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Welcome to the eleventh 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. What’s new in April Charter
This month’s ‘Technical Focus’ section of Charter includes:
- a detailed worked example of cash flow hedging by Patricia Stebbens of KPMG
- the results of the field testing of the application of the IFRS for SME standard to Australian entities commissioned by the Institute and performed by Rob Mackay of Moore Stephens
- an update on the activities of the Australian Professional and Ethical Standards Board (APESB) by the Board’s senior project manager Channa Wijesinghe
- our regular roundup of technical news in ‘The Panel’
These articles can be found on pages 62-73 of April’s Charter magazine.
Members now have free access to two databases provided by EBSCO. The Institute’s Knowledge Centre and its services are featured on pages 28-30 of April’s Charter.
2. IASB meeting update – 11-14 March 2008
The most recent meeting of the International Accounting Standards Board (IASB) was held on 11-14 March 2008 in London. The update summarising decisions of the Board is now available on the IASB website (pdf). Highlights of the meeting are as follows:
Annual improvements
The Board re-affirmed four of the ten proposed amendments published in the October 2007 exposure draft. The proposed amendments are: presentation of finance costs (IFRS 7), components of borrowing costs (IAS 23), measurement of subsidiary held for sale in separate financial statements (IAS 27) and disclosure of estimates used to determine recoverable amount (IAS 36). The Board discussed six other proposed amendments and tentatively decided to issue final amendments subject to drafting changes.
Financial statement presentation
The Board discussed its view that income taxes should be presented as a separate section in each of the financial statements rather than allocated as required by IAS 12 ‘Income Taxes’. The Board tentatively decided to issue an initial discussion document that explores and illustrates both views (separate income tax section and income tax allocation) in order to solicit comments on the issue.
Fair value measurement
The Board has decided not to establish a working group for the fair value measurement project. Instead, the Board will form an informal technical advisory group that will provide practical input on valuation issues.
IFRS for small and medium-sized entities
No decisions were made. The Board discussed the main issues raised in the submissions received on the exposure draft. The issues are summarised in the Update. The Board plans to review a revised draft standard in September or October of this year.
IAS 19 ‘Employee Benefits’
The Board decided to revise the definition of contribution-based promises to clarify that vesting and demographic risks do not preclude a benefit promise from being contribution-based.
First-time adoption of IFRSs
The Board tentatively decided to consider amendments to IFRS 1 raised by the Canadian Accounting Standards Board, including introducing a principle prohibiting retrospective estimates that could be affected by hindsight.
The next meeting of the IASB will be held on 14-18 April 2008.
3. IASB discussion paper ‘Reducing Complexity in Reporting Financial Instruments’
The Australian Accounting Standards Board (AASB) has released the IASB discussion paper ‘Reducing Complexity in Reporting Financial Instruments’ for comment. It is available for download from the AASB website (pdf) and comments to the AASB for input into an Australian submission are sought by 22 August 2008.
The existing requirements for the reporting of financial instruments are widely regarded as difficult to understand, interpret and apply and constituents have urged the IASB to develop standards that are principles-based and less complex.
The discussion paper examines the main causes of complexity under IFRSs today and concludes that the long-term solution is a single measurement principle for all financial instruments within the scope of a standard. However, many issues and concerns must be addressed before a general fair value measurement requirement could be introduced. Consequently, the paper suggests possible intermediate approaches that would improve and simplify measurement and hedge accounting requirements relatively quickly – including any or a combination of:
- amending the existing measurement requirements in IAS 39, for instance, by reducing the number of categories of financial instruments
- replacing the existing IAS 39 measurement requirements with a fair value measurement principle and some optional exceptions to fair value measurement
- simplifying hedge accounting
The discussion paper is the first step in an IASB project that would replace IAS 39. The IASB seeks views on possible long-term and intermediate approaches and possible alternatives on how it should proceed in developing new standards for reporting financial instruments that are principles-based and less complex. Comments are sought by 19 September 2008.
The discussion paper can also be downloaded from the IASB website.
4. IFAC survey on performance measurement in the public sector
The International Federation of Accountants (IFAC) is inviting professional accountants and others who work in the public sector to participate in an online survey on the ways in which public sector entities set objectives, measure performance, and report on results.
Currently, there is little information available about public sector performance measurement structures around the world. This global survey is designed to identify similarities and differences in performance measurement structures, and the extent to which these structures help public sector entities meet their objectives. The survey also seeks examples of strengths and weaknesses of performance measurement structures and what can be done to further improve the assessment, monitoring and reporting of financial and non-financial performance in the public sector.
The results of the survey will also assist IFAC’s Professional Accountants in Business Committee in considering specific public sector aspects when developing its principles-based guidance.
Responses are requested by 30 April 2008.
5. Release of revised AASB 3 and AASB 127
The AASB has issued a revised version of AASB 3 ‘Business Combinations’ and amended AASB 127 ‘Consolidated and Separate Financial Statements’, which clarifies some of the accounting requirements for mergers and acquisitions.
The revised standard is a result of the reissue of IFRS 3 ‘Business Combinations’ and IAS 27 ‘Consolidated and Separate Financial Statements’, details of which were outlined in ANT01/2008.
As a consequence of issuing AASB 3, the AASB has issued amending standard AASB 2008-3 ‘Amendments to Australian Accounting Standards Arising from AASB 3 and AASB 127’. These standards also ensure that Australian accounting standards continue to be aligned with the standards of the IASB. The revisions are effective 1 July 2009, with early adoption permitted for for-profit entities only. The AASB is conducting further research into the suitability of the revised AASB 3 requirements for mergers and acquisitions among not-for-profit entities.
The standards are now available on the AASB website.
6. IAASB reports on progress in achieving clarity and convergence
The International Auditing and Assurance Standards Board (IAASB) has released its 2007 annual report which highlights its work in enhancing the clarity of international standards and notes progress in achieving global convergence to international auditing standards. The report also details the IAASB’s consultation and outreach program and offers a preview of its proposed future strategy.
A central part of the IAASB work program throughout last year has been the redrafting of its international standards to make them clearer and to promote their adoption and translation. Seven final International Standards on Auditing (ISAs) and 21 exposure drafts were approved by the IAASB last year. The IAASB also announced that all final redrafted ISAs will be for periods beginning on or after 15 December 2009 and it plans to complete the redrafting of all ISAs by the end of 2008.
The report can be downloaded from the IAASB homepage. For more information, view the media release.
7. IFAC releases 2008 Handbook of Auditing, Assurance and Ethics
IFAC has released its 2008 Handbook of International Auditing, Assurance and Ethics Pronouncements. The handbook can be downloaded free-of-charge in pdf format from the IFAC online bookstore.
In addition, the 2008 Handbook of International Public Sector Accounting Pronouncements is currently being finalised and will be available for download from the IFAC bookstore later in March.
For more information, view the media release.
8. Emissions trading scheme discussion paper released
The Garnaut Climate Change Review has led to a recently released discussion paper on the framework for the design of an emissions trading scheme (‘ETS’) as well as the proposed features of an Australian model. It recommends an approach for Governments to consider in developing and delivering an effective ETS. The Review’s final report will be released later this year to provide recommendations on policies to the federal and state governments.
The executive summary and full paper can be found here.
Comments are sought by 18 April 2008.
The Federal Government has also announced a detailed timeline for a national carbon trading scheme which could be up and running by 2010. Climate Change Minister Penny Wong said a consultation paper would be released in July and legislation could be drafted by the end of the year.
For further details, see the media release (pdf).
9. ASIC relief for share and interest sale facilities
The Australian Securities and Investments Commission (ASIC) has announced class order relief from provisions of the Corporations Act to facilitate the operation of certain share and interest sale facilities. This relief is provided in ASIC Class Order CO 08/10 ‘Share and interest sale facilities’.
For further details go to the media release.
Financial statements
Q: How is the new “statement of comprehensive income” being introduced by AASB 101 different from the old income statement and is the change mandatory?
A: The change in the structure of the income statement being introduced by the recently reissued AASB 101 ‘Presentation of Financial Statements’ is mandatory and is more than a cosmetic change. It arises from a new requirement to present owner related changes in equity separately from non-owner changes in equity. The statement of comprehensive income can be presented in 2 parts (an income statement and a statement of comprehensive income) if preferred or simply as one statement disclosing total comprehensive income.
Revised AASB 101 is applicable for financial years beginning on or after 1 January 2009 and can be adopted early.
For more details on AASB 101 visit the Institute’s website (pdf) where there is an article summarising the new requirements.
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.
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
15 April 2008
AUASB ED 1/08 ‘Proposed Standard on Assurance Engagements ASAE 3500 Performance Engagements’ (Revision of AUS 806 and AUS 808)
18 April 2008
APESB Notice to Withdraw APS 8 ‘Statement of Management Consulting Services Standards’
22 April 2008
APESB ED 01/08 ‘Compilation of Financial Information’
25 April 2008
IFRC Draft Interpretation D23 ‘Distributions of Non-cash Assets to Owners’
IFRIC Draft Interpretation D24 ‘Customer Contributions’
This list does not represent a complete list of the exposure drafts on issue. For all other exposure drafts, refer to our exposure drafts webpage.
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.
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.
Accounting for Income Tax Workshop
Throughout May and June in Brisbane, Melbourne, Sydney, Adelaide and Perth. Prepared by Deloitte, this workshop will equip you with knowledge and tools to apply to your work place. Build on your understanding of accounting for income taxes (AASB 112) and identify your obligations in time for the June 2008 year-end.
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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