Accounting and Auditing News Today (ANT) Issue No 44 - 9 November 2007

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

1. AASB meeting agenda – 14-15 November 2007

The next meeting of the Australian Accounting Standards Board (AASB) will be held in Melbourne on 14-15 November 2007. Items listed for consideration on the agenda include:

• Draft submissions to the IASB on insurance contracts and SMEs
• Review of submissions on ED 156 “Review of AAS 27, AAS 29 and AAS 31”
• Submissions on draft Interpretations
• Adoption of IFRS 3 “Business Combinations” (revised)
• Issue papers for superannuation entities
• Liaising with constituents on franking credit disclosures under the Presentation of Financial Statements

The AASB is continuing the process of compiling standards to include the amendments issued in Omnibus AASBs 2007-4 and has now released revised versions of:

• AASB 139 “Financial Instruments: Recognition and Measurement”
• AASB 141 “Agriculture”

The AASB has launched a quarterly newsletter called “Transparency” to update constituents about their activities and projects. The first issue can be downloaded from here.
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The Institute has lodged a joint submission to the Auditing and Assurance Standards Board (AUASB) in conjunction with CPA Australia and the National Institute of Accountants (NIA) in relation to ED4/07: Proposed Standard on Review Engagements ASRE 2400.

The submission suggests that proposed ASRE 2400 would be more appropriately issued as two separate Standards on Review Engagements by separating Parts A and B. It is believed that this would greatly simplify matters for assurance practitioners by clarifying when to apply the Standard dealing with a review of financial reports, and the one dealing with a review of other historical financial information.

To view the joint submission, visit the Auditing & Assurance EDs section.
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The next meeting of the International Accounting Standards Board (IASB) will be held in London on 13-16 November 2007. Items listed for consideration on the agenda include:

• Conceptual framework – measurement
• Fair value measurement
• Financial statement presentation
• Insurance contracts
• Related party disclosures – proposed amendments to IAS 24
• Revenue recognition – consideration of measurement model for revenue recognition
• Share-based payment – vesting conditions and cancellations (IFRS 2) – discuss finalisation of the proposed amendment

The Institute is looking for another Reporting and Assurance Consultant, at manager or senior accountant level, who will be able to assist the current team in providing technical assistance to our members. This includes nominating relevant issues and analysing, researching for and preparing submissions on key accounting and auditing matters. Flexible hours are available.

For further details, see the job advertisement.
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Q: I understand that recent changes to AASB 127 have altered the requirements for the preparation of consolidated financial reports. My entity is the ultimate Australian parent and has previously not prepared a consolidated financial report on the basis that the group was not a 'reporting entity' [since group information was not relevant for any external users and was only required by the overseas parent]. Is non preparation of consolidated accounts still permissible?

A: AASB 127 was amended in April 2007 by Omnibus 2007-4 in order to align the requirements for consolidated financial statements with those of the equivalent IFRS standard. The proposals were exposed in ED 151 and the amendments apply to financial reporting periods beginning on or after 1 July 2007 (ie 30 June 2008 year ends) although early adoption is permitted.

The version of AASB 127 applicable to 30 June 2007 year ends states in paragraph Aus 9.1 that consolidated financial statements must be prepared where the GROUP is a reporting entity. You will find this version of AASB 127 on the AASB website in Table 2 of the standards (the version dated 28/2/07).

However for years beginning on or after 1 July 2007 these requirements have been changed. Paragraph Aus9.1 has been deleted and revised paragraphs 9, 10 and 11 added which REQUIRE consolidated financial statements to be prepared by any parent entity that is a reporting entity unless they can take advantage of various exemptions listed in paragraph 10. There is no exemption available for the ultimate Australian parent company when either the parent, the group or both are reporting entities.

A compiled version of AASB 127 incorporating these changes is available on the AASB website.

Therefore, if your parent entity (being the ultimate Australian parent) is a reporting entity it will be REQUIRED to produce a consolidated financial report (with comparatives) for periods commencing 1 July 2007.
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Accounting Day is an essential day for professionals in small to medium enterprises to be up to date with financial reporting. The day offers three sessions:

Session 1 - Accounting Update
This session will explore the new and current accounting requirements such as the new cut off requirement for small to medium enterprises, new upcoming exposure drafts and their implication for future financial reports.

Session 2 - Accounting for Not for Profits - a practical perspective
This session will provide participants with an understanding of the special rules within AIFRS for not for profit entities.

Session 3 - Accounting for Small to Medium Enterprises - a practical perspective
This session will look at particular standards such as Business Combinations, Income Taxes and Financial Instruments for profit small to medium enterprises.

The event will take place next week for readers in Sydney and Brisbane, so it is imperative to register as soon as possible. Please refer to the Accounting Day webpage to register your seat today. The event date of each location is as follows:

• Sydney – 14 November 2007
• Brisbane – 15 November 2007
• Adelaide – 19 November 2007
• Melbourne – 21 November 2007
• Perth – 22 November 2007

Outlined below are the comment closing dates for all current exposure drafts. Members are encouraged to prepare their own submission on each document and submit them to the Institute no later than one week before the closing date shown.

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.

30 November 2007
AASB ED 157: Joint Arrangements'
AASB ED 158: 'Proposed changes to AASB 139'
AASB ED 159: 'Proposed Improvements to Australian Accounting Standards'
AASB Consultation Paper on Consolidation of Subsidiaries by Superannuation Entities
IAASB Consultation Paper on Proposed Future Technical Strategy 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"
IASB ED ‘Proposed Improvements to International Financial Reporting Standards’

Technical Query Service
The Institute's Reporting and Assurance 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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The Reporting and Assurance team comprises, Jeanette Dawes CA, Roslyn Hatton CA, Kerry Hicks CA, Claire Locke CA, Stephanie Kemp CA, Andrew Stringer; Benjamin Lau, Jane Ma and Adrian Tam - Reporting and Assurance Assistants. [ANT44_07_11_09.doc]