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Welcome to the forty-first 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. Senate Economics Committee public hearings – 28-31 October 2008
The Senate Economics Committee (SEC) is holding a series of public hearings on 28-31 October 2008 in Canberra, Melbourne and Sydney to discuss submissions made by various entities on its inquiry into disclosure regimes for charities and not-for-profit organisations. The agendas can be found on the Parliament of Australia website.
Kerry Hicks, Head of Reporting, will be attending the Roundtable hearing in Canberra on behalf of the Institute on 29 October 2008. As mentioned in ANT34/2008, the Institute’s submission on the inquiry is available for download from the SEC submissions page (submission 108).
2. Urgent Omnibus amendment to AASBs 7 and 139
AASB 2008-10
Amendments to Australian Accounting Standards – Reclassification of Financial Assets was issued in response to the worldwide credit crisis.
As foreshadowed in ANT40/2008, the revisions allow non derivative financial assets held for trading and available-for-sale assets to be reclassified in particular situations. They are designed to address differences arising between IFRS and US GAAP in this area which are causing concern in the current economic climate and apply from 1 July 2008. They cannot be applied to financial reporting periods that ended before that date.
The amendments to AASB 139 permit an entity to:
(a) reclassify non-derivative financial assets (other than those designated at fair value through profit or loss by the entity upon initial recognition) out of the fair value through profit or loss category when the financial asset is no longer held for the purpose of selling or repurchasing in the near future, and either of the following apply:
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there are rare circumstances; or
- it would have met the definition of loans and receivables (if the financial asset had not been required to be held for trading at initial recognition); and
(b) transfer from the available-for-sale category to the loans and receivables category a financial asset that would have met the definition of loans and receivables (if the financial asset had not been designated as available for sale), if the entity has the intention and ability to hold that financial asset for the foreseeable future.
Note that once an item is at amortised cost, any future changes in expected cash flows will be recognised as an adjustment to the effective interest rate and thereby be reflected in the profit or loss over the remaining holding period.
For further details see http://www.aasb.com.au/News.aspx?newsID=1627.
3. AASB Omnibuses amend AASB 139 and AASB 1049
In recent weeks, the Australian Accounting Standards Board (AASB) has issued the following new omnibuses, details of which are explained below.
AASB 2008-8 (PDF) Amendments to Australian Accounting Standards - Eligible Hedged Items clarifies how the existing principles underlying hedge accounting should be applied in two particular situations:
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Designation of a one-sided risk in a hedged item; and
- Designation of inflation in a financial hedged item
It corresponds to amendments made by the IAS 39 in early August (see ANT30/2008).
Entities are required to apply this amendment retrospectively for annual reporting periods beginning on or after 1 July 2009, with early application permitted.
AASB 2008-9 (PDF) Amendments to AASB 1049 for Consistency with AASB 101 ensures consistency of terminology between public sector and private sector reporting. When AASB 1049 Whole of Government and General Government Sector Financial Reporting was revised and reissued in October 2007, it was drafted to comply with the then-current version of AASB 101 Presentation of Financial Statements. However, at that time AASB 101 was itself undergoing revision and it was reissued in September 2007 applicable for financial years beginning on or after 1 January 2009. This omnibus updates AASB 1049 for the changes made to AASB 101 effective from 1 January 2009. It also updates AASB 1049 for consequential changes associated with Omnibus 2007-8, which amended all other standards for the changes to AASB 101.
The main differences relate to the inclusion of a whole of government and General Government Sector (GGS) statement of changes in equity and clarification of the applicability of the whole of government operating statement and budget disclosures. The requirements of AASB 2008-9 are applicable from 1 January 2009, with early adoption permitted, provided the revised version of AASB 101 (September 2007) is also early adopted.
4. AASB releases ED on proposed amendments to AASB 7
Following the IASB’s release of exposure draft (ED) Improving Disclosures about Financial Instruments (proposed amendments to IFRS 7)
(Item 6, ANT 40/2008), the AASB has released its Australian version as ED 169 Improving Disclosures about Financial Instruments: Proposed Amendments to AASB 7.
Comments are due to the AASB by 1 December 2008, or to the IASB by 15 December 2008. The ED can be downloaded from the AASB website.
5. IASB/FASB guidance on financial statements
The International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) today published for public comment a discussion paper on financial statement presentation. The discussion paper contains an analysis of the current issues in financial statement presentation and presents the boards’ initial thinking on how these issues could be addressed in a possible future format.
The IASB and the FASB propose to introduce cohesiveness and disaggregation as the two main objectives for financial statement presentation:
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cohesiveness would ensure that a reader of financial statements can follow the flow of information through the different statements of an entity
- disaggregation would ensure that items that respond differently to economic events are shown separately
To achieve these main objectives, the boards have developed a principle-based format that is presented in the discussion paper. The boards seek views from interested parties on both the objectives for the presentation of financial statements and the proposed format.
The discussion paper is open for comment until 14 April 2009. To view the media release, go to the IASB website. The Discussion Paper Preliminary Views on Financial Statement Presentation is available for download on the ‘Open for Comment’ section of the IASB website.
6. IASB/FASB advisory group on credit crisis
The IASB and FASB have announced that they will create a global advisory group comprising regulators, preparers, auditors, investors and other users of financial statements. The advisory group will help to ensure that reporting issues arising from the global economic crisis are considered in an internationally co-ordinated manner.
At the joint meeting of the IASB/FASB on 20 and 21 October, the boards discussed the initial topics for the advisory group to consider. They also discussed how they can appoint the group and schedule its first meeting expeditiously. The boards will report on the first meeting and will consider the group’s discussions immediately thereafter.
The approach will include:
- Rapid appointment of a high-level advisory group: The boards agreed that the advisory group shall be comprised of senior leaders with broad international experience with financial markets. The group will consider how improvements in financial reporting could help enhance investor confidence in financial markets and will also be responsible for identifying the accounting issues requiring urgent and immediate attention of the boards as well as issues for longer-term consideration.
- Public roundtables in Asia, Europe, and North America: In the coming weeks, while the advisory group is being established, the IASB and the FASB will organise three roundtables (in Asia, Europe, and North America) to gather input on reporting issues emanating from the current global financial crisis – including responses by governments, regulators and others. The first roundtable will be held in Europe.
- Common long-term solutions to reporting of financial instruments: In addition to considering the potential for short-term responses to the credit crisis, both boards emphasised their commitment to developing common solutions aimed at providing greater transparency and reduced complexity in the accounting of financial instruments.
For more details, media releases can be downloaded from the IASB website here and here.
7. Further guidance on fair values and inactive markets
In addition to the update of the IASB’s work on fair value measurement in inactive markets (see ANT 40/2008, the FASB has released a staff paper to provide further guidance on the requirements for determining fair value of assets in markets that are not active. The current US guidance is contained in FAS 157 Fair value measurement, which was issued in September 2006.
The new staff position clarifies the application of FAS 157 and provides an example to illustrate key considerations in determining fair values in non-active markets.
A copy of the paper is available on the FASB website.
8. AASB lodges first conceptual framework submission
The AASB has released on its website its submission on IASB Discussion Paper Preliminary Views on an improved Conceptual Framework for Financial Reporting: The Reporting Entity.
The AASB generally supports the proposed concepts for private sector businesses, and it also supports a notion of reporting entity that is broader than a legal entity – although it prefers a description of a reporting entity that creates an explicit link with the objective of financial reporting and users of general purpose financial reports.
In particular, the AASB supports the group reporting entity perspective in preparing consolidated financial statements. Additionally, AASB commented on the potential implications of the proposed concepts for not-for-profit entities in the Appendix to its submission.
A copy is available on the AASB website.
9. IPSASB October Meeting Agenda
At its 28-31 October meeting, the International Public Sector Accounting Standards Board (IPSASB) plans to consider:
- Global Economic Issues and Effect on Public Sector: Discussion of Issues
- Conceptual Framework Phase 2: Discussion of Issues
- Performance Reporting: Review/Approve Project Brief
- Rules Of The Road/IASB Tracking/Workplan: Update/Revise
- Social Benefits: Review Responses to ED On Disclosure and the Consultation Paper on Recognition and Measurement
- Long Term Fiscal Sustainability: Discussion of Issues
- Agriculture: Rules of the Road Analysis/ Review Exposure Draft
- Intangible Assets: Approve Exposure Draft
- Service Concessions: Review Responses/Consider Approach, and
- Financial Instruments: Discussion of Issues
Further details can be found at http://www.ifac.org/PublicSector/Meetings.php.
Auditing & Assurance News | |
10. NGERS Consultation on external audit
As part of consultation for the National Greenhouse and Energy Reporting System, the Department of Climate Change has released for public comment the National Greenhouse and Energy Reporting Act 2007 and Carbon Pollution Reduction Scheme - External Audit Consultation Paper.
This consultation paper is designed to inform stakeholders and seek feedback on the development of external auditor regulations (professional expertise and qualifications) and external audit guidelines (conduct of audits and reports) under the National Greenhouse and Energy Reporting Act 2007 (the NGER Act). The external audit arrangements will support regulatory needs of both the NGER Act and the Carbon Pollution Reduction Scheme.
The consultation paper is now available on our website at http://www.climatechange.gov.au/reporting/publications/external-audit.html. The public is invited to submit their views on the approaches outlined in the consultation paper through written submissions. Submissions should be made by 14 November 2008 to the Department by email: reporting@climatechange.gov.au.
This consultation process is supported by workshops to utilise the expertise and experience of existing auditors (both greenhouse/environmental and financial/corporate) and reporting entities to aid the development of a robust and effective external audit framework. The workshops are taking place in different locations around Australia – for further details see http://www.climatechange.gov.au/reporting/publications/external-audit.html#workshops.
The Institute will be making a submission on the Consultation Paper. Members are encouraged to make their own submissions and can also convey their views to us by email to techsubmissions@charteredaccountants.com.au.
11. AUASB meeting agenda – 27-28 October 2008
The next meeting of the Australian Auditing and Assurance Standards Board (AUASB) will be held on 27-28 October in Melbourne. Items to be discussed include:
Clarity project: ASA redrafting and revision:
- Consider progressive revision of:
- ASA 100 Preamble to AUASB Pronouncements
- Consider redrafted auditing standards for preliminary approval
- 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 Risk
- Consider exposure drafts for approval to release
- ED 15/08 ASA 200 Objective and General Principles Governing an Audit of a Financial Report
- ED 16/08 ASA 250 Considerations of Laws and Regulations in an Audit of a Financial Report
- ED 17/08 ASA 320 Materiality and Audit Adjustments
- ED 18/08 ASA 450 Evaluation of Misstatements Identified During the Audit
- ED 19/08 ASA 510 Initial Engagements- Opening balances
- ED 20/08 ASA 550 Related Parties
- ED 21/08 ASA 580 Management Representations
- ED 22/08 ASA 720 Other Information in Documents Containing Audited Financial Reports
Amendments to GS 001 Concise Financial Reports
Finalisation of GS 009 Auditing Self Managed Superannuation Funds
Consider revision of AUS 940 Agreed Upon Procedures
NGER External Auditing Requirements
The meeting agenda can be downloaded from the AUASB website.
Queensland solicitors’ trust accounts
Q: Where do I find the regulations governing the audit of solicitors' trust accounts in Queensland? I have heard that there have been some changes.
A: Changes to the solicitors’ trust account audit (now called external examination) requirements were made in 2007 with the commencement of the Legal Profession Act 2007 and Legal Profession Regulation 2007. Included in the revisions is a new External Examiners Report, which must be used for any reports signed after 1 April 2008, including for the period ended 31 March 2008.
Members can find details of the revised requirements on the Queensland Law Society website. Useful information for auditors is included under the ‘External Examination’ tab.
For details of solicitors’ trust account requirements in other States, please refer to the following:
NSW:
http://www.lawsociety.com.au/page.asp?partID=18006
Victoria:
http://www.liv.asn.au/regulation/trust/
Tasmania: (requires login)
http://www.taslawsociety.asn.au/web/en/lawsociety/practice/account.html
SA:
http://www.lawsocietysa.asn.au/profession/february2002.pdf (pdf)
WA:
http://www.lpbwa.org.au/
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.
31 October 2008
AASB ED 166 Simplifying Earnings per Share: Proposed Amendments to AASB 133
AICD ‘Underlying Profit’ Discussion Paper
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
15 December 2008
IASB ED Improving Disclosures about Financial Instruments (proposed amendments to IFRS 7)
IFAC Paper 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.
Chartered Accountants Audit of Self Managed Super Funds Workshop
Throughout October and November in Sydney, Canberra Melbourne, Adelaide, Perth and Brisbane. 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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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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