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Welcome to the fortieth 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. Corporate Reporting meeting highlights – 13 October 2008
The Institute of Chartered Accountants’ Sydney Corporate Reporting Discussion Group met on Monday, 13 October 2008 to discuss ‘Developments in Not-for-Profits (NFPs) – What’s Going On?’. Regina Fikkers, Partner at PricewaterhouseCoopers, and Ross Hawkey, Chief Information Officer at Mission Australia were the guest speakers for this forum.
Regina established that most people’s involvement with NFPs is in their personal capacity, i.e. schools, sporting clubs etc. The Institute’s website is a good source of information. The main issues arise from the fact that there is no single regulatory regime and it is hard for donors to currently see how their money is spent.
A Treasury discussion paper on unlisted public companies is expected to be released later this year. Industries that are >65% of the approximately 18000 unlisted public companies in Australia have revenue under $1 million. The majority of these are companies limited by guarantee, which have to report as a reporting entity. ITC 14 Proposed Definition and Guidance for Not-for-Profit Entities was also discussed, as well as the proposed name change to ‘Public Benefit Entity’. The perception is that the name change is unlikely to go ahead.
2. Final submission on second batch of clarity EDs
The three professional accounting bodies have lodged a joint submission regarding the second batch of six proposed auditing standards in clarity format.
The final submission can be downloaded from the Institute website.
3. Member’s Handbook: revised and updated
The Member’s Handbook is Australia’s most comprehensive guide to the standards, by-laws and regulations that affect Chartered Accountants.
The Institute adds to the online handbook every eight weeks, to keep members up-to-date on the latest changes. The CD-ROM version of the handbook automatically downloads these updates when they become available.
The latest update, released on 6 October 2008, includes new and revised accounting, auditing, professional and ethical standards released up to Wednesday, 27 August 2008.
4. AASB meeting update – 10 October 2008
The Australian Accounting Standards Board (AASB) met on 10 October 2008. The following outlines the key areas of discussion.
Interpretations – Superannuation Contributions Tax
The Board agreed that there is diversity in practice in whether to account for the superannuation contributions tax in the measurement of an employer sponsor’s defined benefit liability/asset. A draft interpretation proposing that the superannuation contributions tax be included in the measurement of the defined benefit obligation will be considered by the Board at its November meeting.
Superannuation Plans and Approved Deposit Funds (ADFs)
The Board discussed the draft exposure draft (ED) and asked staff to make further amendments for consideration at the November meeting. Some of the issues for further consideration include the implications of measuring a non-controlling interest in a subsidiary and improving the manner in which the preparation and presentation of consolidated financial statements is proposed.
Criteria for modifying IFRS for Not-for-Profit Entities
An update was given to the Board on the status of discussions by the New Zealand Financial Reporting Standards Board on identifying criteria for consideration when determining whether IFRS should be modified for not-for-profit entities.
Conceptual Framework – Reporting Entity (ED 164)
The Board considered its draft submission on the International Accounting Standards Board – Financial Accounting Standards Board (IASB-FASB) Discussion paper on the reporting entity and agreed that the submission should include that the AASB strongly support the group entity perspective and the term ‘business activity’ be clarified.
Conceptual Framework – Objective and Qualitative Characteristics (ITC 17)
The Board finalised its submission on the IASB-FASB conceptual framework ED, which generally supports the IASB ED, with some suggestions for amendments, including that the objective of financial reporting should include reference to providing information for evaluating decisions.
Discontinued Operations and First-time Adoption
The Board approved ED 167 Discontinued Operations: Proposed Amendments to AASB 5 and ED 168 Additional Exemptions for First-time Adopters: Proposed amendments to AASB 1. These EDs correspond with ED’s of the same name issued by the IASB in September (refer to ANT 37/08 for more details). Both ED’s are now available on the AASB website and comments to the AASB are open until 5 December 2008 to allow it to meet the IASB’s 23 January 2009 deadline.
Process for Adopting IFRSs as Australian Requirements
The Board was briefed on discussions with the Office of Legislative Drafting and Publishing of the Attorney-General’s Department about the legal process for adopting IFRSs in Australia and decided that discussions should continue with staff to establish a more efficient process.
Credit Crisis
The Board will closely monitor the IASB’s developments in relation to amendments to International Accounting Standard (IAS) 39 Financial Instruments: Recognition and Measurement in response to the credit crisis, so that it can act quickly to adopt the amendments in Australia, thus ensuring that Australian constituents maintain IFRS compliant.
To download the AASB action alert, go to the AASB website.
Additionally, the approved minutes from the 24 September 2008 AASB meeting are now available on the AASB website (PDF). The highlights of the meeting were published in ANT 37.
5. IASB urgently amends IAS 7 and 39
As part of the IASB’s response to the global credit crisis the IASB has issued Reclassifications of Financial Assets (Amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures. 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.
The changes to IAS 39 amend paragraphs 50 and AG8 and add paragraphs 50B-50F and I03G while the changes to IAS 7 amend paragraph 12 and add paragraph 12A. The amendments apply from 1 July 2008 and cannot be applied retrospectively to financial reporting periods that were completed prior to 1 July 2008.
The amending standard is available for download on the IASB website (PDF).
A full media release is also available online (PDF).
6. IASB proposes further financial instruments disclosures
The IASB has also published for public comment further proposals to amend IAS 7 to improve the information available to investors and others about fair value measurements of financial instruments and liquidity risk. The proposals form part of the IASB’s response to the credit crisis and follow recommendations of the Financial Stability Forum. They also reflect discussions by the IASB’s Expert Advisory Panel on measuring and disclosing fair values of financial instruments when markets are no longer active.
The exposure draft Improving Disclosures about Financial Instruments (proposed amendments to IFRS 7) (PDF) is open for public comment until 15 December and is available on the IASB website (PDF). If approved the amendments are expected to apply to financial reporting periods beginning on or after 1 July 2009.
7. IASB meeting update – 2 October 2008
An update of the IASB’s special meeting held on 2 October 2008 to discuss urgent issues identified by the IASB’s Financial Stability Forum the forthcoming consolidations ED, as well as possible off balance sheet entity disclosures is now available (PDF).
In addition to the new releases referred to in items 5 and 6 which were the major outcomes of this meeting, the Board considered a revised draft of the consolidation ED, updated with the comments obtained at the consolidations round tables held in early September. Further revisions were suggested and the ED is expected to be finalised at the IASB’s scheduled October meeting for publication in November.
The Board also made some preliminary decisions in relation to required disclosures for off balance sheet entities. These disclosures will have the objective of requiring reporting entities to disclose the nature, purpose, size and type of its activities in these entities. Further discussion is expected to continue at the October meeting.
8. IASB progress on applying fair value in inactive markets
The IASB has released details of the most recent meeting of the Expert Advisory Panel, established in May 2008 to consider the application of fair value when markets become inactive.
Some of the issues discussed at this meeting were:
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The Panel agreed to emphasise that the objective of fair value measurement is the price at which an orderly transaction would take place between market participants on the measurement date, and not the price that would be achieved in a forced liquidation or distress sale
- The Panel agreed to emphasise existing guidance within IFRSs that using the entity’s own assumptions about future cash flows and appropriately risk-adjusted discount rates is acceptable when relevant observable inputs are not available
- The Panel reviewed the feedback received from interested parties on the draft document entitled IASB Expert Advisory Panel: Measuring and disclosing the fair value of financial instruments in markets that are no longer active it released for comment in mid September (refer ant 37/08). When completed this guidance will provide useful information and educational guidance for measuring and disclosing fair values and continue to ensure the consistency of IASB and FASB requirements in this area.
For further details, the full press release is available on the IASB website (PDF).
9. ASIC releases an updated Regulatory Guide 43
The Australian Securities and Investments Commission (ASIC) has issued a revised version of its Regulatory Guide 43 Financial Reporting and Audit Relief. The document replaces Regulatory Guide 43 (formerly Policy Statement 43) Accounts and Audit Relief.
The document sets out ASIC’s policy on the granting of relief from the financial reporting and audit provisions of Chapter 2M of the Corporations Act.
While the underlying policy contained in the new guide is unchanged, it now provides more detail and has been updated for changes in legislation and case law.
The revised document is available on the ASIC website.
10. Climate change progress to continue
International climate change talks in Poland this week have resulted in confirmation that action on climate change cannot stop because of the global financial crisis.
In a media release Federal Government Senator Penny Wong said that:
‘The formal summation by Conference Chair, Polish Minister for the Environment Maciej Nowicki, specifically stated that the financial turmoil does not provide a justification for postponing action on climate change.’
Senator Wong has been attending the talks as part of a series of negotiations leading up to the Copenhagen meeting in December next year, which will aim to forge an international climate change agreement for the post-2012 period.
File Completion Guidelines
Q. Do my audit workpapers have to be completely assembled before the audit report is signed?
A: No. ASA 230 Documentation covers this issue at paragraphs 28-30.
While ASA 230 expects the auditor to have completed all the procedures necessary to support the issue of an audit opinion prior to the issue of that opinion, paragraph 28 does permit the final assembly of the audit file to be completed in a timely manner after that date.
Paragraph 29 states that a firm’s individual quality control procedures will usually determine the firm’s policy on an appropriate ‘timely’ time frame. However, in the absence of any other specified limit, it indicates an appropriate deadline of 60 days.
Paragraph 30 sets out the kinds of tasks the standard envisages as being part of this final assembly process. They include sorting, collating and cross-referencing work papers, documenting audit evidence obtained prior to the audit report being signed, as well as the completion of checklists related to the final file assembly process. The paragraph makes it clear that this is purely administrative work. Once the audit report is signed, you should not be performing any new audit procedures or drawing any new or different conclusions.
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.
20 October 2008
AASB ED 165 Improvements to Australian Accounting Standards
31 October 2008
AASB ED 166 Simplifying Earnings per Share: Proposed Amendments to AASB 133
7 November 2008
IASB Improvements to IFRSs (Proposed amendments to International Financial Reporting Standards)
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)
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.
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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