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Welcome to the forty-fourth 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. Joint submission on ED 166 - EPS
The three professional accounting bodies (The Institute, CPA Australia and the NIA) have lodged a brief submission on ED 166 and its international equivalent Simplifying Earnings per Share: Proposed Amendments to IAS 33 supporting the proposals. To view the submission, go to the Institute website.
2. Melbourne Corporate Reporting Discussion Group meeting highlights – 13 November 2008
The Melbourne Corporate Reporting Discussion Group met on Thursday 13 November at the Institute’s offices to discuss financial instruments. The meeting was chaired by Lincoln Tong, Group Financial Controller of Austock Group Limited and the guest speaker was Patricia Stebbens, Accounting & Advisory Partner at KPMG specialising in Financial Instruments.
The discussion focused primarily on the current economic market conditions. The group were in general agreement that the accounting is not to blame for the current crisis however there were feelings that additional guidance was needed to help businesses implement fair value accounting in illiquid markets.
Patricia highlighted some of the key events which have brought the valuation of financial instruments to the attention of the general public and explained the recent changes to AASB 139 and the implications of moving from fair value accounting to cost with impairment. The group discussed that cost with impairment would enable a greater degree of judgement than fair value accounting. A key aspect of the changes is to understand the effective date, given the amendments have retrospective application.
Patricia outlined the key financial reporting considerations her firm had identified from June and September reporting periods as being current/non-current disclosure, impact of hedges, valuation, risk assessment and impairment. The group also discussed the implications of the current economic conditions on the disclosure requirements for interim reporting and what additional disclosures may be required for the December reporting period.
3. Joint accounting bodies letter to the Prime Minister
The Institute together with CPA Australia and the National Institute of Accountants (the Joint Accounting Bodies) sent a letter addressed to the Prime Minister to outline the position of the Joint Accounting Bodies on three issues that may be on the agenda of the international summit - fair value accounting, financial reporting and prudential reporting, and the future independence of the international accounting standard setting process.
The views presented in the letter advocate for the retention of fair value accounting, financial reporting outcomes that are consistent with the purpose of financial reporting providing decision-useful information without any modification for prudential reporting purposes, and acceptance of the position of the International Accounting Standards Board as the independent international accounting standard setter.
The letter can be viewed on the Institute website.
4. AASB meeting update – 12-13 November 2008
The Australian Accounting Standards Board (AASB) met on 11-12 November 2008. The following outlines the key areas of discussion. The Board tentatively agreed on:
Superannuation Plans and Approved Deposit Funds (ADFs)
The Board will look to issue this exposure draft and corresponding documents, including example financial statements, soon after the December board meeting.
Insurance
The Board agreed to prepare an exposure draft proposing that the recent amendment to AASB 139 Financial Instruments: Recognition and Measurement regarding reclassification in rare circumstances will not be made available to insurers.
Related Party Disclosures in the Public Sector
An issues paper on related party disclosures in the public sector is to be prepared by staff.
Business Combinations in NFPs
An amending standard to AASB 3 Business Combinations was approved which will make the standard applicable not-for-profit entities, including the public sector. The standard will not apply to restructures of local governments.
Policy Statements
The Board agreed to withdrawing the Policy Statements and in their place have an up-to-date document that incorporates various topics such as IFRS convergence.
Interpretations – Superannuation Contributions Tax
The Board will consider at next month’s meeting a draft interpretation proposing that the superannuation contributions tax be included in the measurement of the defined benefit obligation. The Board will also consider the withdrawal of Interpretation 1019 The Superannuation Contributions Surcharge at its next meeting.
IPSASB CP on Conceptual Framework
The Board reviewed the Australian preface that would be attached to the document and expressed a view that this preface should be issued sooner, rather than later, given that the document was already open for comment on the AASB website.
IPSASB ED on Borrowing Costs
Similar to its response to the IASB in relation to the IAS 23 Borrowing Costs exposure draft, the majority of the Board do not conceptually agree with capitalising borrowing costs, and instructed the staff to draft a submission on this basis for consideration at the December Board meeting.
Differential Reporting
The Board had a general discussion as to whether accounts required to be prepared ‘in accordance with accounting standards’ would be required to prepare ‘general purpose financial reports’. Mixed views were expressed on this topic.
Annual Improvements
The Board considered its draft submission to the IASB in relation to the exposure draft on Improvements to IFRS, which will be finalised and submitted to the IASB by mid next week.
Presentation of Financial Statements
The Board decided to publish the IASB discussion paper Preliminary Views on Financial Statement Presentation on the AASB website for comment, with comments due by 24 March 2009.
5. IASB meeting agenda – 17-21 November 2008
The next meeting of the IASB will be held in London on 17-21 November 2008. Matters for discussion include:
> Phases C (measurement) and D (reporting entity) of the conceptual framework project
> Transitional provisions of IFRIC 15 and approval of IFRIC 17
> Post employment benefits – review of response to IAS 19 Discussion paper
> Revisions to IAS 24 Related Parties re state controlled entities
> Financial instruments - feedback form roundtables and consideration of a new recognition and measurement project
> Derecognition of financial assets
> IFRS for private entities – ongoing discussions
> Far value measurements on initial recognition
> Financial instruments with the characteristics of equity
> Leases
> Consolidation
A copy of the agenda can be downloaded from the IASB website.
6. IASC Foundation writes to G20
The International Accounting Standards Committee (IASC) Foundation has taken the unusual step of writing to the President of the US as host of the forthcoming meeting of the leaders of the G20 countries to explain what the IASB is doing in response to the current financial crisis and the extent to which current IASB standards are accepted around the world. The Chairman of Trustees requests that the G20 support the IASB in its work in a manner that reinforces the IASB’s efforts and the organisation’s independence. The full text of the letter can be viewed here.
7. IFRIC Update – 6 November 2008
The International Financial Reporting Interpretations Committee (IFRIC) met on 6 November 2008 and made key decisions on the following topics:
IFRIC D24 Customer Contributions
IFRIC decided to make some key changes to D24 to address concerns expressed by respondents that an entity receiving a transfer of an asset from a customer does not always have an obligation to provide ongoing access to a supply of goods or services as a result of the transfer. IFRIC voted and confirmed the consensus, subject to some drafting changes. A near final draft of the Interpretation will be posted on the website to give constituents an opportunity to comment. Any comments will be reviewed in preparation for the IASB meeting in January.
Customer-related intangible assets
IFRIC decided they could not issue clarification in this area, and referred the matter onto the IASB with a recommendation to amend IFRS 3 Business Combinations to remove the distinction between ‘contractual’ and ‘non-contractual’ customer-related intangible assets and reviewing the indicators that identify the existence of a customer relationship and include them in the main body of the standard.
Two issues were reviewed and agreement was made not to take these to the agenda. Four tentative decisions were made not to take topics onto the agenda and one tentative decision was made to carry out more research on the issue of determining a carrying value of an equity method investment.
To download the update, go to the IASB website.
8. IFAC survey on Public Sector Performance Measures
IFAC's Professional Accountants in Business (PAIB) Committee has conducted a survey to obtain information about the development of financial and non-financial performance measurement and reporting structures in various public sector entities around the world. The survey received 250 responses from public sector organisations in countries all over the world, including 20 from Australia. The results of this survey are contained in the information paper Developments in Performance Measurement Structures in Public Sector Entities.
The results will help professional accountants in business, and others who work in the public sector, in evaluating and further improving their own financial and non-financial performance measurement structures. This will enable these persons to better plan, execute and control their organisation's service delivery and to achieve a higher level of accountability.
The key conclusions to the survey were that performance measurement structures were most satisfactory when:
> A balanced combination of relevant financial and non-financial objectives, supported by specific measurement indicators (financial and non-financial KPIs)
> Accrual accounting for the budgeting, the (legislative) appropriation and the financial reporting processes
> Capability for capturing, processing and reporting useful information on both financial and non-financial developments
> Independent external review of the figures to report on financial and non-financial performance
> A formal structure for measuring and assessing risk, and developing strategies to control it
> A regular review to ensure that the performance measurement structure remains effective and efficient
The full report can be downloaded free-of-charge from the IFAC online bookstore at http://www.ifac.org/store.
Auditing & Assurance News | |
9. AUASB issues eight clarity exposure drafts
The Auditing and Assurance Standards Board (AUASB) has released eight exposure drafts of Australian Auditing Standards (ASAs) in Clarity format for comment by 15 December 2008.
The eight exposure drafts (EDs) released are:
> ASA 200 Overall Objective of the Independent Auditor and the Conduct of an Audit in Accordance with Australian Auditing Standards
> ASA 250 Consideration of Laws and Regulations in an Audit of a Financial Report
> ASA 320 Materiality in Planning and Performing an Audit
> ASA 450 Evaluation of Misstatements Identified During the Audit
> ASA 510 Initial Audit Engagements – Opening Balances
> ASA 550 Related Parties
> ASA 580 Written Representations
> ASA 720 The Auditor’s Responsibility in Relation to Other Information in Documents Containing An Audited Financial Report
The revisions to ASA 200, which provides the overarching framework for the Australian Auditing Standards, have resulted in consequential changes to a number of other Auditing Standards.
ASA 320 and ASA 450 together replace the existing Standard, ASA 320. The new ASA 320 deals with materiality in the context of planning the audit while the new Standard ASA 450, deals with materiality in the context of evaluating misstatements.
ASA 580 has also undergone a complete revision and now provides more comprehensive requirements and guidance in obtaining written representations from management.
Once finalised, it is intended the revised ASAs will be operative for audits of financial reporting periods beginning on or after 1 January 2010.
10. ASIC report on relief granted
ASIC has published a report on recent decisions on relief applications under the Corporations Act made between 1 April and 31 July 2008. ASIC can exempt or modify the Act under the provisions of Chapters 2D (officers and employees), 2J (share buy-backs), 2L (debentures), 2M (financial reporting and audit), 5C (managed investment schemes), 6 (takeovers), 6A (compulsory acquisitions and buy-outs), 6C (information about ownership of entities), 6D (fundraising) and 7 (financial services) of the Act.
The report can be downloaded from the ASIC website.
11. ASX reviews directors trading declarations
The ASX has released the findings of its second quarterly review of the Directors Interest Notices lodged by listed entities. The findings show continued improvement in the lodgement of these notices with 93% lodged correctly and on time in accordance with the listing rules (compared to 87% in its previous review conducted earlier this year). The improvements are attributed to improved awareness of the requirements following the release by the ASX of a companies update in June.
For more details visit the ASX website.
12. Amendments to National Greenhouse and Energy Reporting Act
Amendments to the National Greenhouse and Energy Reporting Act 2007 were enacted on 15 September 2008. The amendments enable the Greenhouse and Energy Data Officer (GEDO) to publish additional information reported by corporations and make a number of minor administrative enhancements to better reflect the original policy intent of the Act.
The amendments which impact business are:
> The provision of an option for corporations to publish information by business unit or subsidiary according to their preference
> Increased flexibility for registration, ie a corporation can apply for registration before a threshold is met
> Clarification on whether provisions apply to the registered controlling corporation or the corporate group (ie whether subsidiaries are covered). These provisions relate to audit, information disclosure and direct reporting by contractors.
Further information is available at http://www.climatechange.gov.au/reporting/index.html.
Registered Company Auditor
Q: I wish to apply to become a registered company auditor. Where can I find some more information on what's involved and some assistance in completing the documents?
A: The auditor registration requirements contained in section 1280 of the Corporations Act were significantly amended with the passage of the CLERP 9 legislation in 2004. The changes eased the difficulties that many auditors, especially those in rural and regional areas, were having in meeting the experience requirements prescribed by the legislation.
Auditors still have to meet the educational requirements prescribed, but now have a choice of either complying with the practical experience rules, or satisfying the components of an "audit competency standard" (see section 1280(2)).
In 2007 ASIC updated its guidance on the application of section 1280 for individuals and companies seeking registration as a company auditor or an authorised audit company. To simplify the registration process for prospective auditors, they have now located all their guidance about registration in one document - Regulatory Guide 180 "Auditor Registration" (RG 180). This document replaces Policy Statement 180, last issued in 2004.
The Institute website contains links to a copy of the approved competency standard referred to in section E of RG 180 (para RG180.77), as well as a logbook to assist members in complying with the standard available here. It also contains reference to an article summarising the main features of the competency requirements published in May 2005's Charter available here, and a series of frequently asked questions here.
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.
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
IASB Simplifying Earnings Per Share: Proposed Amendments to IAS 33
15 December 2008
IASB ED Improving Disclosures about Financial Instruments (proposed amendments to IFRS 7
IAASB Matters to Consider in a Revision of International Standard on Review Engagements (ISRE) 2400 Engagements to Review Financial Statements
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.
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.
*New Event* Economic downturn: the impact on business
Sydney, 2 December & Melbourne, 10 December
This full day course looks at how to advise your business and/or clients in these troubled times and how to minimise risk on investment decisions in the current investment market.
*New Event* Auditing: the impact of the credit crunch
Melbourne, 3 December & Sydney, 8 December
This half day course is designed to highlight some of the particular accounting and auditing procedures that will be directly impacted by the current economic conditions.
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.
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