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Welcome to the twenty-second 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. Sydney Corporate Reporting Discussion Group – 30 June 2008
The Institute is hosting the next Sydney Corporate Reporting Discussion Group meeting on Monday, 30 June 2008 in its Sydney office at 33 Erskine Street.
The meeting will be chaired by David Southwell, Senior Manager for Group Reporting at Insurance Australia Group. The guest speaker will be Doug Niven (Deputy Chief Accountant, ASIC) who will speak about what preparers of financial reports need to focus on for 2008. In particular, Doug will address:
- ASIC's financial reporting surveillance programme
- Areas for focus given current market conditions
- Interpretation of the standards
- What to look for at 30 June 2008
- Recent ASIC class orders and guides
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 crdg@charteredaccountants.com.au by Wednesday, 25 June 2008.
2. Institute SME Audit Manual coming soon!
Later this month, the Institute will be launching an audit manual designed to assist audit practitioners, particularly those who deal with small- to medium-sized entities (SMEs), when applying the current Australian Auditing Standards (ASAs). The manual, which will be freely available on our website, provides a detailed analysis of the ASAs with an illustrative case study to further explain how the requirements apply to the audit of a SME. An accompanying toolkit, complete with forms, checklists and programs necessary for conducting an audit, will be available for purchase to supplement the manual. Training sessions will also be held later this year to support the manual’s implementation.
3. Erratum
In last week’s ANT, we informed you that the APESB are withdrawing APSs 1, 2, 6 and 8. APS 6 is, of course, Statement of Taxation Standards and not Statement of Insolvency Standards as stated. We apologise for any inconvenience caused.
4. AASB issues amendments to AASB 124
The AASB has released AASB 2008-4, Amendments to Australian Accounting Standard – Key Management Personnel Disclosures by Disclosing Entities, which amends AASB 124 Related Party Disclosures.
The changes allow all listed and unlisted public companies that are disclosing entities to only disclose the detailed remuneration of key management personnel in their directors’ report, and not duplicate the information in their financial report. For listed companies, this relief was previously contained in regulation 2M.6.04, which has been repealed. The AASB is now extending this relief to disclosing entities that are unlisted companies.
The revised AASB 124 exempts these companies from complying with paragraphs Aus 25.2- Aus 25.6, Aus 25.7.1 and Aus 25.7.2 in their financial reports as long as this information, duplicated in Section 300A of the Corporations Act 2001 and Regulation 2M.3.03, is disclosed in the directors’ report as required by this section.
However the requirements of paragraphs Aus 25.7 and Aus 25.7.3 to Aus 25.9.3 remain applicable to all disclosing entities. While a number of respondents to ED 162 also requested relief from these paragraphs, no further changes will be made until the AASB concludes its ongoing discussions with Treasury re all the Australian “Aus” paragraphs in this standard.
This amending standard is applicable to annual reporting periods ending on or after 30 June 2008, subject to the proviso that such an annual reporting period not begin before 30 June 2007. The Board has also decided to allow disclosing entities that are companies to apply this standard to annual reporting periods beginning on or after 30 June 2007 that end before 30 June 2008.
KPMG’s Flash Report on the May 2008 AASB meeting contains a useful chart [see Appendix 1] showing which reporting periods are covered by either the amendments to AASB 124 or the old Regulation – http://www.kpmg.com.au/Default.aspx?TabID=695&KPMGArticleItemID=3101.
Note that non-corporate disclosing entities still apply AASB 124 paragraphs Aus 25.1 to Aus 25.9.3 as before.
5. May IASB Update
The IASB’s Update summarising the deliberations of its May meeting is now available from the IASB website.
Significant decisions include the following:
- Future Annual Improvements. The Board resolved to continue using a single ED process to make minor changes to its standards but has made revisions to this process in response to feedback from its first annual improvements ED issued last year. The June 2008 meeting will be the last meeting to approve new proposals to go into the next Improvements ED.
- IFRS for Private Entities (SME Project). The Board decided to rename the project in response to constituent feedback which was concerned about the applicability of the Small and Medium Enterprises terminology. It agreed that the standard should be stand-alone with no cross referencing and that all IFRS options should be available to private entities. The simpler options will be contained in the body of the standard while the more complex will be included in an Appendix. The Board also made a range of decisions on specific issues affecting the standard including topics to be addressed, the use of fair value and the content of sections 1-3. For a detailed discussion of these decisions, refer to their Update.
- Emissions Trading. The Board tentatively decided that the scope of its project should include the accounting for all tradable emissions rights and obligations arising under emissions trading schemes. It will also cover activities that an entity undertakes in contemplation of receiving tradable rights in future periods.
- Fair Value Measurement. The Board announced its plans for forming an Expert Advisory Panel as recommended in the report of the Financial Stability Forum (FSF) Report of the Financial Stability Forum on Enhancing Market and Institutional Resilience. The FSF report recommends that the IASB should enhance its guidance on valuing financial instruments when markets are no longer active. The Panel will assist the IASB review best practices in the area of valuation techniques and formulate sound practical guidance in this area.
- Other Projects. The Board also made tentative decisions on the issue of an exposure draft on changes to IAS 33 Earnings per Share and the issue of a final amendment to IAS 39 Financial Instruments: Recognition and Measurement relating to the 2007 exposure draft Exposures Qualifying for Hedge Accounting. It continued discussing the two measurement approaches for inclusion in the forthcoming discussion paper on revenue recognition. The Board also discussed the comment letter responses in respect of termination benefits as part of the 2005 exposure draft on amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets.
6. June IASB meeting agenda
The IASB’s agenda for its June 17 to 20 meeting is available from the IASB website and agenda papers are also available for download. Topics for discussion include:
- Annual improvements process
- Conceptual Framework – Phase B
- Discontinued Operations (Amendments to IFRS 5)
- Expert Advisory Panel on Valuing Financial Instruments in Inactive Markets: meeting update
- Extractive activities research project
- Fair value measurement, including the valuation of financial instruments
- FASB Hedging project: education session
- Financial Statement Presentation
- IFRIC: Approval of Interpretations on real estate and hedges of a net investment in a foreign operation
- International Financial Reporting Standard for Private Entities (formerly IFRS for SMEs)
7. June IPSASB meeting agenda
The International Public Sector Accounting Standards Board (IPSASB) will hold its next meeting from 16 to 19 June. The agenda is available for download from the IFAC website and significant topics include:
- The conceptual framework – approve Phase 1 Consultation Paper and Discussion of issues related to Phase 2
- Convergence of IPSASB and IASB standards in the areas of financial instruments, intangible assets and entity combinations
- Determine the approach to developing Interpretations for public sector based on IFRIC Interpretations
- Borrowing costs – approval of exposure draft
8. IASC Annual Report 2007/08
The International Accounting Standards Committee (IASC) Foundation has released its 2007 annual report. The document includes reports from the Chairman of the IASB Foundation Trustee, the IASB Chairman as well as from the independent auditors.
The report can be downloaded in full from the IASB website.
The IASC is also engaged in initial consultations for its project to review and revise the IASC constitution as part of a five-yearly review programme of its constitutional arrangements. The trustees have been charged with ensuring that the IASC structure best meets the needs of a changing global marketplace and will commence their work with a series of roundtables which will discuss draft proposals for improvement. For more information, visit the IASB website.
9. ASIC releases report on 2006-7 audit inspections
ASIC have now released the report of their 2006-7 audit inspection programme referred to in ANT 20. It can be downloaded from the ASIC website.
Professional and Ethics News |
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10. IESBA issues further independence proposals
The International Ethics Standards Board for Accountants (IESBA) has issued a re-exposure draft of proposals to strengthen two areas of the independence requirements contained in the IFAC Code of Ethics for Professional Accountants (‘the Code’). These proposals relate to internal audit services and the relative size of fees from a single audit client – issues that were first exposed for comment in July 2007.
Comments on the exposure draft are requested by 31 August 2008. The exposure draft can be viewed on the IFAC website and comments should be submitted via email to edcomments@ifac.org.
Determining NRV for inventory
When determining net realisable value (NRV) for inventory is it appropriate to include a reasonable profit allowance as part of ‘estimated costs to make the sale’ by analogy to AASB 3 Business Combinations?
A: No. It is not appropriate to drawn an analogy with AASB 3 to resolve this issue.
Paragraph B16 (d)(i) of AASB 3 Business Combinations states that for determining the fair value of finished goods and merchandise the acquirer shall use the selling price less the sum of the costs of disposal and a reasonable profit allowance for the selling effort of the acquirer based on profit for similar finished goods and merchandise. However this paragraph only applies only when establishing fair value in a business combination.
To determine the NRV for inventory the relevant guidance is paragraph 6 of AASB 102 Inventories. This paragraph defines net realisable value as ‘the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale’. Accordingly a profit allowance for selling effort is not deducted from estimated selling price to arrive at NRV.
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
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
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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