services Engagements'
ED 33 'Amendments to IPSAS 4, The Effects of Changes in Foreign Exchange Rates'
ISA 220 (Redrafted) 'Quality Control for an Audit of Financial Statements'

11 January 2008
IASB's proposed amendments to IAS 39 - 'Exposures Qualifying for Hedge Accounting'
IASB ED 9 “Joint Arrangements”

Technical Query Service
The Institute's Technical Standards 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.

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TECHNICAL/XFILES/ARTICLES/ANT/ANT38_07_09_28.doc. The Technical Standards team comprises, Jeanette Dawes CA, Roslyn Hatton CA, Kerry Hicks CA, Claire Locke CA, Stephanie Kemp CA, Andrew Stringer; Benjamin Lau and Jane Ma - Technical Standards Assistants.