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Welcome to the ninth 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. Feedback sought on proposed rules for
dividend accounting
The recently released IFRIC D23 Distributions of
Non-cash Assets to Owners proposes to resolve some of
the complex issues that arise when entities pay non-cash
dividends to their owners. The International Financial Reporting
Interpretations Committee (IFRIC) has received feedback that
a variety of different practices occur in this area
internationally and so is proposing a new Interpretation to
give certainty to accounting for these transactions. The
Institute is seeking feedback on these proposals to ensure
that issuing this Interpretation is in the best interests
of the Australian economy.
The Interpretation requires that dividends must be booked
when declared (i.e. become a present obligation) at the
fair value of the non-cash assets (regardless of type) to
be used to settle the dividend. If the fair value is more
than the carrying value at the time of the declaration,
then this difference must be taken to the income statement
at that time. The only dividends to be excluded form this
interpretation will be common control transactions, i.e.
those in which the assets remain under the common control
of the same parent, both before and after the transaction.
IFRIC is also proposing that IFRS 5 Discontinuing
Operations be amended so that the assets affected by a
dividend proposal are captured by this standard. IFRS 5
would require reclassification of the assets as no longer
available for use when the transaction is highly probable
and the entity is committed.
The Institute is preparing a submission to the AASB by 7
April 2008 to enable the AASB to meet the IASB’s
deadline of 25 April 2008. Our preliminary view is that we
do not support the interpretation.
The draft submission on IFRIC Draft Interpretation D23
Distributions of Non Cash Assets to Owners can be
viewed on the Institute website. If you have comments
on this matter, please email techsubmissions@charteredaccountants.com.au.
A copy of IFRIC D23 is available on the IASB website.
2. Institute attends AASB roundtables for
not-for-profits
The Institute participated in the Australian Accounting
Standards Board’s (AASB) Not-for-Profit roundtables held in
both Sydney and Melbourne this week, to discuss the ITC 14
Proposed Definition and Guidance for Not-for-Profit
Entities. Participants represented the accounting bodies,
accounting firms, the public sector, churches and
philanthropic groups.
There was support for the project overall, but no clear
mandate for a change to the New Zealand "public benefit
entity" terminology. A common theme amongst participants
seemed to be that a not-for-profit (whatever it is actually
called) is distinguished by the fact that it either does
not have equity holders, or is set up so that it is
prevented from providing a financial return to equity
holders – rather, any surplus is applied to it’s charitable
purposes or reinvested in providing it’s services.
There is one more roundtable still to go in Canberra on 17
March 2008.
The Institute has drafted a submission to the invitation to
comment on ITC 14 Proposed Definition and Guidance for
Not-for-Profit Entities. It can be viewed on the Institute website.
3. Your input needed on customer
contributions interpretations
The Institute has jointly drafted a submission with CPA
Australia on IFRIC Draft Interpretation D24 Customer
Contributions and we have included this on the Institute website for your input. We
have supported the issue of an international interpretation
on this topic, which will result in the removal of the
Australian UIG Interpretation 1017 Developer and
Customer Contributions for Connection to a Price-Regulated
Network. However, we consider the interpretation needs
to be principles-based in order to consider the extent of
different transactions, rather than taking a
one-size-fits-all approach to revenue recognition.
Comments can be made through the
Institute website.
4. AASB issues omnibus standard 2008-2
The AASB has released AASB 2008-2 “Amendments to Australian
Accounting Standards – Puttable Financial Instruments and
Obligations arising on Liquidation”. This Omnibus-amending
standard makes amendments to AASB 7, 101, 132, 139 and
Interpretation 2, in response to the issue of amendments to
IAS 32 ‘Financial Instruments: Presentation’ by the IASB in
February 2008, which were approved by the AASB last week
(ANT08/2008).
The standard amends the definition of a financial liability
in AASB 132 by introducing an exception that will allow
certain puttable financial instruments and other
instruments to be classified as equity, if they impose on
an entity an obligation to deliver to another party a
pro-rata share of the net assets of the entity only on
liquidation of the entity.
As noted in last week’s ANT (ANT08/2008), this will mean
that entities with limited lives (such as trusts) may be
able to reclassify amounts received from members (such as
unitholders funds) from liabilities to equity under
specific circumstances.
The standard is applicable to annual reporting periods
beginning on, or after, 1 January 2009, with early adoption
allowed. It is available for download on the AASB
website.
5. AASB Action Alert – 7 March 2008
The AASB has released its latest Action Alert (No. 11)
detailing the outcomes of its latest meeting on 5-6 March
2008 on its website.
For a summary of the meeting highlights, refer to last week’s ANT.
The next meeting of the AASB will be held on 17 April 2008.
Auditing & Assurance
News | |
6. AUASB releases GS 007
The Auditing and Assurance Standards Board (AUASB) has
released Guidance Statement 007 (GS 007) “Audit
Implications of the Use of Service Organisations for
Investment Management Services”. It will be operative for
periods commencing on, or after, 1 July 2008.
GS 007 will replace AGS 1026 “Superannuation Funds –
Auditor Reports on Externally Managed Assets”, which is to
be withdrawn on 1 July 2008, and AGS 1042 “Reporting on
Control Procedures at Outsourcing Entities” to the extent
that it applies to investment management services. AGS 1042
will be amended on 1 July 2008 to apply only to services
other than investment management services.
The Guidance Statement has been formulated to provide
guidance to user auditors – where the client uses a third
party service organisation to provide investment management
services. It also provides guidance to service auditors –
who report on controls and/or special purpose financial
reports for which investment management services are
provided by the service organisation.
GS 007 can be downloaded from
here.
7. FRC meeting highlights – 12 February
2008
The first Financial Reporting Council (FRC) meeting for
2008 was held in Melbourne on 12 February 2008, with
Jeffrey Lucy as the chairman. The matters discussed at the
meeting include:
- the performance of the FRC’s auditor independence
function
- the ongoing financial contributions of the professional
bodies
- proposed changes to the governance structure for the
FRC, AASB and the AUASB
- a new business plan programme for the FRC, the AASB and
AUASB
- the 2008 Ken Spencer Memorial Lecture
- reports from standard setters and committees such as
AASB, AUASB, FRC Finance committee etc.
In addition, the FRC confirmed its December 2006 decision
that GAAP/GFS harmonisation at the government department
level is to be expected to be delivered by 2010.
More details are contained in the Bulletin on the FRC website.
Financial Statements
Q: I’ve heard that the recent changes to AASB 101 mean
that the names of the financial statements are changing
again. Is that true?
A: Yes and No! The September 2007 revisions to ‘AASB
101 Presentation of Financial Statements’ do include a
number of changes to the names of financial statements.
These changes were a response to the IASB’s revision of IAS
1 and represent stage 1 of a major financial statement
presentation project the IASB is undertaking with the US
FASB. They were exposed here in early 2007 as ED 148, and
the new standard is applicable for financial years
beginning on, or after, 1 January 2009 – although it can be
adopted early.
In order to align our standards with their revised
international counterparts, the standards will now refer to
a balance sheet as a Statement of Financial Position, the
terms “financial report” and “general purpose financial
report” will be replaced by "financial statement” and
“general purpose financial statement”, and the income
statement will now be referred to as the “Statement of
Comprehensive Income.”
However, since the changes in wording are only being made
within the accounting standards themselves, there is no
requirement to adopt the new terminology in financial
reports produced in accordance with the standards.
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 techsubmissions@charteredaccountants.com.au
no later than one week before the closing date shown.
26 March 2008
AASB – IFRIC Draft Interpretation D24 ‘Customer
Contributions’
31 March 2008
AASB ITC 14 “Proposed Definition and Guidance for
Not-for-Profit Entities”
4 April 2008
APESB ED 07/07 “APES 225 Business Valuation”
7 April 2008
AASB – IFRC Draft Interpretation D23 ‘Distributions of
Non-cash Assets to Owners’
11 April 2008
NSW Office of Fair Trading Associations Incorporation Bill
2008 Exposure Draft
25 April 2008
IFRC Draft Interpretation D23 ‘Distributions of Non-cash
Assets to Owners’
IFRIC Draft Interpretation D24 ‘Customer Contributions’
30 April 2008
APESB ED 01/08 “Compilation of Financial Information”
This list does not represent a complete list of the EDs
on issue. For all other open exposure drafts, refer to our
dedicated
exposure draft website.
Audit Conference
Brisbane - Monday, 31 March - Tuesday, 1 April
2008
Sydney - Monday, 7 April - Tuesday 8 April 2008
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.
Audit of Self Managed Superannuation Funds
Workshop
Throughout May and June in Brisbane,
Melbourne and Sydney.
Now that there are competency requirements for auditors of
self managed super funds, don’t miss out on ensuring your
audits are compliant with the regulatory requirements.
Audit of Self Managed Superannuation Funds
Update
Throughout May and June in Brisbane,
Melbourne, Adelaide, Perth and Sydney.
For those who attended the Audit of Self Managed Super
Funds Workshops in 2007, the Audit of Self Managed Super
Funds Workshops Update will give you thorough knowledge of
the final competency requirements in just a few hours to be
ready for 1 July 2008.
Business Forum 2008
Throughout April, May and June in Brisbane,
Melbourne, Sydney, Adelaide, Perth and Canberra. What's
your strategy for the year ahead? Join industry leaders and
your peers as vital topics are addressed, key technical
updates explored, and new ideas and options examined.
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.
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and Assurance Team of the Institute of Chartered
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