|
Welcome to the thirty-eighth 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. What’s new in October Charter
This month’s Technical Focus section of Charter contains our usual roundup of news in the financial reporting and
audit and assurance spheres. As well as The Panel, it contains:
- An article explaining some of the future directions of the International Accounting Standards Board (IASB) and Australian
Accounting Standards Board (AASB) and the need for adequate advance planning for the implementation of these future changes – by
Sophie Sipidias of Ernst & Young (pages 62-63)
- An article outlining the recent releases of the Boards, including Australian Professional Ethical Standard (APES)
315Compilation of Financial Information which replaces Australian Professional Standard (APS) 9 – by Channa Wijesinghe of
the Australian Professional and Ethical Standards Board (APESB) (pages 64-65)
- Risk revolution – Melissa Wilkinson examines how risk management has now become central to an organisation’s success
(pages 38-41)
- Managing cash flow in tough times - Ann-Maree Moodie outlines the importance of cash flow management to continued
success in tough economic times (pages 20-22)
2. Sydney Corporate Reporting Discussion Group – 13 October 2008
The Institute is hosting the next Sydney Corporate Reporting Discussion Group meeting on Monday, 13 October 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 topic for
the discussion will be ‘Developments in Not for Profits (NFPs) – What’s Going On?’. The guest speakers are still being finalised;
however, they will include Regina Fikkers, Partner at PricewaterhouseCoopers, and Ross Hawkey, Chief Information Officer at
Mission Australia. The discussion will cover recent developments for the NFP sector including:
- Senate Economics Committee Inquiry into the disclosure regimes for charities/NFP
- ITC 14 Proposed Definition and Guidance for Not-for-Profit Entities
- Status on treasury proposals made in 2007 on limited-by-guarantee companies
The lunchtime meeting will begin at 12.30pm at the Level 1 Conference Centre and conclude at 2:00pm. Members who wish to attend
this forum are now able to register online on the Institute’s website by Wednesday, 8 October 2008. For any queries, please email crdg@charteredaccountants.com.au.
Please note that registration is essential as seating is limited and numbers will need to be finalised as soon as possible. A
catered lunch will be served upon arrival.
3. Institute’s website update continues
As highlighted in ANT31/2008 and ANT32/2008, 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 2 Share-based Payment
- AASB 101 Presentation of Financial Statements (Revised)
- AASB 119 Employee Benefits
- AASB 124 Related Party Disclosures
- AASB 127 Consolidated and Separate Financial Statements
- AASB 138 Intangible Assets
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.
4. New omnibus released by AASB
On 3 October 2008, the AASB released AASB 2008-9 Amendments to AASB 1049 for Consistency with AASB 101. The requirements
of AASB 2008-9 are applicable from 1 January 2009, with early adoption permitted provided there is early adoption for the same
annual reporting period of AASB 101 Presentation of Financial Statements (issued September 2007). For more information, go
to the AASB website.
5. IASB meeting update – 16-19 September 2008
The most recent meeting of the IASB was held on 16-19 September 2008 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.
- Credit crisis – the Board discussed the various ways in which it was responding to the credit crisis, including
consolidation roundtables, inactive markets and the disclosure of liquidity risk, off balance sheet entities and the fair value
of financial instruments. The Board has decided to hold an additional public meeting on 2 October 2008 to continue its discussion
of these topics and plans to publish exposure drafts by the end of 2008.
- Annual improvements: Customer loyalty programmes – the Board noted the potential for misinterpretation of the term
‘fair value’ in IFRIC 13 Customer Loyalty Programmes. To amend this, the Board tentatively decided to amend IFRIC 13 as
part of the annual improvements process to clarify the measurement guidance for the fair value of the award credits, and also
tentatively decided that the amendments should be applied prospectively.
- Extractive activities – the Board discussed the upcoming discussion paper as it related to a potential disclosure
model for minerals and oil & gas extractive activities. The paper will be released by the end of 2008. The Board indicated
support for the discussion paper to propose the disclosure of information about proved and probable reserves and cash outflows.
The discussion paper will be published as an IASB document but contain only the views of the project team.
- Fair value measurement – the Board tentatively decided that the fair value of an asset should reflect its highest and
best use. It also tentatively decided that a fair value measurement should be at the individual instrument level and exclude
adjustments for the size of an entity’s holding relative to trading volumes (blockage factors) and exclude other discounts such
as control premiums. Further topics will be discussed at its October meeting.
- First-time adoption of IFRSs – the Board considered and has now published an exposure draft proposing amendments to
IFRS 1 First-time Adoption of International Financial Reporting Standards
- IFRS for private entities – the Board resumed its deliberation of the proposals in the exposure draft (ED) of a
proposed IFRS for SMEs. At this meeting, the Board discussed issues relating to Sections 28-38 of the ED. It made tentative
decisions relating to income taxes (rejected the tax payable method proposed by staff), hyperinflationary economies, foreign
currency translation (prohibition of recycling exchange differences previously recognised in equity through the P&L on disposal
of a foreign operation), related parties (will reflect the final amendments to IAS 24), agriculture (no explicit cost option,
just the “undue cost or effort” proviso), removal of the ‘held for sale’ classification, segregation of discontinued operations,
first-time adoption (inclusion of optional exemptions in IFRS 1) and simplification of disclosures. Outstanding issues will be
discussed by the Board in November.
- Related party disclosures – the Board made tentative decisions regarding the exemption for state-controlled entities,
the definition of a ‘related party’ and the interactions with other IFRSs and decided to release a re-exposure draft that will
seek input on these tentative decisions. The Board expects to publish the re-exposure draft around the end of 2008.
- Revenue recognition – the Board considered that performance obligations should be remeasured after the contract’s
inception to reflect changes in prices and circumstances when deemed onerous, and also at each financial statement date. A
discussion paper is expected to be published later this year.
- Share-based payment – the Board discussed issues relating to IFRS 2 that have arisen since its implementation and
whether to add a project to the agenda. The Board decided to address some issues via the Annual Improvements process, but not to
add a project on IFRS 2 to its agenda.
6. New AASB search feature
The AASB website has a new search
function that provides a list of the principal or compiled versions of Standards, Interpretation and/or Framework documents
matching the reporting period and any optional search text entered. It covers reporting periods that start no earlier than 1
January 2005 and be no longer than 13 months, and does not include archived pronouncements.
Those pronouncements that are listed will bring up links to any subsequent Amending Standards and Errata and relevant supporting
information (e.g. Explanatory Statements, IASB Bases for Conclusions etc.).
7. New AASB Interpretations 15 and 16
The AASB has recently approved two new IFRIC Interpretations for operation in Australia. These are:
- Interpretation 15 Agreements for the Construction of Real Estate, applicable for periods commencing 1 January 2009;
and
- Interpretation 16 Hedges of a Net Investment in a Foreign Operation, applicable for periods commencing from 1 October
2008.
Interpretation 15
The purpose of Interpretation 15 is to clarify which standard applies to agreements for the construction of real estate, either
directly or through subcontractors, AASB 118 Recognition of Revenue, or AASB 111 Construction Contracts. The
Interpretation specifies that such agreements only meet the definition of a ‘construction contract’ (and therefore fall within
the scope of AASB 111 Construction Contracts) when the buyer is able to specify the major structural elements of the
design of the real estate before construction begins and/or specify major structural changes once construction is in progress
(whether or not it exercises that ability).
The Interpretation also provides specific guidance on how to account for revenue when the agreement for the construction of real
estate falls within the scope of AASB 118. In particular, it addresses how to account for separate components of agreements for
the construction of real estate, such as building construction, sales of land, and the provision of property management services.
It is anticipated that the Interpretation may result in contracts previously recognising revenue under AASB 111 now
being required to adopt the recognition criteria in AASB 118, on the basis that the contract did not meet the definition of a
’construction contract‘ as interpreted by the IFRIC.
It applies for reporting periods beginning on or after 1 January 2009 with early adoption permitted. Changes in accounting policy
resulting from the application of this interpretation should be accounted for retrospectively in accordance with AASB 108
Accounting Policies, Changes in Accounting Estimates and Errors.
The Interpretation also deletes the guidance in relation to real estate sales that was contained in the Appendix of AASB 118, as
this has now been superseded by Interpretation 15.
Interpretation 16
This Interpretation applies to an entity that hedges the foreign currency risk arising from its net investments in foreign
operations and wishes to qualify for hedge accounting in accordance with AASB 139 Financial Instruments: Recognition and
Measurement. Specifically it provides guidance on:
- Identifying the foreign currency risks that qualify as a hedged risk in the hedge of a net investment in a foreign operation;
- Where – within a group – hedging instruments that are hedges of a net investment in a foreign operation can be held to
qualify for hedge accounting; and
- How an entity should determine the amounts to be reclassified from equity to profit or loss for both the hedging instrument
and the hedged item.
The Interpretation does not apply to other types of hedge accounting and should not be applied by analogy. The Interpretation
applies for reporting periods beginning on or after 1 October 2008 with early adoption permitted
The new Interpretations are available on the AASB website and an updated
version of AASB 1048 including the new Interpretations is expected to be issued by the AASB shortly.
8. IASB staff position on SEC-FASB clarification on fair value accounting
On 2 October 2008, the IASB issued a press release in response to the clarification made by the office of the Chief Accountant of
the US Securities Exchange Commission (SEC) and the staff of the Financial Accounting Standards Board (FASB). The clarification
is not an amendment of IAS 157 Fair Value Measurements, but rather provides additional guidance for determining fair value
in inactive markets.
The IASB staff has reviewed the clarifications and considered it consistent with IAS 39 Financial Instruments: Recognition and
Measurement.
To view the media release, go to the SEC
website.
9. IFAC launches work on International Public Sector Conceptual Framework
The International Public Sector Accounting Standards Board (IPSASB) has issued for comment the first in a series of consultation
papers focused on the development of an international public sector conceptual framework, entitled ‘Conceptual Framework for
General Purpose Financial Reporting by Public Sector Entities’. It identifies:
- The IPSASB’s preliminary views on the objectives and scope of financial reporting
- Qualitative characteristics of information included in general-purpose financial reports
- Characteristics of public sector reporting entities
The framework will recognise the diversity that exists in the many jurisdictions that may adopt IPSASs and help to strengthen the
transparency and consistency of financial reporting by governments worldwide.
Comments on the paper are requested by 31 March 2009 and should be submitted to EDComments@ifac.org. It is available online.
Auditing & Assurance News | |
10. IFAC releases paper on Review Engagements
The International Federation of Accountants (IFAC) has released a paper entitled ‘Matters to Consider in a
Revision of International Standard on Review Engagements (ISRE) 2400 Engagements to Review Financial Statements. It
focuses on a number of significant matters relating to the revision of ISRE 2400, including:
-
The nature and extent of the work a practitioner should perform in an engagement to review financial statements
- How the level of assurance obtained should be best communicated to users
Comments are requested on this paper and these responses will assist the International Auditing and Assurance Standards Board
(IAASB) in its consideration of a relevant and cost-effective assurance service that is an alternative to an audit for small and
medium-sized entities in particular.
Comments are requested by 15 December 2008 and should be sent to reviewengagements@ifac.org.
The full media release can be viewed on the IFAC
website.
Professional & Ethics News | |
11. APESB releases APES 210
The APESB has released APES 210 Conformity with Auditing and Assurance Standards. The standard was effective as of 30
September 2008 and requires members to comply with Auditing and Assurance Standards when they conduct Assurance Assignments or
Assurance Engagements. It replaces APES 410 of the same name.
The importance of APES 210 (and the standard it replaces, APES 410) is that it clarifies that members have to apply the auditing
standards issued by the AUASB (and those issued by the former AuASB) that are still in place), for all audit and assurance
engagements. Further, the Code of Ethics, including the Independence requirements of section 290 of the Code are applicable.
APES 210 is available for download as a PDF and further information is available on the APESB
website.
Accounting policy note for SPFRS
Q: I understand from last week’s ANT that the accounting policy note in special purpose financial reports needs to change as a
result of the issue of APES 205 Conformity with Accounting Standards. Where can I find a sample accounting policy note for 30
June 2008?
A: It is correct that APES 205 subtly changes the requirements for the accounting policy note for a special purpose financial
report. Previously APS 1 required disclosure of the Accounting Standards and Interpretations applied, whereas the APES 205
requirement is a note disclosing significant accounting policies.
The sample accounting policy note in the current versions of publications such as XYZ Model financial accounts and the Institute’s Business Practice Guide: Financial
Statements of Non-reporting Entities comply with APES 205, as both include a summary of accounting policies applicable to the
entity. However, both also refer specifically to the Accounting Standards and Interpretations applied, and this sentence can now
be removed from the note.
When preparing the accounting policy note, members should ensure the accounting policies listed are those actually applied by
their particular entity, as these sample accounting policy notes list common policies which may or may not be appropriate to the
entity’s circumstances.
The sample accounting policy note from the BPG, with suggested amendments, is included below:
Note 1: Statement of significant accounting policies
The directors have determined that the company is not a reporting entity and accordingly this financial report is a special
purpose report prepared for the sole purpose of distributing a financial report to members and must not be used for any other
purpose. The directors have determined that the accounting policies adopted are appropriate to meet the needs of the members.
It has been prepared in accordance with AASB 101 “Presentation of Financial Statements”, AASB 107 “Cash Flow Statements”,
AASB 108 “Accounting Policies, Changes in Accounting Estimates and Errors” and AASB 1048 “Interpretation and Application of
Standards” which apply to all entities required to prepare financial reports under the Corporations Act 2001 and other applicable
Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board and UIG Interpretations
as selected and modified for use by non-reporting entities in the ICAA's Best Practice Guide for Non-Reporting Entities.
It does not comply with International Financial Reporting Standards. It has been prepared on an accrual basis and under
the historical cost convention, except for certain assets, which, as noted, have been written down to fair value as a result of
impairment. Unless otherwise stated, the accounting policies adopted are consistent with those of the prior year.
(a) Revenue Recognition
Revenue from the sale of goods is recognised upon the delivery of goods to customers.
…
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.
Note – this email address should not be used for technical queries. For this purpose, use rahelpline@charteredaccountants.com.au.
15 October 2008
AUASB ED 9/08 Proposed ASA 230 Planning an Audit of a Financial Report
AUASB ED 10/08 Proposed ASA 300 Planning an Audit of a Financial Report
AUASB ED 11/08 Proposed ASA 540 Auditing Accounting Estimates, including Fair Value Accounting Estimates and Related
Disclosures
AUASB ED 12/08 Proposed ASA 560 Subsequent Events
AUASB ED 13/08 Proposed ASA 570 Going Concern
AUASB ED 14/08 Proposed ASA 600 Special Considerations – Audits of a Group Financial Report (including the Work of Component
Auditors)
31 October 2008
AASB ED 166 Simplifying Earnings per Share: Proposed Amendments to AASB 133
7 November 2008
IASB Improvements to IFRSs (Proposed amendments to International Financial Reporting Standards)
5 December 2008
IASB Simplifying Earnings per Share: Proposed Amendments to IAS 33
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 Essentials
Workshop
Throughout November in Sydney, Parramatta, Melbourne, Adelaide, Perth and Brisbane. Find out which hot spots ASIC will be
targeting, ensure you can address them, and get the latest updates on auditing standards and regulatory requirements.
Chartered Accountants Accounting Update
and Accounting and Audit of Registered Clubs
Throughout November and December in Sydney, Melbourne, Adelaide, Perth and Brisbane. These seminars will bring you
up-to-date for end of year reporting and the intricacies of accounting and auditing for registered clubs.
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. Please note that this email address should not be used for technical
queries.
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
