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Welcome to the thirtieth 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. New Update to the Members’ Handbook available 11 August
The August Update to the Members' Handbook, which is due to 'go live' on 11 August 2008 will include new and revised standards
issued to 2 July 2008 as follows:
- APES 225 Valuation Services
- APES 315 Compilation of Financial Information
- Regulation 5 Regulations relating to Rates of Subscription
- Regulation 9 Regulations Relating to Public Practice – revised to incorporate requirements previously found in
Regulation 8, now withdrawn
- AASB 2008-4 Amendments to Australian Accounting Standards – Key Management Personnel Disclosures by Disclosing
Entities [AASB124]
- ASAE 3100 Compilation Engagements
- GS 008 The Auditor’s Report on a Remuneration Report pursuant to Section 300A of the Corporations Act 2001
2. AASB Improvements omnibuses released
In May 2008, the International Accounting Standards Board (IASB) concluded the first of its annual improvements projects, with
the objective of implementing necessary, but non-urgent, amendments to IFRSs that would not otherwise be incorporated in another
major project (refer ANT21/2008, item 4). These projects, which commenced in 2007 and were initially exposed in Australia as ED
159, resulted in the IASB issuing the standard Improvements to IFRSs. It has now been released in Australia by the
Australian Accounting Standards Board (AASB) as: -
AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Process; and
- AASB 2008-6 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Process
AASB 2008-5 will apply to annual reporting periods beginning on or after 1 January 2009, and AASB 2008-6 to annual reporting
periods beginning on or after 1 July 2009.
Early adoption is permitted for both standards. Unlike other omnibus standards, Omnibus 2008-5 is structured such that each of
its amendments can be considered separately for early adoption, although in some instances amendments are related and must be
adopted at the same time. Omnibus 2008-6 affects only AASB’s 1 and 5, and these amendments must be adopted together (and in
conjunction with the amendment affecting AASB 127 in Omnibus 2008-5).
There are two major types of changes being introduced: -
Changes being made for presentation, recognition or measurement purposes. 24 separate issues were identified by the IASB amending
15 different IFRS which are now reflected in changes to AASBs. The majority of the changes have been included in omnibus 2008-5
however some changes (AASB 1 and 5) have been included as omnibus 2008-6 due to their different IASB application date
- Terminology or editorial changes that have a minimal effect on accounting practice. These changes affecting 11 standards have
been included in AASB 2008-5
In total, Omnibus 2008-5 amends 24 standards whilst Omnibus 2008-6 amends a further 2. A summary of the issues involved is
included in the preface to each standard, and a more detailed analysis of them will be included in next week’s ANT.
The IASB intends to continue using the single ED process to make minor changes to its standards but has made revisions to the
process in response to feedback received as part of the 2007 process. The 2008 improvements ED is expected to be issued later
this month and finalised in early 2009.
At its June meeting, the AASB expressed concern about the potentially cumbersome and confusing impact that an ongoing
improvements process would have on the Australian process of amending standards by omnibus. More efficient ways of updating the
standards are to be investigated.
3. IASB amends IAS 39
The IASB has issued an amendment to IAS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items,
which clarifies how the existing principles underlying hedge accounting should be applied in two particular situations: -
Designation of a one-sided risk in a hedged item, and
- Designation of inflation in a financial hedged item
Entities are required to apply this amendment retrospectively for annual reporting periods beginning on or after 1 July 2009,
with early application permitted.
To view the media release, go to the IASB update. The standard itself is available to eIFRS subscribers, and will be adopted by the AASB
for use in Australia in due course.
4. IASB meeting highlights – 22-25 July 2008
The most recent meeting of the IASB was held on 21-25 July in London, and the Update summarising the decisions of the Board is
now available on their website. A brief summary follows, but full details can be found in the Update.
- Amendments to IFRS 5 – the Board clarified the definition of ‘discontinued operations’ to include "businesses" as defined in
AASB 5 , decided that various disclosure exemptions be given to businesses that meet the criteria to be classified as held for
sale on acquisition, and discussed the disclosures that an entity needs to provide reconciliations for
- Consolidation – the staff presented a draft of an ED to replace IAS 27 Consolidated and Separate Financial Statements and
SIC 12 Consolidation - Special Purpose Entities. The Board also asked the staff to consider the implications of the
proposals for IAS 28 Investments in Associates. The Board expects to publish an ED towards the end of the year
- Fair value measurement – the Board discussed the results of the first phase of a standard-by-standard review of fair value
measurements currently required or permitted in IFRSs in order to assess whether the IASB/IASC intended each measurement basis to
be an entry or exit price. Using these results, the Board considered the wording of a definition of ‘fair value’ and tentatively
decided that fair value should be defined as a current exit price. The second phase of the review will be a scope assessment for
existing uses of fair value in IFRSs
- IFRS for private entities – the Board resumed redeliberations of the proposals in the ED of a proposed IFRS for SMEs.
The Board discussed issues arising from Sections 13-27 of the ED and made a number of tentative decisions on accounting
treatments to be included in the standard. Discussion of the remaining sections of the ED, as well as disclosure
issues, will continue in September 2008
- Income taxes – the Board discussed a pre-ballot draft of the ED of amendments to IAS 12 and made a number of tentative
decisions that will be reflected in the ED
- Leases – the IASB envisages publication of a new lease accounting standard by mid-2011. The Board tentatively decided, inter
alia, to remove the existing requirement to classify a lease as a finance lease or an operating lease and to apply the same
approach to all leases.
- Management commentary – the Board discussed the conclusions reached by the project team that developed the discussion paper
Management Commentary in 2005 in the context of the Conceptual Framework project. The Board instructed staff to begin
drafting an ED of a proposed guidance statement, which is tentatively scheduled for publication in the fourth quarter of 2008
- Revenue recognition – the Board discussed the project plan and the measurement of performance obligations. The Board is
aiming to make significant improvements to the current revenue recognition standards by June 2011
- Valuing financial instruments in markets that are no longer active – the expert advisory panel met to discuss examples of
problems with measurement, for example measuring fair value where there are no longer observable market prices as a result of the
credit crisis. When the panel next meets, it will discuss a draft document containing a summary of issues encountered in the
credit crisis, IAS 39 requirements and guidance for those issues and a summary of how panel members have dealt with the issues in
practice
Auditing & Assurance News | |
5. ASAE 3500 Performance engagement standard release
The Australian Auditing and Assurance Standards Board (AUASB) has released ASAE 3500 Performance Engagements, which
establishes mandatory requirements and provides explanatory guidance for conducting and reporting on performance engagements.
Such requirements include: -
Relationship with other ASAEs, ASAs and ASREs
- Ethics
- Quality control
- Initiation or acceptance
- Terms of the engagement
- Understanding the activity
- Assessing the appropriateness of the activity as the subject matter
- Assessing the suitability of the criteria; and
- Reporting findings, recommendations and responsible party comments.
The essential elements of performance engagements are:
- A three-party relationship involving an assurance practitioner, a responsible party or a number of responsible parties, and
intended users, where either the responsible party or the intended user may also be the engaging party
- An appropriate activity
- Suitable criteria
- Sufficient appropriate evidence; and
- A written assurance report in a form appropriate to a performance audit engagement, or a performance review engagement, or a
report addressing both levels of assurance.
Following the issuance of the Framework for Assurance Engagements (Framework) and ASAE 3000 Assurance Engagements Other
than Audits or Reviews of Historical Financial Information, the AUASB reviewed existing assurance standards issued including
AUS 806 Performance Auditing (July 2002) and AUS 808 Planning Performance Audit’s (October 1995), and identified
the need to update these standards. ASAE 3500 reflects the outcome of this process. This ASAE is operative for performance
engagements commencing on or after 1 January 2009.
To view the media release, go to the AUASB website.
6. Australia commences audit clarity project
The AUASB has released the first four exposure drafts of Australian Auditing Standards (ASAs) in Clarity format. The exposure
drafts are: -
ED 5/08 ASA 240 The Auditor’s Responsibilities Relating to Fraud in an Audit of a Financial Report
- ED 6/08 ASA 260 Communication with Those Charged with Governance
- ED 7/08 ASA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its
Environment, and
- ED 8/08 ASA 330 The Auditor’s Procedures in Response to Assessed Risk
Comments are due by 30 August 2008.
The International Auditing and Assurance Standards Board (IAASB) is in the process of revising its International Standards on
Auditing (ISAs) in Clarity format to ensure a clear and consistent application of its standards globally. To continue to conform
with the ISAs, and in line with strategic direction from the Financial Reporting Council, the AUASB is also redrafting and
reissuing the ASAs in a Clarity format.
To view the media release or download the exposure drafts, go to the
AUASB website.
7. Special climate change editions of Institute e-bulletins
In light of the Federal Government's recent Green Paper and Garnaut review, the current Institute e-bulletins are dedicated to
climate change and examine the assurance, reporting, taxation and accounting issues of the Federal Government’s Emissions Trading
Scheme. A knowledge guide has also been developed by the Institute to assist members in understanding and preparing for the
challenges under the proposed scheme.
If you are looking for an update on climate change and the impact on accountants, and have not yet read an e-bulletin, you can
access them on the
Institute’s website.
8. ASIC outlines issues of focus for coming months
In response to current market concerns, the Australian Securities and Investments Commission (ASIC) has outlined five key market
areas it will be focusing on in coming months. These include: -
Managed Investment Schemes and the disclosure of risk
- Credit Ratings Agencies
- Listed investment vehicles
- Audit and accounting issues surrounding present valuation methodologies and disclosure for complicated financial assets
- Market surveillance for illegal trading activities
ASIC’s accounting team will be focussing on several areas including:
Valuation accounting
- Treatment of off-balance sheet entities
- Correct classification of debt as current or long term
To view the media release, go to the ASIC website.
9. IFAC continues financial reporting project
The International Federation of Accountants (IFAC) has commenced a follow-up project on financial reporting that will compare the
findings of their recently-published report, ‘Financial Reporting Supply Chain: Current Perspectives and Directions’ (see ANT20/2008, item 6), with recent developments in countries around the world.
The results of this new project will assist the IFAC in improving the quality of financial reporting by delivering proposals that
specifically address the primary finding of the initial report – that there remains much to be done by way of meeting the needs
of investors and other participants in the financial reporting supply chain.
A second part of the project involves the development of an interview series, which is centred on the elements and practices that
constitute good business reports.
More information on this follow-up project is available on the IFAC
website.
10. Help for members in business
IFAC has also issued new guidance on the use of discounted cash flow analysis and net present value in investment evaluation. The
publication – titled ‘Project Appraisal
Using Discounted Cash Flow’ – forms part of the Professional Accountants in Business (PAIB) committee’s new project to
develop International Good Practice Guidance on financial and management accounting topics. The scope, purpose and due process of
this project are outlined in the ‘Preface
to IFAC’s International Good Guidance’, which the committee has released recently.
IFAC welcomes feedback on both documents. Comments should be directed to strathisgould@ifac.org.
In addition, IFAC has recently enhanced the functionality and value of it’s webpage on the International Centre for PAIBs. The new ‘Relevant Links’ page now allows registered users to add and share documents, websites and other
resources of interest. Users can also sort the links by topic, name or posting date. This is a free resource.
11. Public information seminars on Owners Corporations Act 2006 (Victoria)
The Owners Corporations Victoria (OCV) is holding 16 information forums across Victoria in September and October to educate
Victorians about the Owners Corporations Act 2006, which has now been fully operation for six months.
These forums are particularly targeted at those who live in, rent, own or manage owners corporations (previously known as body
corporates). Accountants may also be interested in attending, as they need to understand the new laws given that owners
corporations are now required to be audited.
For a list of the dates, times and venues of these forums, see the OCV website.
Queries should be directed to the Project Coordinator, Maree Davenport (0488 458 798).
IFRIC Rejections
Q: I understand that both the IASB's interpretations committee (IFRIC) as well as the AASB publish rejection notices for
issues referred to them which, in their opinion, do not require formal interpretation. What status do these have and how can I
search them to see if they deal with topics that I have a concern about?
A: Both the AASB and the IFRIC rejection items that are proposed to them for various reasons, and these rejection
statements are posted on their respective websites. While the rejections have no status in their own right, it would take a brave
preparer or auditor to interpret a standard in a way that IFRIC had decided was inappropriate.
AASB rejections can be viewed on their website, with the Interpretations
under “Items Not Taken onto the Agenda”. IFRIC also publishes its rejection statements on its .
To help our members, the
financial reporting section of the Institute website also includes all the local and international rejections. The notices
can be found on a standard-by-standard basis under Financial Reporting/Analysis of AASB Standards/Rejection Notices.
Further information on the status of international rejection statements and the process of deciding whether or not an item goes
on IFRIC’s agenda for interpretation can be found in Ruth Picker’s article in Charter, May 2007. The Australian interpretation
process was described in Charter, August 2006, page 60 by the Institute’s technical standards team.
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.
1 August 2008
AASB ED 163 Proposed Amendments to AASB 1049 for Consistency with AASB 101
22 August 2008
AASB IASB Discussion Paper on Reducing Complexity in Reporting Financial Instruments
25 August 2008
AASB ED 164 An improved Conceptual Framework for Financial Reporting: The Objective of Financial Reporting and Qualitative
Characteristics and Constraints of Decision-useful Financial Reporting Information.
AASB ITC 17 Request for Comment on IASB Discussion Paper Preliminary Views on an improved Conceptual Framework for Financial
Reporting: The Reporting Entity
Parliament of Australia Senate Economics Committee: Inquiry into the Disclosure regimes for charities and not-for-profit
organisations
29 August 2008
AASB IASB Discussion Paper on Preliminary Views on Amendments to IAS 19 Employee Benefits
APESB ED 04/08 Forensic Accounting Services
30 August 2008
AUASB ED 5/08 ASA 240 The Auditor’s Responsibilities Relating to Fraud in an Audit of a Financial Report
AUASB ED 6/08 ASA 260 Communication with Those Charged with Governance
AUASB ED 7/08 ASA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and its
Environment
AUASB ED 8/08 ASA 330 The Auditor’s Procedures in Response to Assessed Risk
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.
Australian Audit Manual Training
Throughout September in Sydney, Melbourne, Parramatta, Adelaide, Perth and Brisbane. A step by step guide on how to use the
Institute’s new Audit Manual and walk away with a practical understanding of your auditor responsibilities.
Chartered Accountants Technical Conference
Throughout October in Sydney and Melbourne. Addresses the latest legislation changes and technical details in separate streams
for business and practice. The need–to–know updates that will make a difference to your growth.
Chartered Accountants Audit of Self Managed Super
Funds Workshop
Throughout October in Sydney, Melbourne, Adelaide, Perth and Brisbane. With the increase in the number of reviews and audits of
self managed super funds to 11,000 and new competency requirements in effect, here’s your chance to understand those requirements
and ensure you comply.
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.
We welcome new subscriptions. To subscribe, unsubscribe or to update your mailing details, please visit the newsletters section of the
Institute website. Alternatively, you can email ant@charteredaccountants.com.au.
Accounting & Assurance News Today is an initiative of the Reporting and
Assurance Team of the Institute of Chartered Accountants in Australia.
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