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1. What’s new in Charter – May 2008
This month’s ‘Technical Focus’ articles in Charter include: - our regular roundup of financial reporting and auditing developments in ‘The Panel’
- an explanation of the changes being introduced by the recent revision to AASB 101 ‘Presentation of Financial Statement’s by Kim Heng of KPMG
- an explanation of ASIC’s audit inspection program by Lee White, ASIC’s Chief Accountant
- an update on the IASB’s project to standardise the concept of ‘fair value measurement’ in IFRS by Anna Adamidis of Ernst & Young
These articles can be found on pages 60-66 of May’s Charter.
2. ED 162 Key Management Personnel Disclosures by Disclosing Entities released
As foreshadowed in ANT last week (ANT15/2008) the Australian Accounting Standards Board (AASB) has now released ED 162 ‘Proposed Amendments to Key Management Personnel Disclosures by Disclosing Entities’. This ED proposes exempting disclosing entities that are companies from the key management personnel (KMP) disclosures contained in AASB 124 ‘Related Party Disclosures’.
Currently both AASB 124 and the remuneration report in the directors’ report, prepared under the Corporations Act s.300A, require remuneration details to be specified for directors and executives of listed companies. For years commencing prior to 1 July 2007, a regulation permitted listed companies to report the information only in the remuneration report, provided the information was audited. The Simpler Regulatory System legislation removed that regulation for 30 June 2008 year ends.
Comments are open until 19 May 2008 and the Board expects that the revised standard will be applicable for annual reporting periods ending on or after June 2008.
The AASB has also released its latest on Action Alert (No. 113), which details the outcomes of its latest meeting on 17 April.
3. Specimen AASB/IFRS compliant financial reports
A range of specimen AASB/IFRS compliant financial statements are available to members to assist them in the preparation of financial statements for the year ended 30 June 2008. All have recently been updated to reflect all the changes that are applicable to this financial year (including AASB 7).
For details of what is available go to the Institute website.
Other freely-available material standard-specific material is linked from the part of the website dealing with that particular standard.
4. The Treasury revises “Uniform Presentation Framework” for AASB 1049
The Federal Treasury has recently revised and reissued its ‘Uniform Presentation Framework – April 2008’, which provides guidance on the common core of financial information to be presented by all levels of government in their budget papers.
The changes incorporate amendments approved by the Australian Loan Council in March 2002, March 2003 and March 2008, and in particular reflect changes made in response to the revision and release by the AASB of its revised government accounting standard AASB 1049.
The new standard aims to harmonise Government Finance Statistics (GFS) and Generally Accepted Accounting Principles (GAAP), thereby improving the clarity and transparency of government financial statements.
The Framework can be viewed on the Treasury website.
5. IASB meeting update – 15-18 April 2008
The latest International Accounting Standards Board (IASB) Update covering the proceedings of the April meeting is now available for download from the IASB website. The IASB met on 15–18 April and then met with the United States FASB on 21 and 22 April.
Significant points of discussion in the meetings included:
- SME project – the results of field testing were presented. Field testing covered 116 entities from 20 countries, including 3 entities from Australia. The main issues identified were the requirements to fair value financial assets, the annual reassessment of residual values of property plant and equipment, the extent of the disclosure requirements and the need for reference back to full IFRS.
- Revenue recognition – the Board discussed three chapters in its forthcoming discussion paper on revenue recognition. The IASB and FASB propose basing revenue recognition on the asset or liability arising from the rights or obligations in the contract with the customer.
- Cost of an investment in a subsidiary, jointly controlled entity or associate (AASB 1) – the 64 comment letters presented by staff were supportive of the ED’s proposals and the board reaffirmed its proposals. The amendments will be operative from 1 Jan 2009.
- IFRS 5 – the Board decided to embark upon a thorough review of IFRS 5 linking the idea of a discontinued operation to the concept of a segment per IFRS 8 and basing the amounts disclosed on the measurement requirements in applicable IFRS. This will result in a full exposure draft of a revised IFRS 5.
- Conceptual framework – FASB and the IASB continued to discuss the implications of the entity perspective for the conceptual framework. This means that the entity itself is the subject matter of financial reporting rather than the proprietors’ perspective which is currently in use in Australia.
- Response to the credit crisis – the FASB and the IASB have decided to review their standards to see whether improvements can be made to the regulatory environment. FASB is moving to eliminate the concept of a qualifying special purpose entity under FIN 46R and focus more on qualitative factors in assessing control and to review the disclosure requirements relating to off balance sheet activities. The IASB is reviewing fair value measurement, financial instruments, consolidation and derecognition and related disclosures.
6. AASB releases Service Concession Arrangements ITC
The AASB has now released as ITC 16 the International Public Sector Accounting Standards Board (IPSASB) consultation paper entitled ‘Accounting and Financial Reporting for Service Concession Arrangements’.
The paper identifies issues and provides proposals to be considered in the development of international guidance for grantors (typically public sector entities) of service concession arrangements.
The ITC is open for comment until 30 June 2008 in order to allow the AASB to prepare comments to meet the IPSASB’s August 1 deadline. Comments may be submitted to standard@aasb.gov.au.
Auditing & Assurance News | |
7. IAASB reissues standards on written representations and subsequent events
The International Auditing and Assurance Standards Board (IAASB) has released International Standard on Auditing (ISA) 580 (Revised and Redrafted), Written Representations, and ISA 560 (Redrafted), Subsequent Events. Both form part of the IAASB’s ongoing clarity project.
ISA 580 (Revised and Redrafted) has been revised to improve audit practice in the area of seeking written representations from management in relation to evidence supporting the audit opinion. In particular, the standard requires that the auditor request management to provide written representatives on two fundamental matters:
- that it has fulfilled its responsibility for the preparation and presentation of the financial statements
- that it has provided the auditor with all relevant information and that all transactions have been recorded and are reflected in the financial statements
The Standard also provides guidance on appropriate action by the auditor when such written representations are not provided by management or are considered unreliable.
ISA 560 (Redrafted) deals with the auditor’s responsibilities relating to subsequent events in an audit of financial statements and has been redrafted using the IAASB‘s clarity guidelines without introducing any substantive changes to them.
Both these standards are effective for audits of financial statement for periods beginning on, or after, 15 December 2009. Their revisions will be incorporated into the Australian standards when they are reviewed as part of the clarity review programme due to be completed in 2009.
The standards can be viewed in full on the IFAC online bookstore.
8. New IPSAS on Employee Benefits and Cash-Generating Assets
As part of its program to converge with International Financial Reporting Standards, the International Public Sector Accounting Standards Board (IPSASB) recently issued two new International Public Sector Accounting Standard (IPSAS):
- IPSAS 25, ‘Employee Benefits’, addresses reporting requirements for employee benefits by public sector entities, including a number of public sector specific issues.
- IPSAS 26, ‘Impairment of Cash-Generating Assets’, sets out procedures for reporting on impairment losses on assets held by public sector entities for primarily commercial reasons.
IPSAS 25 and 26 are effective for reporting periods beginning on, or after, 1 January 2011 and 1 April 2009 respectively.
9. Request for Comment on the review of the Legislative Instruments Act 2003
The Attorney-General's Department of the Australian Government has released an Issues Paper requesting comments by 9 May 2008 on the review of the Legislative Instruments Act (LIA) 2003.
The review is a broad consultation (given that the Act applies to all government rule-making) reviewing the operation of the LIA, whether the objectives of the LIA have been met and how the performance of the LIA may be improved. Information about the review, including the terms of reference, is available from the Attorney-General Department’s website.
The Institute will be preparing a submission on this review within the context of auditing standards and accounting standards (which are both legislative instruments), and while members are encouraged to prepare their own submissions, we welcome comments for inclusion in the Institute submission to techsubmissions@charteredaccountants.com.au prior to Tuesday 6 May 2008.
Professional & Ethics News | |
10. IESBA issues strategic and operational plan
The International Ethics Standards Board for Accountants (IESBA) has issued its 2008-9 ‘Strategic and Operational Plan’. Several new projects have been proposed, including:
- Developing additional guidance regarding the ethical responsibilities of professional accountants who encounter fraud and illegal acts; and
- Expanding the existing guidance for professional accountants who face conflicts of interest (e.g. information on the institutional mechanisms that can safeguard confidential information and assistance on managing conflicts).
In addition IESBA plans to improve the clarity of the IFAC’s ‘Code of Ethics for Professional Accountant’s and work towards establishing the Code of Ethics as a global benchmark in consultation with national standard setters and regulators.
The IESBA's ‘Strategic and Operational Plan 2008-2009’ can be downloaded in full from the IFAC online bookstore.
Audit reports for New Zealand companies
Q: As a member of the Institute of Chartered Accountants, can I sign audit reports for New Zealand companies?
A: Section 199(1) of the New Zealand Companies Act 1993 reads:
“A person must not be appointed or act as an auditor of a company unless: …
“(c) The person is a member, fellow, or associate of an association of accountants constituted outside New Zealand where -
“(i) the association is, by notice in the Gazette, approved for the time being for the purposes of this section by the Register; and
“(ii) The person is eligible to act as an auditor in the country, state, or territory in which the association is constituted.”
For the purposes of Section 199(1)(c), the register in New Zealand has gazetted the Institute of Chartered Accountants in Australia
However, while it is technically possible for a member of the Institute to sign a New Zealand audit report, the Institute would urge its members to use caution in accepting such an engagement. The Institute recommends that members seek specific New Zealand legal advice relating to their particular circumstances before accepting such an engagement. Members should also carefully consider whether their familiarity with the NZ reporting and legislative framework, auditing standards and tax legislation is sufficient to enable them to reduce the risk of failing to identify material errors and misstatements in the financial statements to an acceptable level.
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.
9 May 2008
Review of Legislative Instruments Act 2003
30 May 2008
AUASB ED 2/08 ‘Proposed Standard on Review Engagements ASRE 2400 Reviews of Financial Reports Performed by an Assurance Practitioner Who is not the Auditor of the Entity (Replacement of AUS 902)’
AUASB ED 3/08 ‘Proposed Standard on Review Engagements ASRE 2405 Review of Historical Financial Information Other than a Financial Report (Replacement of AUS 902)’
AUASB ED 4/08 ‘Proposed Amendments to ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity’
16 June 2008
AASB ITC 15 ‘Request for Comment on IPSASB Exposure Draft ED 34 Social Benefits: Disclosure of Cash Transfers to Individuals or Households and IPSASB Consultation Paper Social Benefits: Issues in Recognition and Measurement’
For further exposure drafts, refer to our exposure drafts webpage.
Business Forum 2008
Throughout May and June in 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.
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.
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