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Welcome to the forty-second 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. Submission lodged to AICD
The Joint Accounting Bodies have lodged a submission to the Australian Institute of Company Directors on the joint FINSIA/AICD discussion paper on underlying profit. The bodies support the efforts being made to improve the quality and consistency of the non-statutory profit information communicated by entities. The seven principles outlined in the paper are generally supported, but the bodies have some concerns with the definition of underlying profit, the resultant adjustments and the example provided.
Download the submission, and read the discussion paper (pdf).
2. Melbourne Corporate Reporting Discussion Group – 13 November 2008
The Institute is hosting the Melbourne Corporate Reporting Discussion Group meeting on Thursday, 13 November 2008 at its Melbourne office at Level 3, Bourke Place, 600 Bourke Street, Melbourne.
The meeting will be chaired by Lincoln Tong, Group Financial Controller of Austock Group Limited. The guest speaker will be Patricia Stebbens, Accounting & Advisory Partner at KPMG specialising in Financial Instruments.
This session will discuss the recent changes to the financial instruments standards as a result of current economic conditions.
The session will: - provide an overview of recent amendments to AASB 139 and AASB 7
- consider the commercial implications of the changes
- briefly update you on other IASB related projects such as fair value, reducing complexity and the debt equity proposals
- give you the opportunity to discuss key issues
The lunchtime meeting will begin at 12.30pm in Training Room 1 and conclude at 2:00pm. If you wish to attend this forum, members can register online by Friday, 7 November 2008. If you have any questions regarding the forum, please email crdg@charteredaccountants.com.au.
3. Feeling spooked by the credit crunch?
The institute website now has a page of links to various local and international resources, which is continually updated and a collection of articles (pdf) and Q&As.
4. AASB releases AASB 2008-10 Reclassification of Financial Assets
The AASB has released AASB 2008-10 Amendments to Australian Accounting Standards – Reclassification of Financial Assets, which makes amendments to AASB 139 Financial Instruments: Recognition and Measurement and AASB 7 Financial Instruments: Disclosures. These amendments arise from the issuance of Reclassifications of Financial Assets (Amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures) by the IASB in October 2008 [refer to ANT40/2008].
The amendments to AASB 139 relate to the optional reclassification of non-derivative financial assets and the transfer of a financial asset from the ‘available-for-sales’ category to the ‘loans and receivables’ category. The amendments to AASB 7 specify the disclosures required by an entity that reclassifies financial assets out of fair value through profit or loss in accordance with the amendments to AASB 139 made by this Standard.
The amendments to AASB 139 and AASB 7 shall be applied from 1 July 2008.
To download AASB 2008-10 for further information, go to the AASB website (pdf).
5. AASB releases AASB 2007-10
The AASB has finally released AASB 2007-10 Further Amendments to Australian Accounting Standards arising from AASB 101, which makes amendments to Australian Accounting Standards, including Interpretations and the Framework for the Preparation and Presentation of Financial Statements. These amendments arise from the issuance of the revised AASB 101 Presentation of Financial Statements in September 2007.
The main change introduced by AASB 2007-10 is to change the term ‘financial report’ to ‘financial statements’. This will ensure Australian accounting standards are consistent with the terminology of IFRS.
This new amending standard is applicable to annual reporting periods beginning on or after 1 January 2009, with early adoption permitted for annual reporting periods beginning on or after 1 January 2005, provided that the revised AASB 101 is also adopted for the same period.
To download AASB 2007-10, go to the AASB website (pdf).
6. AASB ED 167-169 – invitations to comment
Over the past month the AASB has released a number of exposure drafts (ED):
The closing dates for these submissions are in various dates throughout December, with full details available on the AASB website. The Institute will also be preparing submissions and will take comments from interested parties up until one week prior to the closing date. Comments should be directed to techsubmissions@charteredaccountants.com.au.
7. AASB releases IPSASB ED 35 on borrowing costs
The International Public Sector Accounting Standards Board (IPSASB) has issued an exposure draft – ED 35 IPSAS 5 Borrowing Costs (Revised 200X). The AASB are interested to receive constituent comments on the proposal in order to assist in the AASB submission to the IPSASB.
The main changes proposed by the ED are: - Scope – to include a scope exclusion in paragraph 6, to exclude application of the standard to borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset measured at fair value at initial recognition.
- Definitions – to remove unnecessary definitions from paragraph 7: accrued basis, assets, cash, contributions from owners, distributions to owners, economic entity, expenses, government business enterprises, liabilities, net assets/equity and revenue.
- Recognition – to require the immediate recognition as an expense of borrowing costs, except that where borrowing costs are specifically incurred for the acquisition, construction or production of a qualifying asset an entity has the option to capitalise those borrowing costs. [Note: this treatment is not consistent with the revised AASB 123 Borrowing Costs which is applicable for all reporting entities for periods beginning on or after 1 January 2009].
- Transitional provisions – to include a transitional provision that, when application of the new Standard constitutes a change in accounting policy, an entity shall apply the Standard to borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or after the effective date.
Comments are due to the Australian Accounting Standards Board (AASB) by 1 December 2008, or to the IPSASB by 7 January 2009. The submission is available for download on the AASB website (pdf).
8. AASB lodges a second conceptual framework submission
The AASB has made a submission to the International Accounting Standards Board (IASB) on its exposure draft An Improved Conceptual Framework for Financial Reporting: The Objective of Financial Reporting and Qualitative Characteristics and Constraints of Decision-useful Financial Reporting Information.
The AASB generally supports the proposed concepts for private sector businesses; however, it had some significant concerns relating to both the technical issues and the process for progressing the Conceptual Framework project. The submission recommends that the IASB consider not-for-profit issues at each stage of the conceptual framework project, as this would be of considerable benefit to national standard setters whose standards cover both profit and not-for-profit entities.
To download the submission, visit the AASB website (pdf).
9. AASB meeting agenda – 12-13 November 2008
The next AASB meeting will be held on 12-13 November 2008 in Melbourne. The agenda includes the following items: - Superannuation plans and ADFs – consideration of Exposure Draft
- Insurance – consider implications of amendment to allow
reclassification of financial assets
- Related party disclosures in the public sector – consider project scope
- Business combinations in Not-for-profits – consider Australian amendments
- Non-exchange income – consider project status
- Superannuation contributions tax – consider draft Australian interpretation
- IPSASB publications on Conceptual framework and Borrowing costs – consider AASB responses
- Differential reporting
- Annual improvements 2008 – consider submissions to ED 165
- Presentation of Financial Statements – consider issue of the IASB Discussion Paper
To download the complete agenda, visit the AASB website (pdf).
10. IASB meeting update – 13-17 October 2008
The most recent meeting of the International Accounting Standards Board (IASB) was held on 13-17 October 2008 in London, and the Update summarising the decisions of the Board is now available on the their website (pdf).
A brief summary follows, but full details can be found in the Update. - Credit crisis – the Board discussed various aspects of its response to the credit crisis, including the amendments made to IAS 39 Financial Instruments: Recognition and Measurement, a proposed exposure draft for consolidation, derecognition of financial instruments and inactive markets. The Board will continue its discussion on consolidation and derecognition in November.
- Annual improvements – as part of its annual improvements project, the Board discussed two issues in IAS 39 Financial Instruments: Recognition and Measurement. The issues relate to the definition of a derivative (where the Board considered comments received on the amended definition of a derivative proposed in the 2007 ED Improvements to International Financial Reporting Standards) and the effective interest method.
- Fair value measurement – the board tentatively decided not to preclude the use of a mid-market pricing or another pricing convention as a practical expedient for a fair-value measurement within a bid-ask spread; to specify that the bid-ask spread guidance applies in all levels of the fair-value hierarchy; and to exclude guidance on offsetting positions.
- Financial instruments with characteristics of equity – the Board considered an analysis of the comment letters received in response to the discussion paper Financial Instruments with Characteristics of Equity (published in February 2008). The Board also discussed which approach for identifying equity instruments provides the best starting point for future deliberations.
- IFRS for private entities (formerly small and medium-sized entities, or SMEs) – the Board made tentative decisions regarding exempting consolidation where temporary control exists following an acquisition, purchased options cannot be accounted for as hedging instruments, modifying the application of the straight line method for lessees in operating leases in certain circumstances and incorporating the recent classification of equity/liability amendments regarding puttable instruments. The Board will discuss the remaining issues (primarily relating to restructuring the financial instruments section, possible replacement of the term ‘fair value’, concepts and pervasive principles, equity-settle share-based payments, defined benefit plans, incomes taxes, and impairment of goodwill) in November and December meetings.
- Insurance contracts – the Board discussed measurement approaches in respect of insurance liabilities. The session was educational and no decisions were made.
- Share-based payment – the Board held its first discussion of the ED Group Cash-settled Share-based Payment Transactions since it was published in December 2007. The Board tentatively confirmed the proposal in the ED to include all forms of group share-based payments in the scope of IFRS 2 Share-based Payment.
- Technical plan – the Board made its regular review of its Technical Plan, which sets out the expected timetable over the next 3 years for projects on the IASB’s active agenda and research agenda. The revised timetable will be available shortly on the IASB website.
11. IFRIC meeting agenda – 6 November 2008
The next International Financial Reporting Interpretations Committee (IFRIC) meeting will be held on Thursday 6 November 2008 in London. The agenda (pdf) includes the following items: - D24 Customer Contributions
- Compliance costs for European regulation concerning REACH
- Customer related intangible assets
- Review of tentative agenda decisions published in September IFRIC update:
- Restricted securities
- Application to prepaid employer’s contribution reserve
- Staff recommendations for tentative agenda decisions:
- Regulatory assets and liabilities
- Classification of puttable and perpetual instruments
- Potential effect of IFRS 3 and IAS 27 (as revised in 2008) on equity method accounting
- Derecognition
More information about the meeting is available at the IASB website.
Auditing & Assurance News | |
12. AUASB meeting update – 27-28 October 2008
The Auditing and Assurance Standards Board (AUASB) met in Melbourne on Monday and Tuesday 27 and 28 October. - Revising and Redrafting of Standards in connection with the Clarity Project –
The Board considered feedback received in connection with exposure drafts of the first four standards for which the comment period has now passed. These standards have been cleared for final approval, subject to some minor further amendments. They are to be held pending completion of the Clarity Project and any consequential amendments that may arise out of changes to other standards. All revised and redrafted standards are expected to be issued at the same time, in accordance with the Board’s published timetable for this project, in time for implementation for the audits of financial periods beginning on or after 1 January 2010. These four standards are:- ASA 240 The Auditor’s Responsibilities Relating to Fraud in an Audit of a Financial Report
- ASA 260 Communication with Those Charged with Governance
- ASA 315 Identifying and Assessing the Risks of Material Misstatement Through Understanding the Entity and its Environment
- ASA 330
- The Auditor’s Procedures in Response to Assessed Risks
The Board considered and approved for release as exposure drafts in ‘clarity’ format (subject to some minor amendments) the following – - ASA 200 Objective and General Principles Governing an Audit of a Financial Report
- ASA 250 Considerations of Laws and Regulations in an Audit of a Financial Report
- ASA 320 Materiality and Audit Adjustments
- ASA 450 Evaluation of Misstatements Identified During the Audit
- ASA 510 Initial Engagements – Opening Balances
- ASA 550 Related Parties
- ASA 580 Written Representations
- ASA 720 Other Information in Documents Containing Audited Financial Reports
A preamble to the revised and redrafted Standards appears on the AUASB website as a work-in-progress document. The document will be revised progressively and will eventually be transformed into an Exposure Draft.
- The Board received an update on proposed Guidance Statement GS 009 Auditing Self Managed Superannuation Funds, which is expected to be issued within the next two weeks.
- The Board considered amendments to GS 001 Concise Financial Reports to clarify certain matters and to more closely align the terminology with AASB 101 Presentation of Financial Statements and AASB 8 Operating Segments. The changes were approved, subject to inclusion in the illustrative auditor’s reports set out in GS 001, of disclosures in relation to the Remuneration Report.
- Discussions with the Department of Climate Change are continuing in relation to emissions reporting under the National Greenhouse and Energy Reporting (NGER) System and the proposed Carbon Pollution Reduction Scheme (CPRS). The Board expects to make a submission in connection with the External Audit Consultation Paper which has been issued by the Department of Climate Change.
- The Board discussed the format of the proposed consultative meeting with stakeholders, due to be held on 2 December 2008.
- The Board discussed the need to update the existing AUS 904 Engagements to Perform Agreed-upon Procedures. A project plan is to be developed for consideration at the next meeting.
- The Board approved minor editorial changes to ASAE 3500 Performance Engagements.
Superannuation Audit Reports
Q: ANT37/2008 (26 September 2008) announced the release by the ATO of new self-managed superannuation funds (SMSF) audit reports. Do these reports apply to the current financial year (i.e. years ending 30 June 2008)?
A: Yes. The new reports are to be used for financial years ending on or after 30 June 2008 by members who are an approved auditor, and have been appointed by a trustee of a SMSF to give a report on the operation of that fund for each income year.
The ATO application date of 1 July 2008 refers to the date when the audit report is signed.
As noted in the ANT37/2008 item, the ATO has also released Auditing a self-managed super fund – questions and statements to consider when auditing a self-managed superannuation fund (SMSF). It can be viewed on the ATO website.
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.
7 November 2008
IASB Improvements to IFRSs (Proposed amendments to International Financial Reporting Standards)
14 November 2008
National Greenhouse and Energy Reporting Act 2007 and Carbon Pollution Reduction Scheme - External Audit Consultation Paper
1 December 2008
AASB ED 169 Improving Disclosures about Financial Instruments: Proposed Amendments to AASB 7
5 December 2008
AASB ED 167 Discontinued Operations: Proposed Amendments to AASB 5
AASB ED 168 Additional Exemptions for First-time Adopters: Proposed amendments to AASB 1
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 Audit of Self Managed Super Funds Workshop
Throughout >November in Melbourne, Sydney and Canberra.
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 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.
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