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Welcome to the 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. Still time to have a say on not-for-profits
As reported in ANT01/2008, the Australian Accounting Standards Board (AASB) recently issued Invitation to Comment ITC 14 "Proposed Definition and Guidance for Not-for-Profit Entities" exploring whether clarification and/or guidance is required in the determination of a 'not-for-profit entity'.
The Institute is inviting readers to complete a quick survey, the outcomes of which will form the basis of the Institute's submission on the ITC and assist the AASB to provide improved guidance for this sector. The survey closes 15 February 2008.
Background information to assist you to complete the survey is available here.
The survey is available here.
2. What's new in Charter – February 2008
This month's Charter magazine contains:
- our regular roundup of financial reporting and assurance news "The Panel"
- an explanation of the workings of the Companies Auditors and Liquidators Disciplinary Board by Stephen Newman of Cornwall Stoddart Lawyers and
- a review of the needs of the users of 'not for profit' financial statements by the CEO of Philanthropy Australia, Gina Anderson
These can be found on pages 64-68 of February's Charter.
3. AASB meeting agenda – 7 February 2008
The next meeting of the Australian Accounting Standards Board (AASB) will be held in Melbourne on 7 February 2008. Items listed for consideration on the agenda include:
- adoption of IFRS 3 "Business Combinations" and IAS 27 "Consolidated and Separate Financial Statements" (revised)
- draft submissions to the IASB on cost of investment ( ED 160)
- issues paper on measurement of defined benefit obligations relating to superannuation plans and ADFs
- criteria for determining differences from IFRS for not-for-profit entities
- current IFRIC draft interpretations
- draft preface to IPSAB ED – social benefits
- IASB Concepts Project – progress discussion
- options for progressing non-exchange income project
- proposed amendments to IAS 1 and IAS 32 – puttable financial instruments
The agenda can be downloaded from the AASB website.
4. Standard Business reporting – update
This week, members of the Institute participated in a consultative workshop together with Treasury and the Australian Tax Office (ATO) in order to provide feedback on streamlining business reporting to government.
This occurred following the media release issued by the government on 25 January 2008 announcing a tender program for the standard business reporting core services infrastructure.
The Rudd government remains committed to the red tape reduction program and envisages benefits to business of up to $795 million annually as a result of the Standard Business Reporting (SBR) program.
For more information on SBR, visit the Institute's SBR website.
5. IFRIC meeting update – 10-11 January 2008
The International Financial Interpretations Committee (IFRIC) met in London on 10 and 11 January 2008. They discussed the following matters, which are also contained in the January IFRIC update.
IFRIC D21 Real Estate Sales
No decisions were made at this meeting.
IFRIC D22 Hedges of a Net Investment in a Foreign Operation
The IFRIC directed the staff to prepare a comprehensive example which will be considered in more detail before further decisions are made.
IAS 19 "Employee Benefits" – Settlements
The IFRIC discussed whether to add to its agenda a question about whether some payments of benefits under a defined benefit plan are settlements defined in IAS 19. The IFRIC directed staff to consult further.
IAS 37 "Provisions, Contingent Liabilities and Contingent Assets" – Deposits on returnable containers
The IFRIC had already decided not to add the issue to its agenda in November 2007. However, the wording for that decision will be amended.
IFRIC agenda decisions
The IFRIC decided not to add the following items to the agenda and published its reasons:
- IAS 19 "Employee Benefits" – death in service benefits
- IAS 19 "Employee Benefits" – definition of plan assets
- IAS 23 "Borrowing cost" (Revised) – foreign exchange and capitalisable borrowing costs
The IFRIC decided to ask the Board to clarify:
- IAS 39 "“Financial Instruments: Recognition and Measurement" – scope of IAS 39 paragraph 2(g)
Tentative agenda decisions:
IAS 7 Statement of Cash Flows – classification of expenditures
The IFRIC tentatively decided not to add this to its agenda because the matter can best be resolved by the IASB amending the wording of IAS 7 to clarify that only a cash outflow that results in a recognised asset can be classified as investing.
6. IPSASB revises guidance for grants and external assistance
The International Public Sector Accounting Standards Board (IPSASB) has issued new requirements to assist governments and public sector entities report international aid, development grants and other forms of external assistance.
The new requirements are set out in the revised International Public Sector Accounting Standard, "Financial Reporting under the Cash Basis of Accounting" (Cash-Basis IPSAS), which can be downloaded free-of-charge from the IFAC online bookstore.
The new requirements are aimed at reducing the multiple reporting practices between providers and recipients of external assistance, so that the recipients can use their resources more efficiently and help public sector entities improve their accountability.
The new disclosure requirements and recommendations are effective for reporting periods beginning on or after 1 January 2009.
7. Forum of firms established
Seventeen international networks of accounting firms, whose member firms perform transnational audits, have become the first full members of the Forum of Firms, which operates under the auspices of the International Federation of Accountants (IFAC). The Forum of Firms is responsible for performing audits of financial statements that are, or may be, used across national borders.
This commitment to the Forum by the seventeen networks is a major step towards consistent cross-border audit quality and these actions are indicative of the networks’ dedication to achieving a convergence of the various national audit standards to ISAs.
It is the Forum's goal to promote consistent and high quality standards of financial reporting and auditing practices worldwide. This is a significant landmark in the reduction of complexity in audits, and it is hoped that audits will be made more timely and efficient as a result of this move.
Changes to audit report wording (part 1)
Q: I've noticed that the new mandatory audit reports are now quite different in structure to those of the old AUS 702 and extend beyond changing "should to shall" which I understood to be the main "force of law" change. Can you give me some background to the changes please?
A: When the AUASB issued a revised version of ASA 700 as part of its new force of law suite of standards the changes it made were not purely those required to implement "force of law" requirements ie changing "should to shall".
It also took the opportunity to incorporate into our audit report format international best practice changes that had occurred since its predecessor AUS 702 was last revised. The changes followed the release by the International Auditing Standards Board of its revised version of ISA 700 "The Independent Auditors Report on a complete set of General Purpose Financial Statements" which became operative in late 2006.
The main changes were:
- splitting the auditing standard into 2 parts – ASA 700 dealing with "clean audit reports" and ASA 701 dealing with "modified audit reports" and
- inserting additional mandatory requirements that changed the form and content of the specimen audit reports
These latter changes included replacing the old "Scope" paragraph in AUS 702 with two paragraphs that more clearly explain the Directors' Responsibility for the Financial Report and the Auditor's Responsibility and an opening paragraph that more directly refer to the contents of the financial report being audited. The audit opinion wording has also been changed to either "gives a true and fair view" or "presents fairly in all material respects".
For audits conducted under the provisions of the Corporations Act, there is a further paragraph addressing the auditor’s obligations to comply with the independence requirements of the Corporations Act.
A summary of all the changes made between AUS 702 and ASA 700 is included in the explanatory statement that is attached to ASA 700.
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.
13 February 2008
AASB ED 160 Proposed amendments to IFRS 1 and IAS 27 – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate
15 February 2008
AUASB ED Proposed ASAE 3100 "Compliance Engagements"
29 February 2008
AASB ED 161 Proposed Amendments to AASB 2 and AASB Interpretation 11, Group Cash-settled Share-based Payment Transactions
31 March 2008
AASB ITC 14 "Proposed Definition and Guidance for Not-for-Profit Entities"
For further exposure drafts, refer to our exposure drafts webpage.
National Audit Conference
Throughout April in Brisbane and Sydney
The only constant for the auditing profession is change. As standards, legislation and compliance issues continually evolve, this conference provides the latest facts, insights and opinions for auditing professionals.
New Employees Workshop 2008
Throughout February in Brisbane, Melbourne, Sydney, Parramatta, Newcastle, Tamworth & Albury. Five day workshop.
Give your new employees the practical experience and real-life skills they need to deliver professionally at the New Employees Workshop.
Accounting & Auditing for the Aged Care Industry Seminar
Throughout March in Brisbane, Melbourne, Sydney, Adelaide & Perth.
Are you an accountant or auditor for the aged care industry? Acquire essential information and advice to fully interpret relevant accounting standards for your business, clients and staff.
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.
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.
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