|
Welcome to the twenty-third 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. Institute lodges submission on Financial Instruments Complexity
Today the Institute lodged a submission,
prepared jointly with CPA Australia, to the AASB and the IASB on the IASB Discussion Paper (DP) Reducing the Complexity in
Reporting Financial Instruments.
The DP outlines various approaches to reducing the complexity related to the reporting of financial instruments, which includes
intermediate and long-term solutions with respect to measurement and hedge accounting. We do not support an intermediate solution
to measurement, as we do not believe that any intermediate solution would reduce complexity. We do however support an
intermediate solution to simplify hedge accounting, with respect to documentation and effectiveness testing. We believe that
further analysis is required in order to determine a long-term solution with respect to measurement, in conjunction with the
ongoing work on the Conceptual Framework project.
2. Institute publishes guides to carbon emissions scheme
The Institute has published two articles summarising the federal government’s green paper on the proposed Carbon Pollution
Reduction Scheme as well as presenting the process for how the proposed cap and trade scheme is to function.
These articles have been added to our webpage of
articles related to emissions reporting and assurance.
3. Institute involved in water accounting
This week the Institute hosted a ‘Water Accounting Focus Group’ where participants reviewed and provided input to a conceptual
framework for water accounting. The workshop was facilitated by Professor Keryn Chalmers from Monash University and Bradley
Potter from the University of Melbourne.
Water accounting development is one of eight areas of major water reform identified under the National Water Initiative. Both in
Australia and Internationally, water accounting is in its embryonic stage. To progress water accounting in Australia a Water
Accounting Development Committee was established in February 2007 under the auspices of the Murray Darling Basin Commission.
The development of a conceptual framework will ensure that a sound theoretical foundation underpins the delivery of items
identified in paragraph 80 of the National Water initiative, as follows:
‘The parties agreed that the outcome of water resources accounting is to ensure that adequate measurement, monitoring of
reporting systems are in place in all jurisdictions, to support public and investor confidence in the amount of water being
traded, extracted for consumptive use, and recovered and managed for environmental and other public benefit outcomes’.
The benefits of a conceptual framework for water accounting include:
-
assisting the Committee in the development of water accounting standards; and
- the development of standardised general purpose water accounting reports to provide relevant and reliable information to
external users to enhance decision making regarding the allocation of scarce resources.
4. Sydney CRDG – 8 September 2008
The Institute is hosting the next Sydney Corporate Reporting Discussion Group meeting on Monday, 8 September 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 guest
speaker will be Heather Watson (Director, The Audit Office of NSW) who will speak about the implications of an emissions trading
scheme for accountants and auditors. The following specific issues will be discussed: -
a broad overview of greenhouse gases, their impact on the environment and action that can mitigate this impact
- discussion about emissions trading schemes generally and how they work
- details of the proposals for an Australian emissions trading scheme
- accounting for emissions trading schemes
- emissions reporting for 2009
- impacts for accountants and auditors of an emissions trading scheme.
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, 3 September 2008.
5. Institute’s website update continues
As highlighted last week, the Reporting & Assurance Team is currently updating the ‘Analysis of AASB (Australian Accounting
Standards Board) Standards’ section within the
Financial Reporting page of the Institute’s website.
This week’s updated pages include: -
AASB 101 Presentation of Financial Statements
- AASB 116 Property, Plant and Equipment
- AASB 139 Financial Instruments: Recognition and Measurement
Did you know that in addition to finding a summary of the standards on these pages, you will also find history, future
developments, key differences, comparison to IFRS, relevant interpretations, rejection notices, relevant Q & A’s and relevant
articles.
6. AASB meeting agenda – 27 August 2008
The Australian Accounting Standards Board (AASB) agenda for its 27 August 2008 meeting is now available from the AASB website. Key items for discussion include: -
Considering draft EDs for:
- Superannuation plans and ADFs
- IASB Annual Improvements
- Simplifying earnings per Share
- Considering standards for Australian adoption:
- IASB Amendment to AASB 139 Financial Instruments: recognition and measurement regarding eligible hedged items
- AASB Interpretation 15 Agreements for the construction of real estate
- AASB Interpretation 16 Hedges of a net income in a foreign operation
- Considering amendments to AASB 1039 Concise Financial Reports
7. Omnibus standards explained
With financial statement preparation in full swing, it is timely to remind members of the need to ensure that they are applying
the versions of the accounting standards applicable to their year end.
The AASB’s approach of issuing omnibus standards can make this difficult. The AASB issues an omnibus standard when it needs to
make minor changes to a number of AASB standards. For example, Omnibus 2007-6 changes six AASB standards and two Interpretations
to deal with consequential amendments arising from the revision to AASB 123 Borrowing Costs. There is usually a delay before the
omnibus is compiled by the AASB staff into the text of the relevant standards it amends, with the timing dependent on the
application date of the omnibus and the AASB’s work priorities.
This means that it is not usually possible for members to access compiled standards immediately an omnibus has been issued, as
updates to the member’s handbook are dependent on the receipt of compilations from the AASB.
An additional complication arises because whilst every omnibus standard has an operative date, they can usually be adopted
earlier than the date at which they become mandatory. However, the choice to adopt early generally applies to the entire contents
of an individual omnibus. This means that it is usually not permissible to adopt the changes that an omnibus makes to one
particular standard and ignore the changes made by the same omnibus to other standards. For example, if Omnibus 2007-6 is adopted
early, changes to all the impacted standards and interpretations must be adopted at the same time.
The only exception to this rule is where the omnibus itself specifically allows each amendment it contains to be considered
independently for early adoption. The only example of this to date is the recently released annual improvements Omnibus 2008-5.
For more details on the adoption requirements of this omnibus, refer to ANT30/2008 (item 2).
These requirements make it particularly important for members to be aware of all the changes that have occurred during any given
year and ensure that the particular versions of the standards that they are reading actually meet their financial reporting
needs. To assist users with their 30 June 2008 year end reporting, the AASB has placed on its website a list of the
standards that apply mandatorily to that date .The text of these standards incorporate all the amendments made by the omnibus
standards effective up to this date.
Members also need to be aware of disclosing the effects of “issued but not yet operative” standards on an entity as required by
AASB 108. The impact of omnibus standards has to be reported in the same way as for all AASB standards. For more details on
these disclosures requirements, refer to the Q&A in ANT28/2008.
8. AASB’s social benefits submission to the IPSASB
The AASB has made a submission to the International Public Sector Accounting Standards Board (IPSASB) in relation to the social
benefits project and, in particular: -
ED 34 Social Benefits: Disclosure of Cash Transfers to Individuals or Households;
- Consultation Paper, Social Benefits: Issues in Recognition and Measurement; and
- Project Brief Long-term Fiscal Sustainability.
Whilst the AASB is supportive of a project to develop an IPSAS for social benefits, it believes that the IPSASB needs to take a
more fundamental approach to the social benefits project and considers that the project should be progressed in conjunction with
the conceptual framework project.
The submission is available for download on the AASB
website.
9. ASIC issues alerts to accountants who provide ‘capacity to repay certificates’
The Institute (see media release, Q&A and RAT) supports the Australian Securities and Investments Commission’s
(ASIC) initiative to alert accountants who provide certification for borrowers applying for finance that they have the ‘capacity
to repay’ a loan to ensure that there is reasonable basis for providing the certification. The Institute advises its members to
sign certificates only where they have properly ascertained or researched the borrower’s financial position or their true
capacity to repay the loan and understand what they have signed.
ASIC has previously released a report Protecting wealth in the family home which analyses the conduct of transactions made
by brokers who had refinanced a home loan for a borrower in financial difficulty.
To view the ASIC media release or download the ASIC report, go to the ASIC website.
10. National consumer laws proposed
The Ministerial Council on Consumer Affairs (MCCA) has agreed that all Australian State governments should adopt a new national
consumer law, which will be consistent across all Australian jurisdictions.
In line with the Rudd government’s economic reform agenda, it is hoped that this change will benefit businesses by drastically
cutting compliance costs, as 9 sets of consumer laws are weaved into a single, national consumer law. The Productivity Commission
estimates that such steps could benefit Australian consumers and businesses up to $4.5b every year.
Key features of the new national consumer law include: -
To be based on the current consumer protection provisions of the Trade Practices Act 1974, including the appropriate amendments
that reflect best practice in state and territory legislation
- To be developed by agreement of all Australian governments, and made law through an application legislation scheme
- Will apply to sectors of the economy except the financial services sector. The Australian Government will, however, strive
for consistency between this new consumer law and the legislative framework of the financial services sector
- Will include a provision addressing unfair contract terms, modelled on recommendations from the Productivity Commission
- Any amendments to the law must be agreed to by the Commonwealth plus four other State and Territory governments, of which
three must be states
- To be jointly enforced by the Australian Competition and Consumer Commission (ACCC) and the State and Territory offices of
fair trading. ASIC will retain its role of administering the consumer law that applies to financial services
This new national consumer law is expected to be fully operational and implemented by 2011.
For further details of the proposed law, see the Assistant Treasurer’s page.
For a copy of MCCA’s communiqué from their August meeting detailing these proposals, see the MCCA website.
11. ASIC annual report on ASX
ASIC has released its annual assessment report of the Australian Securities Exchange (ASX), covering the period 1 July 2006 to 30
March 2008. The report also covers the Sydney Futures Exchange (SFE) as well as other ASX Group Companies, such as Austraclear
Ltd.
The report found that both the ASX and SFE had adequate arrangements in place for market supervision, including clearing and
settlement facilities, as well as the management of conflicts of interest. However, ASIC also outlined 10 areas of improvement,
which the ASX has now agreed to implement.
Recommendations include that there be additional certification of supervisory expenditure, that the procedures for settlement
delays be amended, and that further steps be taken to ensure that conflicts of interest are managed adequately into the future.
For further information, visit the page of the Minister for Superannuation & Corporate Law.
12. Public information seminars on Owners Corporations Act 2006
The Owners Corporations Victoria (OCV) – in conjunction with the Victorian Property Fund – is holding 16 information forums
across Victoria in September and October to educate the more than one million Victorians who remain uninformed as to how they are
affected by the Owners Corporations Act 2006, which has now been fully operational for six months.
These forums are particularly targeted at those who live in, rent, own or manage owner’s corporations. Real estate agents,
lawyers, conveyancers, accountants and insurers also may be interested in attending, as they need to understand the new laws to
ensure that their clients meet the compliance responsibilities.
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).
Decrease in market value of investments since 30 June?
Q: The market values of some of my client's listed investments, classified as available for sale and therefore carried at fair
value, have show a substantial decline since balance date in line with the decline in the market as a whole. What are the
implications of this for their 30 June financial statements? Does a post 30 June market price movement get taken into account
when considering the 30 June fair value?
A: This issue is within the scope of AASB 110 Events After the Balance Sheet Date. This standard classifies events
occurring after balance date into two types - adjustable and non adjustable.
Adjustable events are those that provide evidence of conditions that existed at the reporting date, and so the standard requires
that their effect is to be recognised in the financial statements by adjusting the relevant items in the financial records
(paragraph 8). Non-adjusting events are those that are indicative of conditions that arose after balance date and therefore are
not to be adjusted, but may be required to be disclosed (see paragraphs 10 and 21).
Paragraph 11 of AASB 110 states that a decline in the market value of investments post balance date is an example of a
non-adjusting event. This is because the decline does not usually relate to the conditions that existed at balance date, but
rather to conditions that arose subsequently.
Therefore, the change in market value should not normally be included in assessing fair value for June 30 – but if material, does
require disclosure (under paragraph 21) which sets out the nature of the event and an estimate of the financial effect involved.
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.
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
29 August 2008
AASB IASB Discussion Paper on Preliminary Views on Amendments to IAS 19 Employee Benefits
APESB ED 04/08 Forensic Accounting Services
Parliament of Australia Senate Economics Committee: Inquiry into the Disclosure regimes for charities and not-for-profit
organisations
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.
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.
Chartered Accountants Managing the Payroll Function
Workshop
Throughout November in Sydney, Melbourne, Adelaide, Perth and Brisbane. Legislative changes resulting from the Federal Budget
have impacted payroll, be able to confidently deal with the myriad of issues affecting you.
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.
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.
The information is this email is confidential to the named addressee and subject to copyright. No one else may read, print,
store, copy, forward or act in reliance on all or any of this email or its attachments. If you are not he intended recipient, any
use, reliance upon, disclosure or copying of this email is prohibited and unlawful. If you have received this email in error
please notify the sender. The Institute of Chartered Accountants in Australia (ABN 50 084 642 571) does not warrant that this
email and any attachments are error or virus free and recommends that all attachments be checked for computer viruses.
| 
The Institute’s education and training pathway is the preferred choice for industry professionals.
Considering a career as a Chartered Accountant? Looking for the next step in your professional life?
The Institute is leading the debate in the areas that matter most to business and the accounting profession. 
The Institute produces an invaluable suite of tools, guidance, products and services to help members in their work. 
Print this article
Email this Article
Back to
Top
