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Welcome to the twenty-first 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. Joint Submissions on AUASB EDs 2/08, 3/08 and 4/08 lodged
The Institute, CPA Australia and the National Institute of Accountants have jointly lodged a submission on the Auditing and Assurance Standards Board’s (AUASB) exposure drafts on:
- proposed amendments to ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity
- proposed standard on Review Engagements ASRE 2400 Reviews of Financial Reports Performed by an Assurance Practitioner Who is not the Auditor of the Entity
- proposed standard on Review Engagements ASRE 2405 Reviews of Historical Information Other than a Financial Report
The submissions support the AUASB’s proposed amendments to ASRE 2410 and commend the AUASB for the two proposed standards for review engagements to replace AUS 902 Review of Financial Reports.
The submissions are available for download from the Institute’s website .
2. IASB/FASB conceptual framework developments
The International Accounting Standards Board (IASB) and US Financial Accounting Standards Board (FASB) joint project to develop an improved conceptual framework has published two consultative documents seeking public comment on the first two of the eight phases of this project. They deal with the objectives and qualitative characteristics of financial information and the use of the reporting entity concept.
The first document is an exposure draft of the first two chapters of the framework which deal with an improved objective of financial reporting (Chapter 1) and the qualitative characteristics of information provided by financial reporting and the constraints on providing that information (Chapter 2). The second document sets out the board’s preliminary views on the reporting entity concept and related issues, a topic which was not previously been specifically addressed by the IASB framework.
The IASB and FASB invite comments on both documents by 29 September 2008. The Institute will be preparing submissions on these documents and interested parties are welcome to submit comments for inclusion to techsubmissions@charteredaccountants.com.au.
A full copy of the press release can be accessed via the IASB website.
3. IASB issues amendments to IFRS 1 and IAS 27
The IASB has issued amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards and IAS 27 Consolidated and Separate Financial Statements, which were exposed in Australia as ED 160 earlier this year.
The amendments allow first-time adopters to use a deemed cost of either fair value or the carrying amount under a previous accounting practice to measure the initial cost of investments in subsidiaries, jointly controlled entities and associates in the separate financial statements.
Of more significance to Australian entities already adopting IFRS are:
- The removal of the cost method definition from IAS 27, replacing it with a requirement to present dividends as income in the separate financial statements of the investor
- The requirement for a new parent in a group reorganisation to measure the cost of its investment in the previous parent at the carrying amount of its share of the equity of the previous parent
The revised versions of IAS 1 and IAS 27 will apply for annual reporting periods beginning on or after 1 January 2009. Equivalent revisions to AASB 101 and AASB 127 are expected to be considered for release in Australia by the AASB at its next meeting.
For further information on the amendments, see the IASB website
4. IASB concludes first annual improvements project
The IASB has recently concluded its first annual improvements project commenced in 2007 for the purpose of implementing necessary, albeit non-urgent, amendments to IFRSs that would not have otherwise be incorporated in another major project. The amendments have been released as a document titled ‘Improvements to IFRSs’, and are in 2 major categories:
- Accounting changes made for presentation, recognition or measurement purposes .There are 24 separate issues being amended affecting 15 different IFRS which are detailed in the press release
- Terminology or editorial changes that have a minimal effect on accounting
Unless otherwise stated, the amendments are effective for annual periods beginning on or after 1 January 2009, although entities are permitted to adopt them earlier. In accordance with our harmonisation commitments, the AASB is expected to consider this document for release in Australia at its next meting.
For further information, see the press release on the IASB website.
5. Standard Business Reporting Advisory Forum
On 2 June 2008 the Institute’s Head of Reporting, Kerry Hicks, participated in the second meeting of the Standard Business Reporting (SBR) Business Advisory Forum (BAF).
The Business Advisory Forum helps SBR stay in touch with the needs of Australian businesses and their intermediaries. The Forum provides input into SBR design, consultation, marketing and strategy implementation. Comprising representatives from industry groups and professional associations, the Business Advisory Forum sets and enhances public perceptions of the program, and communicates SBR direction and outcomes to the businesses and intermediaries they represent.
Areas discussed in the meeting included:
- the role and charter of the BAF
- timetable for SBR
- SBR activities since the last meeting
- Proposed government communiqué on SBR
- Feedback from workshops
- Recent international SBR/XBRL initiatives including the mandatory lodgement of XBRL financial statements for all US registrants (including FPIs)
- SBR messages, strategies and directions
- The process for dealing with issues raised by members of the BAF
- The need for SBR to be communicated through relevant organisations core training events
- SBR deliverables and the need for organisations and their members to be involved in workshops, authentication and user testing over the coming months
For more information on SBR, the terms of reference for the BAF, and to register your interest with the SBR team please refer to the SBR website .
If you would like to provide direct input to the Institute’s BAF member, regarding matters discussed above, or matters/issues that may emerge and that you wish to be brought to the attention of the BAF/SBR groups, or even volunteer to be involved in workshops, user testing, etc as an Institute representative please email techsubmissions@charteredaccountants.com.au
Auditing and Assurance News |
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6. AUASB meeting highlights
The Auditing and Assurance Standards Board (AUASB) met in Melbourne on Monday 2 June and Tuesday 3 June. Matters covered included:
- The Board discussed the proposed ASAE 3100 Compliance Engagements and agreed to make some minor amendments and change the application date to reporting periods or engagements commencing 1 October 2008, with early adoption permitted.
- The Board discussed the proposed Guidance Statement 008 Auditor’s Report included in the Annual Directors’ Report pursuant to s300A of the Corporations Act 2001 and agreed that presenting an opinion on the s300A requirements should be in a separate section after the auditor’s opinion (in accordance with paragraph 51 of ASA 700 The Auditor’s Report on a General Purpose Financial Report). The final Guidance Statement 008 will be considered and approved by the Board out of session and is expected to be issued late next week.
- Progress on the proposed Guidance Statement 009 Financial and Compliance Audits of Self Managed Superannuation funds was discussed. It is expected to be finalised at the 21-22 July AUASB meeting.
- Comment letters had been received in relation to the three most recent exposure drafts on review engagements (ASRE 2400, 2405 and 2410). The Board was informed that there is general support for all exposure drafts but some amendments have been suggested which will be considered by the staff and brought to the next AUASB meeting on 21-22 July.
- As part of the redrafting of ASAs under a new ‘clarity’ format, several ASAs were discussed including ASA 230 Audit Documentation, ASA 240 The Auditor’s Responsibility to Consider Fraud in an Audit of a Financial Report, ASA 260 Communication of Audit Matters with Those Charged with Governance and ASA 315 Understanding the Entity and its Environment and Assessing the Risks of Material Misstatement. The Board agreed to make some further minor amendments and will reconsider these ASAs for approval for exposure at the July 21-22 AUASB meeting.
- Key agenda items for the next International Accounting and Assurance Standards Board meeting were discussed including proposed ‘clarity’ versions of International Standards on Auditing (ISAs) ISA 700 The Independent Auditor’s Report on General Purpose Financial Statements, ISA 705 Modifications to the Opinion in the Independent Auditor’s Report and ISA 706 Emphasis of Matter and Other Matter(s) Paragraphs in the Independent Auditor’s Report
Other matters:
The Board was informed that ASIC Regulatory Guide 69 Debentures –Improving disclosure for retail investors was in the process of being redrafted by ASIC to establish the requirement to audit against each of the eight benchmarks outlined in the Guide. AUASB staff and Board members are assisting ASIC in this process.
7. AGM reform paper ‘Rethinking the AGM’
Chartered Secretaries Australia have recently released a paper 'Rethinking the AGM'. A roundtable was held in February and participants discussed whether the AGM achieves its intended objectives as part of the corporate governance framework, particularly in the light of declining attendance numbers. The paper sets out suggestions for reform of the AGM arising from the roundtable including:
- separating the deliberative and decision-making functions of the AGM through amendments to legislation
- provide different rules for AGMs of public listed companies compared to unlisted private companies
- extend the statutory time frame for holding an AGM
Areas identified to make the AGM more meaningful for shareholders included:
- encouraging committee chairmen to report to shareholder and answer questions in report
- encouraging directors standing for re-election to answer relevant questions from shareholders
You can download a copy of the paper at http://www.CSAust.com.
If you wish to make comments on the matters included in the paper, submissions should be sent to tim.sheehy@CSAust.com by the closing date, 2 July 2008.
Professional and Ethics News |
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8. APESB releases EDs 2/08, 3/08 and 4/08
ED 2/08, proposed standard APES 345 Reporting on Prospective Financial Information Included in a Disclosure Document replaces Professional Statement F.2 Prospectuses and Reports on Profit Forecasts. This standard incorporates ethical and professional considerations that will be applicable to members in public practice who undertake reporting service engagements for clients. These are engagements in connection with a Disclosure Document containing prospective financial information.
Comments are due by 16 July 2008.
ED 3/08, proposed standard APES 210 Conformity with Auditing and Assurance Standards replaces existing APES 410 of the same name. APES 210 has been updated to ensure the formality and structure of the document is in line with the conventions articulated in the Due process and working procedures document issued by APESB in November 2007.
Comments are due by 4 July 2008
ED 4/08, proposed Standard APES 215 Forensic Accounting Services outlines the mandatory requirements and guidance for members who provide forensic accounting services. The proposed standard will apply to members in public practice, as well as members in business - the previous standard only applied to members in public practice.
APES 215 has also been updated in accordance with recent court rulings concerning the conduct of forensic accountants and includes some mandated requirements that were previously only guidance under APS 11 Statement of Forensic Accounting Standards and GN 2 Forensic Accounting.
Comments are due by 29 August 2008.
9. Withdrawal of APSs 1, 2, 6 and 8
As announced in their 2 June Media Release, the APESB have announced that they are withdrawing APS 1 Conformity with Accounting Standards and UIG Consensus Views, APS 2 Terms of Engagement, APS 6 Statement of Insolvency Standards and APS 8 Statement of Management Consulting Services Standards effective from 1 July 2008.
For further details, go to http://www.apesb.org.au/media.php?id=22.
Statement of compliance with IFRS for Not-for-profit entities
Q: I’ve heard that there should be a statement of compliance with IFRSs in the financial report and auditor’s report. Do not-for-profit entities need to make this statement?
A: A statement of compliance with IFRS is required by paragraph 14 of AASB 101 Presentation of Financial Statements for entities that have compiled with IFRS, usually included in the accounting policy note. Not-for-profit entities are only required to make this statement if they have fully complied with IFRS. Special purpose financial reports are generally not compliant with IFRS and therefore are not required to make this statement.
Generally, for-profit entities producing general purpose financial statements will include a statement of compliance with IFRS because the AASB standards are equivalent to IFRS for for-profit entities. However, a number of the AASB standards include Aus paragraphs that contain requirements applicable only to not-for-profit entities, and which differ to IFRS. If one or more of these Aus paragraphs applies to a not-for-profit entity, it will have accounting policies that comply with the AASB standards, but are not in compliance with IFRS.
Paragraph 14.3 of AASB 101 allows for this situation, saying that a not-for-profit entity need not comply with the paragraph 14 requirement to make an explicit and unreserved statement of compliance with IFRSs. However, if a not-for-profit entity producing general purpose financial statements does not apply these Aus paragraphs and therefore does have the same accounting policies as a for-profit entity; it should make the compliance statement. This is on the basis that paragraph 14 of AASB 101 says that entities complying with IFRS should make this statement.
A list of the specific NFP requirements contained within the AASB standards is available on the AASB website under staff articles.
The statement of compliance with IFRSs is also now mirrored in the auditor’s report. The AUASB amended ASA 700 The Auditor’s Report on a General Purpose Financial Report in June 2007, requiring the auditor to state whether, in the auditor’s opinion, the financial report complies with IFRSs. This is only applicable where the entity has included a statement of compliance with IFRSs in the financial report. Not-for-profit entities that have not stated compliance with IFRSs should therefore have no mention of IFRSs in the auditor’s report.
The standards do not require not-for-profit entities to state that they have NOT complied with IFRSs, although some may choose to include this disclosure to assist their readers.
The important issue for the preparers and auditors of general purpose financial reports for not-for-profit entities is to ensure that:
- the financial report and auditor’s report do not state compliance with IFRSs in circumstances where a not-for-profit entity has applied accounting policies applicable only to not-for-profits
- a statement of compliance with IFRSs is included for those not-for-profit entities that have the same accounting policies as for-profit entities.
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.
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
30 June 2008
AASB ITC 16 Request for Comment on IPSASB Consultation Paper Accounting and Financial Reporting for Service Concession Arrangements
4 July 2008
APESB ED 03/08 Conformity with Auditing and Assurance Standards
15 July 2008
IPSASB ED 34 Social Benefits: Disclosure of Cash Transfers to Individuals or Households and IPSASB Consultation Paper Social Benefits: Issues in Recognition and Measurement
16 July 2008
APESB ED 02/08 Reporting on Prospective Financial Information Included in a Disclosure Document
This list does not represent a complete list of the exposure drafts on issue. For all other open exposure drafts, refer to our dedicated exposure draft website.
CFO of the Future Series
Throughout July, August, September, October, November, December in Sydney and Melbourne.
An invaluable opportunity for current CFOs or aspiring CFOs, to hear the latest, including updates on GST, stamp duties, CGT, property finance and risk management plus much more.
Audit Conference 2008 DVD
Canberra, 3-4 June 2008.
Recorded at the conference in April 2008, view highlight sessions at your convenience, including fraud, audit sampling, quality control, problem audit opinions and more.
Auditor Independence Checklist
Throughout June in Adelaide, Perth and Sydney.
Show ASIC and your clients that you and your firm are sufficiently independent when conducting audits, with this user friendly checklist.
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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