Accounting and Auditing News Today (ANT) Issue No 40 - 12 October 2007

Welcome to the fortieth edition of Accounting & Auditing News Today for 2007. What follows is a brief update on changes and proposed changes in the financial reporting sphere.

1. AASB approves harmonisation of GAAP/GFS

The Australian Accounting Standards Board (AASB) has approved AASB 1049 'Whole of Government and General Government Sector Financial Reporting', which includes Generally Accepted Accounting Principles (GAAP) and Government Finance Statistics (GFS) harmonisation requirements for financial reporting by whole of governments. The previous AASB 1049 standard only harmonised GAAP and GFS for the General Government Sector.

The new standard is a product of the AASB's broad strategic objective to pursue GAAP/GFS harmonisation reporting to achieve a single set of government reports which are auditable, comparable between jurisdictions and in which the outcome statements are directly comparable with the relevant budget statements.

The final standard is operative for annual reporting periods beginning on or after 1 July 2008 and will be publicly available shortly.

To view the media release, go to the AASB website.

The AASB has now published its Action Alert detailing the proceedings of its October 3 and 4 meeting. It can be downloaded from the AASB website. A report of the meeting by our correspondents was given in last week’s ANT.

The next International Accounting Standards Board (IASB) meeting will be held in London on 16 -19 October 2007. Items to be discussed include:

• Conceptual framework – elements and recognition, objectives and qualitative characteristics
• Fair value measurements – comment letter analysis
• Annual improvements process
• Financial instruments
• Related party disclosures
• IFRIC proposal – draft amendment to IFRIC 11 and IFRS 1 – Group cash-settled share-based payment transactions
• Liabilities – amendments to IAS 37

The agenda is available for download on the IASB October meeting website.

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The Government has announced the allocation of $3 million in additional funding to support a range of corporate law initiatives.

The funding will be divided amongst the following:

• Australian Securities and Investments Commission (ASIC) – to fund a secondment programme between ASIC, Treasury, financial services industry markets and international regulators of comparable jurisdictions, and to support initiatives towards increase cooperation with international regulators
• AASB – to maintain Australia's funding contribution to the IASB and fund a project to support the automated online compilation of accounting standards
• Takeovers Panel – to fund the development of a searchable database and indexing framework and
• Treasury – to partner with the National Institute for Governance at the University of Canberra on a research project into best practice corporate governance arrangements for small corporates.

To read the media release, go to the Treasurer’s Press Release.

Financial arrangements will be subject to new tax timing and character hedging rules under new legislation currently before Federal Parliament.

The Tax Laws Amendment (Taxation of Financial Arrangements) Bill 2007 was introduced to the House of Representatives on 20 September 2007. This Bill introduces a new division, Division 230, into the Income Tax Assessment Act 1997 which will provide a principles-based framework for the taxation of gains and losses from financial arrangements. Division 230 provides a range of elective methods for determining gains and losses, including the elective fair value method, the elective retranslation method, the elective hedging method and the elective financial reports method. Where these elective methods are not, or cannot be, adopted, the tax treatment defaults to either the accruals or realisation method. There are certain exceptions to Division 230 listed in the Bill, including an exception for small and medium-sized taxpayers.

The Bill can be viewed here and the EM is available here.

More details on the development and application of this new legislation can be found on the Institute’s website.

The Bill includes an elective start date of the 2008-09 income year and a general start date from the 2009-10 income year.

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The Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) have issued a discussion paper on a proposed online breach reporting system for dual-regulated institutions.

The proposals will allow APRA regulated entities to report breaches to APRA online. They will also allow entities regulated by both APRA and ASIC to report breaches that are required to be notified to both authorities to do so online to APRA through a single reporting system. This will reduce the current duplication in having to notify breaches to both bodies.

The media release and discussion paper are available on the APRA website. Comments close on October 31 2007.

The International Auditing and Assurance Standards Board has announced that the complete set of clarified international auditing standards will be effective for audits of financial statements for periods beginning on, or after, 15 December 2009. The International Board's decision will now enable national standard setters and regulators to effectively plan to implement the new standards which the IAASB has been progressively reviewing over the past 3 years, in the interests of improving the clarity of wording and the implementation of new drafting conventions.

The AUASB has commenced preliminary discussions regarding the Clarity project, and has welcomed the announcement by the IAASB of the effective date, so that more detailed planning and project management can now be undertaken.

For more information about the IAASB's clarity project and timetable, refer to the October 2007 communique.

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The Institute of Chartered Accountants is hosting the next Sydney AIFRS Corporate Discussion Group Meeting on Monday 22 October 2007 at its Sydney offices at 33 Erskine Street, Sydney NSW 2000.

The meeting will be chaired by David Southwell CA, CA for Group Reporting at Insurance Australia Group. Debbie Hankey, partner at Deloitte Touche Tohmatsu will be the guest speaker for this forum. She will be leading discussion on the practical issues arising out of and concerning AASB 3 'Business Combinations'.

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 Jane Ma by Wednesday 17 October 2007.

AUASB Chair Reappointed
The Treasurer has reappointed Ms Merran Kelsall as part-time Chairman of the Auditing and Assurance Standards Board (AUASB) for a second three-year term, which commenced on 10 August 2007. To view the media release, view the Treasurer’s Press Release.

CALDB reappointments
The Treasurer has also reappointed Professor Ian Ramsay, Tom Bostock, Simon Stretton, David Barnett, John Keeves and Patrick Burroughs as part-time members of the Companies Auditors and Liquidators Disciplinary Board (CALDB). The reappointments are for a further three-year term which commenced 1 September 2007.
To view the media release, view the Treasurer’s Press Release.

Independent audit regulators from 21 countries met for the second time at the International Forum of Independent Audit Regulators (IFIAR) in Toronto. The meeting was chaired by ASIC Commissioner Jeffrey Lucy FCA, a past president of the Institute.

Key issues discussed at the meeting include:

• Possible implications for audit regulators of current market turbulence
• The role of audit inspections in driving audit quality
• Exchange of information between regulators
• Cooperation between regulators in relation to registration and/or notification of auditors of foreign issuers
• The holding of workshops for members on audit inspection techniques and audit market concentration and choice

For further information, go to the IFIAR press release.

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Q: Does the release by the AASB of a revised version of AASB 101 "Presentation of financial statements" affect my unsigned financial statements for 30 June 2007?

A: Yes. AASB 108 paragraph 30 requires financial statements to disclose details concerning any new standards that have been issued but not yet applied because they are not effective. Therefore, if financial reports for 30 June 2007 are as yet unsigned, the note complying with AASB 108 paragraph 30 needs to include a reference to AASB 101, noting that it has been reissued but has not yet been adopted. The note should also make reference to any known or reliably estimable information about the possible impact of this standard on the first financial report to which it will be applied.

Specimen notes complying with AASB 108 are included in the various "specimen published financial statements" published by the major firms and these can be accessed via our website.

While these notes have not yet been updated for AASB 101 they provide guidance as to the kind of information that should be provided.

A summary of the changes being introduced by AASB 101 is contained in the AASB media release accompanying the release of the standard http://www.aasb.com.au and was also discussed in ANT39.

Audit of Self Managed Superannuation Funds Workshop
Throughout October in Adelaide, Sydney, Brisbane, Melbourne & Perth Now that the new auditing standards apply to SMSF audits, don't miss out on ensuring your audits of SMSFs are compliant with the regulatory requirements.

Regional Roadshow
Running in 12 key regional centres throughout October 2007, the Regional Roadshow is a two-day event that provides the very latest changes and strategies for tax, accounting and auditing.

Superannuation Day
Throughout November in Adelaide, Sydney, Brisbane, Melbourne & Perth Explore essential SMSF updates and insights, now that ‘Better Super’ reforms are in place. Delve into the planning issues and pitfalls, focusing on how to identify the triggers.

National Future of Professional Practice
16 November 2007, Sydney
Identify key practice management issues and opportunities that impact your business.

Audit Day
Throughout December in Adelaide, Sydney, Brisbane, Melbourne & Perth Highlighting key audit topics. Sessions include: Auditing update; Audit of Not for profit and Registered Clubs, Audit Quality Control and independence requirements.

National Audit Conference 2007 DVD
If you didn't attend the National Audit Conference in June 2007 - don’t miss out on this opportunity to view the conference at your convenience informing you and your colleagues.

Outlined below are the comment closing dates for all current exposure drafts. Members are encouraged to prepare their own submission on each document and submit them to the Institute no later than one week before the closing date shown.

For more information, refer to the Institute's Technical Standards' exposure drafts web page

Forward all ED submission/comment emails to techsubmissions@charteredaccountants.com.au.

15 October 2007
IESBA ED "Proposed Revised Section 290 of the Code of Ethics for Professional Accountants, Independence - Audit and Review Engagements, and Proposed Section 291, Independence - Other Assurance Engagements"

18 October 2007
IFRIC D22 'Hedges of a Net Investment in a Foreign Operation'

19 October 2007
Exposure draft of APES 205 "Conformity with Accounting Standards"

26 October 2007
AASB ITC 13 'Preliminary Views on Insurance Contracts'

31 October 2007
AUASB ASRE 2400 ‘Review of Financial Reports and Other Historical Information’
ISA 510 (redrafted) ‘Initial Audit Engagements – Opening Balances’
ISA 530 (redrafted) ‘Audit Sampling’
IASB proposed IFRS for SMEs field test questionnaires

16 November 2007
IASB Discussion Paper "Preliminary Views on Insurance Contracts"

30 November 2007
AASB Consultation Paper on Consolidation of Subsidiaries by Superannuation Entities
ISA 700 (Redrafted) 'The Independent Auditor's Report on General Purpose Financial Statements'
ISA 705 (Revised and Redrafted) 'Modifications to the Opinion in the Independent Auditor's Report'
ISA 706 (Revised and Redrafted) 'Emphasis of Matter Paragraphs and Other Matter(s) Paragraphs in the Independent Auditor's Report'
ISA 800 (Revised and Redrafted) 'Special Considerations-Audits of Special Purpose Financial Statements and Specific Elements, Accounts or Items of a Financial Statement'
ISA 805 (Revised and Redrafted) 'Engagements to Report on Summary Financial Statements'

31 December 2007
ISQC 1 (Redrafted) 'Quality Control for Firms that Perform Audits and Reviews of Financial Statement, and Other Assurance and Related Services Engagements'
ED 33 'Amendments to IPSAS 4, The Effects of Changes in Foreign Exchange Rates'
ISA 220 (Redrafted) 'Quality Control for an Audit of Financial Statements'

11 January 2008
IASB's proposed amendments to IAS 39 - 'Exposures Qualifying for Hedge Accounting'
IASB ED 9 “Joint Arrangements”

Technical Query Service
The Institute's Reporting and Assurance Team responds to inquiries from members on auditing and financial reporting issues. This service provides general assistance and guidance only. Members have the responsibility to apply their own professional judgment. The service can be contacted on (02) 9290 5702.

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More information is available at our website.

TECHNICAL/XFILES/ARTICLES/ANT/ANT40_07_10_12.doc. The Reporting and Assurance team comprises, Jeanette Dawes CA, Roslyn Hatton CA, Kerry Hicks CA, Claire Locke CA, Stephanie Kemp CA, Andrew Stringer; Benjamin Lau, Jane Ma and Adrian Tam – Reporting and Assurance Assistants.