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Welcome to the twelfth 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. Not-for-profit submission lodged
The Institute has lodged its submission on ITC 14 Proposed Definition and Guidance for Not-for-Profit Entities. Regular ANT readers will remember that in February we conducted a member survey to gain input into our submission on this Invitation to Comment.
From the level of responses, we could see that there is a high level of interest in this topic among our members and a general feeling that the definition of a not-for-profit needs to be clarified. Views were mixed, however, on whether Australia should change to the New Zealand “public benefit entity”.
Thank you to all our members who took the trouble to participate in this survey.
The full submission can be viewed online at the Institute website.
2. Customer contributions submission lodged
The Institute and CPA Australia have lodged their joint submission to the IASB and AASB on IFRIC Proposed Interpretation D24 Customer Contributions. In our view, D24 as drafted is not flexible enough to cope with the variety of contracts that are in use at present, including those that are the subject of the AASB’s Interpretation 1017 Developer and Customer Contributions for Connection to a Price-Regulated Network, and we would prefer to see an interpretation that is far more principles-based.
The final submission can be viewed online at the Institute website.
3. Institute releases report on the governance of superannuation funds
Late last year, the Institute and Deloitte conducted a survey to understand the current governance practices of Australian superannuation funds and to identify and recommend further improvements where appropriate.
The survey revealed that since the Registrable Superannuation Entity (RSE) licensing regime was introduced in 2004, the majority of superannuation industry experts believe that discipline around governance practices has tightened and that standards have improved.
The report based on the survey, entitled The Governance of Superannuation Funds – three years on from trustee licensing is available for download.
4. Corporate Reporting Discussion Group – 21 April 2008
The Institute is hosting the next Sydney Corporate Reporting Discussion Group (formerly Sydney AIFRS Discussion Group for CABs) meeting on Monday 21 April 2008 at its Sydney office at 33 Erskine Street, Sydney.
The meeting will be chaired by David Southwell, Senior Manager for Group Reporting at Insurance Australia Group. The discussion topic will be on practical issues arising out of impairment in light of recent changes in the Australian and International climates.
There will be a panel of three guest speakers at the forum, each presenting from a different perspective:
- Tanya Branwhite, Divisional Director – Strategy, Macquarie Bank
- Ishwar Madhyastha, Partner, Ernst & Young
- Vik Bhandari, Executive Director – Assurance & Advisory Business Services, Ernst & Young
Tanya will speak from an analyst’s perspective on the impact of changes in the current Australian and international market climate upon asset valuations. Ishwar will approach the topic from a valuation expert's point of view, and will include discussion of various methods of valuation and accounting for impairment loss. Vik will present from an accounting perspective and will discuss how accountants in practice treat impairment testing and disclosure.
The lunchtime meeting will begin at 12.30pm at the Level 1 Conference Centre and conclude at 2:00pm. If you wish to attend this forum, please send your name, member number, position and organisation to jane.ma@charteredaccountants.com.au by 16 April 2008.
5. AASB meeting agenda – 17 April 2008
The next meeting of the Australian Accounting Standards Board (AASB) will be held on 17 April 2008 in Melbourne. Items to be discussed include:
- consideration of an issues paper on measurement of defined benefit obligations
- consideration of submissions on the IFRIC draft interpretations
The agenda can be downloaded from the AASB website.
6. AASB releases IASB discussion paper on financial instruments
The AASB has released the IASB Discussion Paper on ‘Financial Instruments with Characteristics of Equity’.
The Discussion paper was released by the IASB in early March (refer ANT08: 7 March 2008) in response to criticism by stakeholders that the principle in IAS 32 is difficult to apply and could lead to inappropriate classification of some financial instruments.
Comments are due to the AASB by Friday 1 August 2008, with comments due to the IASB by 19 September 2008. Constituents are asked to respond to both the IASB and FASB documents.
The Institute will be preparing a submission on this discussion paper, which will be available on our website in draft form in due course. Members are encouraged to prepare their own submissions to the AASB but are welcome to forward comments for inclusion in the Institute submissions to techsubmissions@charteredaccountants.com.au prior to 22 July 2008.
7. IASB discussion paper for post employment benefits
The International Accounting Standards Board (IASB) has released for public comment a discussion paper titled ‘Preliminary Views on Amendments to IAS 19 Employee Benefits’.
The paper is a response to concerns from stakeholders that the accounting model set out in IAS 19 is inadequate and sets out the IASB’s preliminary views on how the accounting for some post-employment benefits could be improved.
Key areas include:
- Removal of the options for the deferred recognition of gains and losses in defined benefit plans; and
- Introduction of new classifications of benefit promises and include new measurement attributes for these new classifications to allow the requirements to cope with those benefits that include a promised return on contributions based on an asset or index.
These changes are expected to be a valuable starting point in the IASB’s plans to improve the quality and comparability of post-employment benefit reporting.
Comments are requested by 26 September 2008. The IASB then intends to release an ED of proposed amendments to IAS 19, with a view to issuing a revised standard in 2011.
To view the media release and download the discussion paper, go to the IASB website.
8. XBRL taxonomy
The International Accounting Standards Committee (IASC) Foundation’s XBRL Team has announced the release of the near-final version of the IFRS Taxonomy 2008.
The IFRS Taxonomy 2008 is a complete translation of International Financial Reporting Standards (IFRSs) – as published in the IFRS Bound Volume 2008 –into XBRL, an eXtensible Markup Language (XML) language that is used to communicate information between businesses. The IFRS Taxonomy 2008 is published in the same languages as the IFRS Bound Volume 2008, and represents a complete review of past taxonomies.
Interested parties are invited to access the near-final version of the IFRS Taxonomy 2008 and send comments by 30 May 2008. It is freely available on the IFRS XBRL Website. The final version is expected to be released at the end of June 2008 and will also be freely available.
A copy of the press release can be viewed online here.
9. ASIC issues report on relief applications
The Australian Securities and Investments Commission (ASIC) has released a report titled ‘Overview of decisions on relief applications (September to November 2007)’ which outlines it’s recent decisions on applications for relief from the corporate finance, financial services and managed investment provisions of the Corporations Act between 1 September and 30 November 2007.
The report can be viewed on the ASIC website or by calling ASIC’s Infoline on 1300 300 630.
10. Changes to class order 98/1418 relief and new class order relief for disclosing entities
ASIC has announced a number of changes to Class Order 98/1418 Wholly-owned entities, which will enable more companies to rely on the relief and reduce the administrative work for group companies.
Additionally, ASIC has announced new relief under Class Order 08/15 Disclosing entities – half-year financial reporting relief. CO 08/15 relieves a disclosing entity from the requirement to prepare and lodge a half-year financial report and directors’ report during the first financial year of the entity, where that first financial year lasts for eight months or less.
For further details, see the media release on the ASIC website.
Professional and Ethics News | |
11. IFAC seeks nominations for 2009 IESBA members
IFAC is seeking nominations from its member bodies for 2009 members of the IESBA and other IFAC boards and committees, as well as for the position of IFAC Deputy President. Two positions on the IESBA are also open to nominations from the Forum of Firms (through the Transnational Auditors Committee).
For more information on the nominations process and the positions available, visit http://www.ifac.org/nominatingcommittee.
Changes in Audit Appointments
Q: The new auditor of my former audit client has approached me, requesting access to my audit work papers in order to avoid qualifying his report on the basis of opening balances. What information am I required to share with the new auditor?
A: N1 “Books and Papers”, the Institute guidance statement specifically dealing with this topic, makes it clear at paragraph 3 that the auditor's working papers are the property of the auditor. Therefore, the provision of access to anyone else is entirely a matter for the outgoing auditor to decide, provided that there is no overriding statutory requirement. Client consent to providing information is essential.
However, several other professional pronouncements and Institute regulations provide guidance on the appropriate procedures for transitional arrangements between auditors, and members should consider these requirements before making their decision.
In particular, reference should be made to:
- Auditing Guidance Statement AGS 1004 “Transitional arrangements on changes in audit appointments under the Corporations Act 2001”
This pronouncement outlines the responsibilities of both incoming and outgoing auditors under the Corporations Act. It is still in force because its requirements were unchanged by the amendments to that Act and the “force of law” auditing standards. Paragraph 13 states that there is no obligation for the outgoing auditor to respond to any inquiries made by the incoming auditor – other than those of an ethical nature as required in APES 110 “Code of Ethics for Professional Accountants” – paragraph 210.10 onwards. However, the AGS does acknowledge that it may be appropriate for the incoming auditor to be provided with assistance in such areas as documentation of internal control and assessment of risk.
- R9 “Regulations relating to public practice”
This regulation outlines the professional regulations applying to public practices. Paragraph 1215 contains the commentary that “following the appointment of another auditor, the outgoing auditor does not have any obligation to provide such information and advice to the incoming auditor as will enable the incoming auditor to substantiate the existence and value of assets and liabilities as at the end of the previous financial year. However, the outgoing auditor is encouraged to do so as a professional courtesy and with the knowledge and consent of the client. The audit working papers of the outgoing auditor are the property of that auditor and there is no obligation to make available any information contained therein.”
- AGS 1038 “Access to Audit Working Papers”
Paragraphs 41 and 42 address this issue. Paragraph 41 mentions that “The financial report on which the recently appointed auditor reports is affected by the account balances brought forward from the previous reporting period on which the outgoing auditor issued an audit report. Consequently, the new auditor will need to form a view about whether the opening balances for the year are fairly stated in accordance with Auditing Standard (AUS 510) Initial Engagements–Opening Balances; accordingly, it is for this purpose access to the outgoing auditor’s audit working papers may be sought.” (Note: the reference to AUS 510 should now be to ASA 510 “Initial Engagements – Opening Balances”.)
Paragraph 42 – “Where the outgoing auditor agrees to provide the recently appointed auditor access to the auditor’s audit working papers, such access ordinarily involves an exchange of letters between the two auditors.”
To this end, AGS 1038 provides assistance by way of specimen letters setting out appropriate terms and conditions to formalise the inspection process. It also considers client consent to be an essential requirement of the information sharing process.
- APES 110 “Code of Ethics for Professional Accountants”
Section 210 deals with changes in professional appointments. This section makes it clear that the extent to which a practitioner can and should discuss the affairs of his or her client will depend on both whether the client’s permission has been obtained, and any other legal or ethical requirements.
In summary, audit working papers are the property of the auditor and therefore it is entirely up to the discretion of the outgoing auditor as to what, if any, material is shared with the incoming auditor.
However, the Institute encourages such sharing of information (provided client permission is granted) in the interests of professional courtesy and risk management.
If material is shared, the duties of the incoming auditor are not reduced by the involvement of the outgoing auditor. The incoming auditor must carefully consider the requirements of ASA 710 “Comparatives”, particularly paragraphs 20 and 21 which deal with the situation where the prior period financial report was audited by another auditor, as well as ASA 510 “Initial Engagements - Opening Balances” and ASA 600 “Using the Work of Another Auditor”.
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.
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
IFRIC 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.
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.
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.
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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