Accounting and Auditing News Today (ANT) Issue No 39 - 5 October 2007

Welcome to the thirty-ninth 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/NZFRSB meeting highlights – 3-4 October 2007

The Australian Accounting Standards Board (AASB) and New Zealand Financial Reporting Standards Board (NZFRSB) met jointly in Sydney on 3-4 October 2007. Highlights of the meeting included:

• Compliance with IFRS: Agreed to prepare a joint paper on possible legislative changes to facilitate IFRS implementation;
• Differential Reporting: Agreed to co-operate in progressing changes to differential reporting regime in respect of SMEs;
• Insurance Contracts: Confirmed that NZ held similar views to the AASB on Discussion Paper ‘Preliminary View on Insurance Contracts’;
• Policy on Modifying NFP: Agreed to the development of a protocol for modifying IFRS based accounting standards for Not-for-Profit (NFP) entities;
• NZ Australia Convergence: Agreed to a process on aligning Australian NFP and NZ Public Benefit Entity (PBE) paragraphs; and
• Business Combinations: Discussed differences between Australian NFP and NZ PBE paragraphs in respect of the imminent release of the revised IFRS 3 ‘Business Combination’.

• SMEs: Discussed a draft submission to the IASB on the ‘Exposure Draft of A Proposed IFRS for SMEs’. The submission will be finalised at the November meeting;
• GAAP/GFS Harmonisation: Approved AASB 1049 ‘Whole of Government and General Government Sector Financial Reporting’;
• Review of AAS 27, AAS 29 and AAS 31: Confirmed the topic-based approach, and agreed that land under roads would be recognised on a prospective basis;
• Interpretations: Discussed submissions on Draft Interpretations D21 ‘Real Estate Sales’ and D22 ‘Hedging of a Net Investment in a Foreign Operation’; and
• Two Exposure Drafts Approved: Approved the release of Australian equivalents to the IASB ED 9 ‘Joint Arrangements’ and ‘Proposed Amendments to AASB 139 Financial Instruments: Recognition and Measurement’.

On 4 October 2007, an International Workshop was held in Canberra, which explored the use of XBRL in the recently announced Standard Business Reporting (SBR) Project being undertaken by Government. The Government's SBR programme is part of its long term initiative to cut red tape confronting business when reporting to Government. XBRL is being used in a number of countries as the global standard for business reporting. The event linked international members of the XBRL community with the SBR team, presented the strategic direction of the XBRL standard, the adoption status around the world and helped to identify issues the SBR team may encounter in fulfilling its objectives.

The SBR/XBRL Project team are planning to hold an international conference in Brisbane on 27 and 28 November 2007. The conference aims to inform members of the accounting/finance and software development communities about the impact that SBR will have on the financial reporting to government. For more information go to the XBRL website or send an email to: standardbusinessreporting@treasury.gov.au.
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The structure of Australian financial statements will undergo more change in the next 2 years as a result of the release yesterday by the AASB of the revised version of AASB 101 'Presentation of Financial Statements'.

AASB 101 has been revised in response to the release early last month of a revised version of IAS 1 by the IASB. In turn this standard represented the completion of stage 1 of a significant project undertaken by the IASB with FASB to improve the presentation of financial statements internationally.

Further changes are anticipated as the IASB embarks on stage 2 of this project which is expected to result in the publication early next year of a discussion paper examining some of the more fundamental questions about the content of financial statements.

The major change being introduced now is the requirement to present owner related changes in equity separately from non owner changes in equity. This will result in a new statement of comprehensive income in addition to changes to the format of the income statement and statement of changes in equity.

The statement of comprehensive income can be presented in 2 parts (an income statement and a statement of comprehensive income) if preferred or simply as one statement disclosing total comprehensive income. Other changes include the inclusion of a statement of financial position at the beginning of the earliest comparable period.

The release of AASB 101 is accompanied by Omnibus amending standard AASB 2007-8 which makes consequential amendments to 30 existing AASB standards and 8 existing interpretations. Changes made by AASB 2007-8 include incorporating new AASB 101 terminology into other standards e.g. replacing balance sheet with statement of financial position and amending the term “financial report” and “general purpose financial report” to "financial statement” and “general purpose financial statement" to better align Australian and IFRS terminology.

The new standards are applicable to financial years beginning on or after 1 January 2009 with early adoption encouraged. They can be downloaded on the AASB Accounting Standards website.

View the media release.
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The Financial Reporting Council (FRC) is seeking expressions of interest from people wishing to fill part-time vacancies on either the Australian Accounting Standards Board (AASB) or the Auditing and Assurance Standards Board (AUASB). The positions are available during 2007-08.

Successful candidates will possess knowledge and experience in business, accounting, auditing, law or government.

The deadline for submitting an expression of interest, which should address the selection criteria available on the FRC website is Friday 12 October 2007.
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The International Accounting Standards Board (IASB) met in London on 18-21 September and their update summarising the decisions can be downloaded from here.

Conceptual Framework
Board staff are to prepare an exposure draft on Phase A of the Conceptual Framework, Objective and Qualitative Characteristics of Financial Reporting.

Short-term convergence: earnings per share
The Board considered changes to the calculation of EPS on forward purchase contract with or without remittance of dividends. The Board tentatively decided that shares subject to a repurchase should be viewed as a separate class of ordinary shares and that the two-class method should be applied for the calculation of EPS.

Annual Improvements Process
The Board confirmed the wording of IAS 39 paragraph 50 that the classification of non-derivative financial instruments as held for trading, and thus accounted for at fair value through profit or loss, should be available only at initial recognition and not subsequently. The Board also tentatively decided to amend the proposed improvement to IAS 19 'Employee Benefits' by replacing the term 'fall due' with 'expected to be settled' in order to focus on the timing of the employee's entitlement to the benefit rather than the expected timing of the employee's use of the benefit.

Financial instruments puttable at fair value and obligations arising on liquidation
The Board directed its staff to draft a proposed amendment based on a revised approach to identifying whether puttable financial instruments are the residual interest in an entity and therefore should be classified as equity under the proposed amendment.

Post-employment benefits
The Board continued its discussions of the definitions of benefit promises and suggested some editorial changes to clarify its intentions. It tentatively decided to include the former 'defined contribution promises' in the 'defined return' category and to treat 'defined benefit' promises as the residual category of benefit promises.

Accounting Standards for small and medium-sized entities
The Board decided to extend the deadline for comments on the proposed IFRS for SMEs and for submitting field test results to 30 November 2007.
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The most recent meeting of the International Financial Reporting Interpretations Committee (IFRIC) was held in London on 6 and 7 September 2007. Full details of the IFRIC deliberations are available in the IFRIC update.

The committee discussed the following issues:

• IAS 18 'Revenue' – Customer contributions;
• IAS 27 'Consolidated and Separate Financial Statements' – non-cash distributions;
• IFRS 2 'Share-based Payments' – Group cash-settled share –based payment transactions; and
• IAS 39 Financial Instruments: Recognition and Measurement – Paragraph AG33(d)(iii) and Scope of paragraph 11A.

The Institute has launched its Audit Conference DVD following the National Audit Conference in June to help auditors in understanding the 35 new auditing standards that are legally enforceable for Corporations Act audits that came into effect for financial years commencing on or after 1 July 2006.

Audit topics covered in this DVD include:

• The Mandatory requirements of APES 320 Quality Control for firms
• Independence issues for audit, review and other assurance engagements
• Requirement of audit risk and fraud standards
• Corporations Act - directors’ and auditors’ obligations
• Superannuation Industry (Supervision Act)

To purchase the Audit Conference DVD, contact the Institute on (02) 9290 1344 or visit the website.
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The October Update to the Members' Handbook which went 'live' on 5 October 2007 includes new and revised accounting and auditing standards released up to 29 August 2007.

The CD update to the Members' Handbook, distributed in late July will now allow you to download these new/compiled standards onto the hard drive of your computer.

Those members who require the Members' Handbook on their hard drive and who wish to receive the CD Rom must update their profile on the Institute's website. To view a step-by-step guide on how to do this, visit the Institute's website. The next CD release will be in December.
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The Institute encourages you to act now to benefit from the new schemes capping liability for members in NSW, WA, VIC, SA and NT. The schemes were approved by the Professional Standards Council (PSC) on 14 September 2007.

These schemes for members in NSW, WA, VIC and SA will be gazetted for commencement on 8 October 2007 (or later in the case of the NT and VIC).

The Institute is waiting for advice from the NT Department of Justice in relation to the publication date for the NT scheme in the Government Gazette. The NT scheme will commence two months after this publication date.

To find out more information on how your practice can benefit from these important schemes, visit the Institute's website.
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Q: I have been the auditor of XYZ Club Limited for the last 10 years and have 2 questions:

1. am I required to rotate off the audit?
2. if I do need to rotate, do I need to notify ASIC?

APES 110 290.153 recognises that “Using the same senior personnel on an Assurance Engagement over a long period of time may create a familiarity threat. The significance of the threat will depend upon factors such as:

• The length of time that the individual has been a member of the Assurance Team;
• The role of the individual on the Assurance Team;
• The nature of the Assurance Engagement.

• Rotating the senior personnel off the Assurance Team;
• Involving an additional professional accountant who was not a member of the Assurance Team to review the work done by the senior personnel or otherwise advise as necessary; or
• Independent internal quality reviews.

If your firm was appointed auditor, or if your firm is an authorised audit company, and the audit will be taken over by another registered company auditor within your firm, then there has not been a change of auditor in accordance with the Corporations Act. It is an internal matter for your firm to determine which member of the firm is appropriate to act as lead auditor.

Alternatively:

• if you were appointed auditor as an individual, or
• your firm was appointed as auditor and you are the only partner who is a registered company auditor, then another auditor will need to be appointed. In this case you will need to resign as auditor including notifying ASIC, and the company will need to appoint a new auditor.

Technical Conference
Registrations close Friday 5 October*
Sydney 8 - 10 Oct, Melbourne 8 - 10 Oct. Day 2: Auditing. Examine force of law, AIFRS, APES 320 and the latest technical issues and developments. Take away timely and practical solutions for immediate implementation.

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.

Audit Day
Highlighting key audit topics. Sessions include: Auditing update; Audit of Not for profit and Registered Clubs, Audit Quality Control and independence requirements.

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 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.
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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.

12 October 2007
Draft Interpretation on Petroleum Resource Rent Tax

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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TECHNICAL/XFILES/ARTICLES/ANT/ANT39_07_10_05.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.