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Welcome to the forty-ninth and final edition of Accounting & Assurance News Today for 2008. This bumper edition includes a
brief update on changes and proposed changes in the financial reporting and assurance sphere.
1. Season’s Greetings from Reporting and Assurance
This is the final ANT for 2008.
The Institute and its Reporting and Assurance team would like to thank you for your ongoing support and subscription to ANT
throughout the year. We hope you have a happy and restful holiday season and look forward to continuing to keep you up to date
with changes in the fields of financial reporting, audit and assurance during 2009. The first issue of ANT in the New Year will
be despatched on Friday, 16 January 2009.
The Institute will be closed from 25 December 2008 to 2 January 2009 inclusive. Queries to the Institute's Reporting and
Assurance Helpline (both phone and email services) received after 5pm Tuesday 23 December 2008 will be responded to as
soon as possible after Monday 5 January 2009 when our helpline services reopen. However, please note that reduced staff
levels will operate until Monday 12 January 2009. For further technical assistance over the holiday period, please refer
to the technical and professional section of our website.
2. Your festive gift from the Institute!
The Reporting & Assurance Team has completed the update of the ‘Analysis of AASB (Australian Accounting Standards Board)
Standards’ section within the Financial Reporting page of the Institute’s website for your reading pleasure over the holiday
period.
Every AASB standard on issue (except for amending AASBs) and every AASB Interpretation is summarised for ease of reference and to
provide an overview of the basic requirements of each pronouncement. Each section also includes commentary, such as AASB and
International Financial Reporting Interpretations Committee (IFRIC) rejection statements that are relevant to the topic and
frequently asked questions from our ANT newsletter. This section will be maintained going forward to ensure that it provides
up-to-date information on each AASB standard and interpretation issued.
Should readers have any questions, or want some new reading material during the holiday downtime, this resource is ideal.
3. Final submissions on eight exposure drafts of revised Auditing Standards in Clarity format
The Institute, together with the other accounting bodies, has lodged a joint submission to the Auditing and Assurance Standards
Board (AUASB) on the following exposure drafts (EDs):
- ASA 200 Overall Objectives 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 proposals were summarised in ANT 44 Item 9 and the submission can be viewed on the Institute
website.
4. AASB meeting update – 17-18 December 2008
The AASB met on 17-18 December 2008. The action alert has already been released on the AASB website. The following
outlines the key areas of discussion.
Superannuation Plans and Approved Deposit Funds
The Board continued discussions on the draft exposure draft (ED), with further amendments requested for consideration at the
February meeting. Some of the amendments include the disclosure of information about expected rate of return, updating and ‘road
testing’ of the illustrative example and reducing the number of questions for comment.
GAAP/GFS Harmonisation
The Board considered a draft ED Amendments to Australian Accounting Standards to facilitate GAAP/GFS Harmonisation for
Entities within GGS. The Board approved the ED for issue, subject to some final amendments and also recommended that an
example of an entity adopting the ED be prepared during the four month comment period to assist constituents in understanding the
application of the proposed amendments. It is expected that roundtables will be held in Melbourne and Canberra to consider the ED
and the example financial statements.
Income from non-exchange transactions
A draft ED was considered by the Board, with recommendations to staff to include illustrative examples and obtain clarification
on some of the examples contained in IPSAS 23 Revenue from Non-Exchange Transactions. The draft ED is to be reconsidered
at the next AASB meeting.
Interpretations – Distributions of Non-cash Assets to Owners
The Board considered and approved AASB Interpretation 17 Distributions of Non-cash Assets to Owners and the related
amending standard, which are effective from 1 July 2009 with early application permitted. The interpretation will be available on
the AASB website shortly.
Interpretations – Superannuation Contributions Tax
A draft interpretation was considered by the Board, with amendments to be made for reconsideration at the next AASB meeting.
Criteria for modifying IFRS for Not-for-Profit Entities
The Board was updated on the status of discussions by the New Zealand Financial Reporting Standards Board (FRSB) on identifying
criteria for consideration when determining whether IFRS should be modified for not-for-profit entities.
Reclassification of Financial Assets in relation to insurers
The Board decided not to proceed with an ED on this issue. Therefore, the reclassification amendment will remain available to
insurers.
Revenue Recognition
The Board discussed the soon-to-be-issued joint IASB/FASB Discussion Paper on Revenue Recognition in Contracts with Customers.
The AASB determined it would hold Roundtables during the comment period.
Borrowing Costs
The Board’s submission to the IPSASB regarding the proposed amendments to IPSAS 5 Borrowing Costs was finalised, which in
essence states that the AASB does not support the justification provided by IPSASB for the departure from IAS 23 Borrowing
Costs. The Board also decided to defer the application date of AASB 123 Borrowing Costs for the public sector until
completion of IPSAS 5 and the FRSB’s project on borrowing costs and depreciated replacement cost.
Differential Reporting
The Board tentatively agreed that financial statements made available to the public at large under a legal mandate would be
general purpose financial reports (GPFRs). Discussions to continue at a future meeting.
IASB Exposure Drafts
Submissions on each of the ED’s relating to amendments to IAS 33 Earnings per Share, IFRS 1 First-time Adoption of
International Financial Reporting Standards, IFRS 7 Financial Instruments: Disclosures and IFRS 5 Non-current
Assets Held for Sale and Discontinued Operations were considered and approved.
It is expected the IASB will issue an ED on embedded derivatives relating to hybrid financial instruments that are classified at
fair value through profit or loss, with a comment date of 22 January 2009.
Other Business
- The preface to accompany the ED regarding amendments to IAS 24 Related Party Disclosures (as issued by the IASB) will
be approved out of session, with the comment period to end on 15 February 2009.
- The AASB will approve the preface for the income taxes ED (to be issued early in 2009 by the IASB) out of session, with a
comment date of 30 March 2009.
- The draft amending standard AASB 2008-12 Amendments to Australian Accounting Standards – Reclassification of Financial
Assets – Effective Date and Transition was approved by the Board and will be available on the AASB website shortly
5. Appointment of new Chairman of AASB
Kevin Stevenson has been appointed as the new full-time Chairman of the AASB for a 5-year term commencing in 1 July 2009. He
succeeds Professor David Boymal, the former Chairman whose 5-year term has come to a close.
Mr. Stevenson brings with him a wealth of experience from an accounting research and accounting standards background, both in
Australia and abroad. Most notably, he was the Executive Director of the Australian Accounting Research Foundation, as well as a
National Technical Partner for a major accounting firm.
Mr Stevenson is a fellow of the Institute of Chartered Accountants and was a Victorian State Councillor for three years. He
received a Meritorious Service Award in 2001.
For further details, see the media release on the website of the Minister for Superannuation and Corporate Law.
6. IASB ED10 Consolidated Financial Statements
The International Accounting Standards Board (IASB) has published for public comment ED 10 Consolidated Financial
Statements, which contains proposals to strengthen and improve the requirements for identifying which entities a company
controls and which includes review of off-balance sheet items.
The proposals form part of the IASB’s comprehensive review of off balance sheet activities and address an area cited by the G20
leaders at their 15 November meeting. The proposals also respond to the recommendations contained in a report published in April
2008 by the Financial Stability Forum (FSF). Further proposals on off balance sheet items, covering the derecognition of assets
and liabilities, are due to be published in the first quarter of 2009, consistent with the G20 target date of 31 March 2009.
The proposals:
- present a new, principle-based, definition of control of an entity that would apply to a wide range of situations and be more
difficult to evade by special structuring
- include enhanced disclosure requirements that would enable an investor to assess the extent to which a reporting entity has
been involved in setting up special structures and the risks to which these special structures expose the entity
The IASB comment closing date is 20 March 2009 (expected AASB comment closing date is 22 February 2009). The IASB exposure draft
is available on the IASB website.
7. IASB Foundation publishes update on responses to the G20 conclusions
The International Accounting Standards Committee (IASC) Foundation has published a table summarising the actions and work
currently being undertaken by the IASB and IASC Foundation in response to conclusions reached by G20 leaders at their November
summit in Washington DC. The summit was primarily concerned with the implications of the global economic downturn in the markets
(see ANT 45 Item 8).
The summary table can be viewed on the IASB website
(PDF). A detailed account of the G20 conclusions is also available on the White House website.
8. Change in effective date of restructured IFRS 1
In December, the IASB decided to change the effective date of revised IFRS 1 First-Time Adoption of International Financial
Reporting Standards from 1 January 2009 to 1 July 2009. This change corrects a potential technical problem arising from the
interaction of IFRS 1 and the revised IFRS 3 Business Combinations, and the amended IAS 27 Consolidated and Separate
Financial Statements.
For more information, see the IASB website.
9. No holiday break for international standard setters
As the year draws to a close, there are a number of IASB project papers that are expected by 31 December 2008 which to date have
not been issued. As the first ANT for 2009 will be 16 January 2009, we thought it appropriate to summarise those project papers
that are due, in anticipation that they will be issued over the holiday period.
The IASB is anticipated to release the following:
- ED – Income Taxes: Amendments to IAS 12 Income Taxes (convergence with US GAAP)
- Discussion Paper – Accounting for Extractive Industries to replace IFRS 6 Exploration for and Evaluation of Mineral
Resources
- Discussion Paper – Revenue Recognition (convergence with US GAAP)
Auditing & Assurance News | |
10. IFAC paper highlights roles of regulators and profession in standard-setting process
The International Federation of Accountants (IFAC) has released a policy position paper that explains the international
standard-setting process, particularly for International Standards on Auditing (ISAs). The paper explains how responsibility is
shared between public and private sector organisations to produce high-quality standards that are in the public interest. It also
identifies the underlying principles of legitimacy, independence, accountability, transparency and performance that are key to a
successful standard-setting process.
The paper is titled ‘International Standard Setting in the Public Interest’ and is available for download (PDF) from the IFAC website.
For further details, see the media release on the IFAC
website.
11. IAASB nears completion of the Clarity project with the issuance of eight standards
The International Auditing and Assurance Standards Board (IAASB) is moving towards the completion of its Clarity Project with the
release of 7 clarified International Standards on Auditing (ISAs) and one clarified International Standard on Quality Control
(ISQC).
The newly issued standards are:
- ISQC 1 (Redrafted) Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and other Assurance
and Related Services Engagements
- ISA 220 (Redrafted) Quality Control for an Audit of Financial Statements
- ISA 500 (Redrafted) Audit Evidence
- ISA 501 (Redrafted) Audit Evidence-Specific Considerations for Selected Items
- ISA 505 (Revised and Redrafted) External Confirmations
- ISA 520 (Redrafted) Analytical Procedures
- ISA 620 (Redrafted) Using the Work of an Auditor’s Expert
- ISA 710 (Redrafted) Comparative Information-Corresponding Figures and Comparative Financial Statements
The Public Interest Oversight Board (PIOB) has also approved the due process of four additional ISAs that were approved by the
IAASB at its September meeting:
- ISA 700 (Redrafted) Forming an Opinion and Reporting on Financial Statements
- ISA 800 (Revised and Redrafted) Special Considerations – Audits of Financial Statements Prepared in Accordance with
Special Purpose Frameworks
- ISA 805 (Revised and Redrafted) Special Considerations – Audits of Single Financial Statements and Specific Elements,
Accounts of Items of a Financial Statement
- ISA 810 (Revised and Redrafted) Engagements to Report on Summary Financial Statements
The IAASB believes that the approval of the following final three ISAs (subject to PIOB approval) will constitute the completion
of its work in redrafting its international standards under the Clarity Project:
- ISA 210 (Redrafted) Agreeing the Terms of Audit Engagements
- ISA 265 Communicating Deficiencies to Those Charged with Governance and Management
- ISA 402 (Revised and Redrafted) Audit Considerations Relating to an Entity Using a Service Organisation
The completed set of clarified ISAs will be effective for audits of financial statements for periods commencing on or after
December 15, 2009.
For further information, see the media release on the IFAC website.
12. ASX review of trading by directors in ‘blackout’ period
The Australian Securities Exchange (ASX) has released its latest review of securities trading by directors during the ‘blackout’
period. The blackout period refers to the time between the close of a listed entity’s financial period and the announcement of
its full-year results.
The review was based on the disclosure of Directors’ Interest Notices by listed entities, and examined trading by directors
during this period in possible contravention of disclosed trading policy of the entity concerned.
For detailed statistics and results of the review, see the media release on the ASX website
(PDF).
13. New commissioners appointed to ASIC
Mr. Greg Medcraft, Dr. Peter Boxall AO and Mr. Michael Dwyer have all been appointed as new full-time members to the Australian
Securities and Investments Commission (ASIC). This brings the Commission to six members.
The new Commissioners will broaden the skills base of ASIC to include investment banking, insolvency, public policy and
economics.
For further details about the appointments as well as details about the new Commissioners, see the media release on the website for the Minister for Superannuation and Corporate Law.
14. APRA releases prudential framework for supervision of general insurance groups
The Australian Prudential Regulation Authority (APRA) has issued a package that will establish the prudential framework for the
supervision of general insurance groups domiciled in Australia.
The package is comprised of three new prudential standards, one revised prudential standard and a response paper that addresses
submissions received from the general insurance industry in relation to a consultation package released in April 2008.
The new standards will help APRA to ensure that insurance groups are financially sound, and that group interrelationships do not
compromise the financial soundness of individual APRA-authorised insurers within the group.
The prudential standards will become effective on 31 March 2009. The standards and the response paper are available on the APRA website. Further
information is available in APRA’s media release.
15. Australian Government releases White Paper on the Carbon Pollution Reduction Scheme
On Monday 15 December, the Government released the Carbon Pollution Reduction Scheme (CPRS) White Paper, which outlines the final
design of Australia’s forthcoming emissions trading scheme. The Government still intends for the scheme to commence in 2010. The
final design is very similar to the preferences outlined in the green paper released in July. Significant differences to the
information in the green paper include:
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Outline of the medium-term emissions reduction targets – to be between 5 and 15 per cent of 2000 levels by 2020. 5 per cent limit
as a minimum increasing to 15 per cent with all developed and significant developing nations agreeing to emission reduction
targets
- Indication of permit prices - Treasury modelling indicates a price of $23 per tonne of CO2-e in 2010 and the Government will
set at cap for the first five years beginning at $40 and rising at 5 percent per annum
- Borrowing of permits (from the subsequent year) to be limited at 5 per cent of the following years allowance
- The levels for determining emissions intensive industries have been reduced, expands the activities which will be eligible
for assistance, the period for the data defining the emissions levels has been increased and assistance will initially be 25 per
cent of permits and the allocation will decline over time in line with the reduction in the emissions cap.
The government has decided not to pursue the issue of Australian specific accounting standards for the treatment of emissions
permits and will instead wait for the exposure draft to be released from the IASB in 2009, to be released by the AASB for comment
in Australia.
The detailed chapters of the White Paper are available here and include information on the green paper proposals, the submissions received and the policy position.
The Institute has updated its summary of the CPRS proposals. More information on climate change can be found on the Institute website.
16. The Carbon Pollution Scheme and You
The Australian Government Treasury has released an electronic document titled The Carbon Pollution Scheme and You. The
document outlines the package of cash assistance, tax offsets and other measures that the Government will provide in order to
help Australian households maintain their standard of living, while the Government continues to endeavour for a low-pollution
future (through the Carbon Pollution Reduction Scheme).
The document is available for download from the Treasury website
(PDF).
Classification of Assets Sold for a Hire Company
Q: An entity acquired an asset with a dual purpose – to rent it in the short-term and then to sell it. The entity is
predominantly a hire company. When the asset is eventually sold, should the entity present the proceeds in the income statement
as gross (revenue and costs of sales) or net (gain or loss)?
A: This issue has been the subject of professional debate over recent years as a result of inconsistencies between AASB 116
Property, Plant and Equipment, AASB 118 Revenue and AASB 5 Non-current Assets Held for Sale and Discontinued Operations. The
matter was referred to the IFRIC in 2007. However, IFRIC determined that it was not an appropriate issue to place on its agenda
(see May 2007 IFRIC agenda
rejections) and instead it referred the matter to the IASB for resolution.
The IASB has now resolved the debate as part of its 2007 Improvements Project, issuing an amendment to IAS 16 (the equivalent to
AASB 116) in its “Improvements to IFRS” standard released in May 2008. The equivalent change has been made to AASB 116 by
amending standard AASB 2008-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project.
The change inserts a new paragraph 68A into AASB 116, which says:
However, an entity that – in the course of its ordinary activities – routinely sells items of property, plant and
equipment that it has held for rental to others shall transfer such assets to inventories at their carrying amount when they
cease to be rented and become held for sale. The proceeds from the sale of such assets shall be recognised as revenue in
accordance with AASB 118 Revenue. AASB 5 does not apply when assets that are held for sale in the ordinary course of
business are transferred to inventories.
Therefore, the sales revenue is now required to be treated gross in accordance with AASB 118, rather than net as a gain or loss
on property, plant and equipment under AASB 116.
The amendment is applicable for financial years commencing on or after 1 January 2009, but may be applied earlier.
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.
23 January 2009
AUASB EDs
Proposed Auditing Standard ASA 530 Audit Sampling
Proposed Auditing Standard ASA 610 Using the Work of Internal Auditors
13 February 2009
IPSASB Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities
18 February 2009
SEC Roadmap for the potential use of financial statements prepared in accordance with International Financial Reporting Standards
(IFRS) by US Issuers
20 March 2009
IASB ED10 Consolidated Financial Statements
24 March 2009
AASB (IASB/FASB) Discussion Paper Preliminary Views on Financial Statement Presentation
31 March 2009
IASC Foundation - Review of the Constitution: Identifying issues for Part 2 of the Review
This list does not represent a complete list of the exposure drafts on issue. For all other exposure drafts, refer to our
dedicated exposure drafts website.
Business Valuations Workshops
Throughout March and April 2009 in Sydney, Melbourne, Adelaide, Perth and Brisbane.
Build your technical business valuation skills in this intensive and highly practical two-day workshop.
Accounting Conference 2009
Throughout March in Sydney, Melbourne, Perth and Brisbane.
The essential conference program to update yourself with the latest in accounting standards.
Business Performance Analysis Workshop
Throughout February and March 2009 in Sydney, Melbourne, Adelaide, Perth and Brisbane.
Are you working within the finance division of your organisation? Do you want to understand how to develop strategies to bring
your organisation forward?
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.
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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