GAAP ALERT No.11/2008 To read online click here
30 June 2008
By Colin Parker B.Bus FCA MAICD
Principal, GAAP Consulting, colin@gaap.com.au
Member of the Australian Accounting Standards Board
Hot Spot: Impairment for 30 June 2008
AASB June Meeting Highlights
ASIC Focus for 30 June Reporting Period
FRC June Meeting Highlights
ASX Findings from Review of Director Trades
Directors’ Share Trading Findings and ASIC Guide
Continued Improvement in Corporate Governance Reporting
Climate Change Reporting from 1 July 2008
New Framework for Cross Border Financial Recognition
Improved Governance for AASB and AUASB
APRA Finalises Refinements to General Insurance Prudential Framework
AUASB June Meeting Highlights
CaseWare Audit and Financial Update
Changes to SMSFs Contravention Reporting
APRA Releases New Superfund Audit Report
Highlights of IASB Financial Instruments Valuation Panel
IFAC EDs on Principles-Based Guidance on Governance and Costing
Justin Reid’s Assurance Expertise on Show
Hot Spot: Impairment for 30 June 2008
David Sauer, Chartered Accountant, Member of GAAP Consulting Network
Market conditions and uncertainty mean some financial statement preparers must address asset impairment issues in more depth for the first time since AASB 136 ‘Impairment of Assets’ and AASB 139 ‘Financial Instruments: Recognition and measurement’ first applied.
All preparers must consider whether indicators of impairment exist at each balance date. If indicators are identified, an impairment assessment must be undertaken. If an annual impairment assessment is not mandatory, e.g., in the absence of goodwill or indefinitely lived assets, indicators will only exist in some financial periods.
The daily press has carried reports of volatile market performance, reductions in credit availability, attacks on stocks that are held in vulnerable margin lending positions, and the financial difficulties encountered by some entities whose business model left exposure to declines in asset values or ability to access funds.
However, it is not just the financial services sector that is affected by current conditions, and not just the consequences of the sub-prime mortgage collapse producing impairment indicators. The impacts of rising fuel prices on businesses in the transport and tourism sectors have already announced changes in profit forecasts and operations. Forecasts of reductions in consumer confidence and spending are also potential impairment indicators.
Perhaps the most common cause of lower estimates of discounted net cash flows (DCF) in impairment assessments is the higher discount rate that has to be applied by many entities. This may be attributable to the higher cost of funds, or it may reflect the increased uncertainty and risk in the cash flow forecast. Uncertainty about the quality of cash flows over a typical forecast period needs to be reflected in the DCF calculation. Some preparers will do that through the discount rate, others through a wider range of possible outcomes in weighted average cash flows.
2008 will provide another test of whether appropriate financial reporting systems have been adopted to apply AIFRS. Preparers who already know their key sensitivities, and therefore key potential impairment indicators, will be a step ahead of the pack.
AASB June Meeting Highlights
The highlights of AASB’s 25-26 June meeting included:
Cost of Investment in Subsidiary: Agreed to vote on making AASB 2008-7 ‘Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate’ out of session. Amendments will impact the accounting for pre-acquisition dividends, impairment testing, and group reorganisations where a new parent is formed. The Standard will apply for annual reporting periods beginning on or after 1 January 2009. Early adoption will be permitted.
Annual Improvements: Agreed to vote on making AASB 2008-5 ‘Amendments to Australian Accounting Standards arising from the Annual Improvements Process’ and AASB 2008-6 ‘Further Amendments to Australian Accounting Standards rising from the Annual Improvements Process’ out of session. These Standards will include amendments made to IFRSs by the IASB as a result of its Annual Improvements Process; over 25 AASBs will be amended. AASB 2008-5 will apply to annual reporting periods beginning on or after 1 January 2009 and AASB 2008-6 to for annual reporting periods beginning on or after 1 July 2009. Early adoption will be permitted.
Conceptual Framework Exposure Draft: Approved a AASB Preface to Exposure Draft ED 164 ‘An Improved Conceptual Framework for Financial Reporting: The Objective of Financial Reporting and Qualitative Characteristics and Constraints of Decision-useful Financial Reporting Information’. Comments are sought on ED 164 by 25 August 2008
Reporting Entity Concept: Approved Preface to ITC 17 ‘Request for Comment on IASB Discussion Paper Preliminary Views on an improved Conceptual Framework for Financial Reporting: The Reporting Entity’. Comments are sought by 25 August 2008
Income Taxes: Held an educational session on the IASB/FASB short-term convergence project on Income Taxes. Many decisions made by the IASB will have significant implications for AASB 112 ‘Income Taxes’. An ED is expected to be issued later this year
Superannuation Plans and ADFs: In developing an Exposure Draft to the revised AAS 25 ‘Financial Reporting by Superannuation Plans’ the following decisions were made:
AASB 7 ‘Financial Instruments: Disclosures’ should be used as a basis for developing principles that facilitate the disclosure of information relating to the risks associated with both the financial and non-financial assets Parent entity financial statements will not be compulsory The principles underlying the requirements in AASB 8 ‘Operating Segments’ should be used as a basis for developing a set of principles that would facilitate the disclosure of information about how the trustee arranges the entity’s assets for the purposes of evaluating performance and allocating resources; and the financial performance of each group of assets identified by the trustee for these purposes Require disclosure of information that provides users with a basis for understanding the nature of the entity, the benefits the entity provides to its members and the entity’s liability for its members’ accrued benefits The requirements in AASB 124 ‘Related Party Disclosures’ should apply, and Accrued benefits are the present obligation for benefits that members and beneficiaries are entitled to receive in the future as a result of membership of the superannuation plan or approved deposit fund up to the reporting date
Social Benefits: Discussed a draft submission to the IPSASB’s ED 34 ‘Social Benefits: Disclosure of Cash Transfers to Individual or Households’; and Consultation Paper ‘Social Benefits: Issues in Recognition and Measurement’; and IPSASB’s Project Brief ‘Long-Term Fiscal Sustainability Reporting’
Service Concession Arrangements – Grantor Accounting: Held an education session on the IPSASB’s Consultation Paper ‘Accounting and Financial Reporting for Service Concession Arrangements’, which is the subject of the AASB Invitation to Comment ITC 16
Differential Reporting/SMEs: Considered a paper describing the AASB’s decisions on the differential reporting project and the related tentative basis for conclusions, to be discussed at July joint meeting with the FRSB
Interpretations: Reconsidered the proposed Agenda Decision in relation to the applicability of Standards to non-reporting entities and agreed to consider it further following its comprehensive review of the differential reporting regime in Australia, and
Next Meeting on 30-31 July 2008: Meeting with the NZ FRSB in Auckland, and likely agenda items include: Business Combinations (Not-for-Profit Entities); Conceptual Framework (including IASB and IPSASB projects); Differential Reporting; Emission Trading Schemes; Financial Statement Presentation – Phase B; Income from Non-exchange Transactions; Long-term Fiscal Sustainability; Policy for Modifying IFRS Requirements for Not-for-Profit Entities; and Service Concession Arrangements – Grantor Accounting (IPSASB proposals).
ASIC Focus for 30 June Reporting Period
ASIC has highlighted areas of focus for companies and auditors preparing for the upcoming 30 June financial reporting and auditing cycle. ‘This reporting period will have significant challenges for those involved with preparing and approving financial reports and the accompanying audit’, said ASIC’s Chief Accountant, Mr. Lee White. ‘All participants involved with the reporting period will need to approach their roles with a strong understanding of the potential impact of the market turbulence and the liquidity squeeze. It is essential that companies understand the risks they face and adequately assess and measure them, as well as having appropriate responses in place. Disclosure should be a strong focus and priority’, he added.
‘The current market turbulence places further emphasis on new accounting standard AASB 7 (Financial Instruments: Disclosures) which requires detailed information on the various risks arising from financial instruments and how these risks are being managed. Good disclosure from this standard will assist in keeping users of the financial reports well informed’, Mr. White said.
Mr. White highlighted the following areas for the upcoming reporting period:
Use and disclosure of off balance sheet arrangements: International experience has revealed numerous off balance sheet arrangements where the market turbulence has returned substantially the risks to the initiator Impairment of asset values: There will be more pressure on understanding, measuring and documenting the triggers of impairment Determining fair market values: Challenges in valuation practices and disclosures exist with the market turmoil and illiquid markets. There should be a focus on valuation methodologies and processes, and the disclosure of key assumptions, risks and uncertainties Going concern: Appropriateness of going concern assumption should be assessed and where relevant, disclosure of levels of uncertainty Significant judgements: All significant judgements used in preparing the financial statements and sources of estimation uncertainty should be disclosed Classification of debt: It is essential that the classification of the maturity of debt is accurate and loan covenants are well understood, particularly in terms of triggers Foreign currencies: There may be greater stress on currencies with wider, sharper movements bringing focus to foreign currency management and related hedging activities, and Other areas of focus: The reported timing recognition of revenue and deferred expenses.
FRC Meeting June Highlights
The highlights from 11 June 2008 meeting of the Financial Reporting Council (FRC) included:
Emissions Trading: Noted that an IFRS standard would not be ready to coincide with the commencement of Australia’s emissions trading scheme scheduled for 2010. Recognised the necessity for Australia to proceed with the development of a standard in the interim. The AASB, in consultation with Treasury, will develop a paper canvassing alternative options for developing a standard in the Australian context
Public Sector Accounting: Agreed to convene a public sector accounting workshop in August to discuss issues identified by the Department of Finance and Deregulation and the Treasury on their experience in preparing the Australian Government’s 2008-09 Budget based on the recently released accounting standard AASB 1049 ‘Whole of Government and General Government Sector Financial Reporting’
Credit Crisis: Proposed the formation of an Australian expert panel on valuations by requesting the professional accounting bodies consider establishing this group. The discussions of the panel will potentially provide the FRC with insight into the type and extent of additional guidance that might be necessary in this area, and the form of any such guidance. Also recognised the need to update guidance for management in assessing going concern, and the FRC will liaise with ASIC and the ASX Governance Committee in this regard
Financial Improvements Project: Treasury advised that it is currently examining a number of proposals for consideration by the Government to further improve corporate reporting and accountability; these are grouped into: cutting red-tape; enhancing accountability; and refining the framework. Key proposals being examined include financial reporting requirements for unlisted public companies, parent entities and wholly-owned subsidiaries and ensuring that the disclosures in the directors’ and remuneration reports provide useful and meaningful information to users. A consultation paper is expected to be publicly released in the second half of the year
AUASB Report: The AUASB Chairman advised that the AuASB was of the strong view that Australia should proceed on the assumption that the adoption date for the introduction of the IAASB Clarity standards will be 1 January 2010
AASB Report: The AASB Chair agreed to prepare a matrix in which IFRS and GAAP would be comprehensively compared. The document will capture observations of significance and highlight any serious deficiencies in, and/or disparities, between standards, and
Audit Independence: Recommendations from consultancies engaged by the FRC in 2006-07 will be included in the 2007-08 ‘Audit Independence Report’. Topics to be monitored by the FRC include: non-audit services/audit services, auditor involvement in the preparation of a prospectus for an audit client, and auditor rotation.
ASX Findings from Review of Director Trades
The Australian Securities Exchange (ASX) released a review of disclosure of Directors’ Interest Notices lodged by listed entities, including for securities trading by directors during the ‘blackout’ period. Of the 4,137 notices lodged during the three-month period (1 January and 31 March 2008), 538 (13%) breached the ASX listing rule requirement to disclose to the market within five business days. Of these 538 breaches, 289 (7%) also breached the Corporations Act by failing to disclose to the market within 14 calendar days. Seventy (70) of these were ‘active’ on market trades and have been referred to ASIC. The review was conducted by ASX Markets Supervision (ASXMS).
The ASXMS also reviewed trading by directors during the ‘blackout’ period (between the close of a listed entity’s financial period and the release of its half-year or full-year results) for possible contravention of an entity’s publicly disclosed trading policy. There were 795 trades by directors during the ‘blackout’ period deemed to be of potential market concern. Fifty-seven (7%) of the trades may have contravened the trading policies of the entities involved.
The ASXMS has contacted all of the entities whose lodgement of Directors’ Interest Notices posed market concerns and reminded them of their compliance obligation under ASX rules. In some cases, ASX’s query and an entity’s response will be released to the market. In the most serious cases, where the Corporations Act may have been breached or where trading during a ‘blackout’ period suggests possible insider trading or a failure to meet continuous disclosure obligations, the ASX will refer the matter to ASIC for possible investigation and enforcement. The ASX will continue to actively monitor the lodgement of Directors’ Interest Notices and take appropriate supervisory action for late or incomplete disclosure.
Directors’ Share Trading Findings and ASIC Guide
Australian Securities and Investments Commission (ASIC) welcomed the ASX’s release of its findings on a review of disclosure of Directors’ Interest Notices, including trading by directors during the company’s own 'black out’ period. ASIC confirmed that ASX on 22 May 2008 referred some 70 possible breaches by directors of the Corporations Act by failing to disclose to the market within 14 calendar days contrary to the Corporations Act (s205G). ASIC is currently examining these and will, as necessary, take enforcement action. ASX has foreshadowed that there may be additional breaches that arise from trading during a ‘blackout’ period which it may refer to ASIC. ASIC will immediately investigate any such referrals.
To assist directors better understand their obligations and when ASIC may take enforcement proceedings, ASIC has released a new guide ‘Regulatory Guide 193: Notification of directors’ interests in securities – listed companies’. It provides information on how directors of listed companies should comply with the disclosure requirements under the Corporations Act.
The guide covers the definition of ‘relevant interests’ and ‘securities’, circumstances where notification is not required, and the identification of breaches. It also covers the factors ASIC will take into consideration when determining whether to take action against a director by referring the matter to the CDPP. These factors include the amount of a company’s shares in question, whether a market announcement was made at or shortly after the time a notice should have been lodged, and whether there have been any other instances of late lodgement of a notice by a director.
Continued Improvement in Corporate Governance Reporting
The latest review by the ASX of reporting against the ASX Corporate Governance Council’s Principles and Recommendations shows that listed entities, both companies and trusts, continue to improve their corporate governance reporting. The ASX reviewed the FY07 annual reports of 1,291 listed entities that reported with a 30 June balance date. This represented approximately 67% of all listed entities at the time.
Overall reporting levels – the aggregate of adoption of recommended practices and of ‘if not, why not’ reporting – rose slightly in 2007 to 90.5%, up from 90% last year. This is the highest level since ASX began the annual review in 2004. For the top-500 listed entities the overall reporting level was 94%. The overall reporting level for listed trusts was 93%, up from 85% last year.
The number of Recommendations with overall reporting levels over 80% increased to 26 out of 28 Recommendations; in 2006 it was 23 out of 28. Among the top-500 listed entities all 28 Recommendations achieved reporting levels of over 80%. For listed trusts, 27 out of 28 Recommendations achieved reporting levels over 80%.
The ASX Corporate Governance Council carried out a review of, and broad public consultation on changes to, the Principles during 2006 and 2007. The revised ‘Corporate Governance Principles and Recommendations’ came into effect on 1 January 2008.
Climate Change Reporting from 1 July 2008
The first reporting year for the Australian Government’s National Greenhouse and Energy Reporting Act 2007 commences on 1 July 2008. Corporations need to register for reporting under the Act by 31 August 2009, with their first reports provided by 31 October 2009 (www.climatechange.gov.au/reporting).
Corporations will need to report for the 2008-9 financial year where they:
Emit 125 kilotonnes or more of greenhouse gases (measured in Co2 equivalent) or procedure or use 500 terajoules or more of energy each year; or Control facilities that emit 25 kilotonnes or more of greenhouse gases (measured in Co2 equivalent) or procedure or use 100 terajoules or more of energy each year.
Lower thresholds will be phased in by 2010-11 reporting year to include corporations that produce less energy and emit fewer gas emissions.
New Framework for Cross Border Financial Recognition
The Treasury and ASIC have issued a joint consultation paper ‘Cross border recognition: Facilitating access to overseas markets and financial services’ which will provide the framework for Australian investors to more effectively access other well regulated capital markets, advisers, and products. The consultation paper invites comment on proposals for cross border recognition of financial markets, financial services, and disclosure about investments. The joint consultation paper contains proposals to:
Refine ASIC’s current framework of unilateral recognition as stated in ASIC ‘Regulatory Guide 54: Principles for cross border financial services – making the regulatory regime work in a cross-border environment’, and Develop a mutual recognition framework for application in agreements between Australia and an overseas jurisdiction that ensures the integrity of financial markets and protects investors.
The consultation paper has identified some scope for improvements to the administration of the existing regime, including a new framework for mutual recognition. ‘Importantly, the consultation paper will assist the development of a framework for mutual recognition of securities regulation for use in agreements between Australia and other countries with well regulated financial markets,’ Senator the Hon. Nick Sherry, Minister for Superannuation and Corporate Law Minister, stated.
The consultation paper seeks to obtain the views of the users and providers of financial services, financial markets, and those involved in raising capital, about how the initiatives outlined in the consultation paper will assist Australian investors and enhance Australia’s position in the global economy. Treasury and ASIC invite comments on the proposals set out in the joint consultation paper by 25 July 2008.
Improved Governance for AASB and AUASB
Senator the Hon. Nick Sherry, Minister for Superannuation and Corporate Law, has welcomed the passage through Parliament of the Governance Review Implementation (AASB and AUASB) Bill 2008. The Bill, inter alia, establishes the Office of the Australian Accounting Standards Board and the Office of the Auditing and Assurance Standards Board, to support the operations of the AASB and the AUASB. The Chairs of the AASB and the AUASB will hold the position of Chief Executive of each respective Office.
‘This governance structure is well suited to the AASB and AUASB and will improve the existing accountability and governance arrangements. Under the new framework, the Chief Executives will be directly responsible to Parliament. The Bill will not change the current statutory functions of the AASB and the AUASB with respect to development of accounting and auditing standards. Both the AASB and the AUASB perform a valuable role as standard setters,’ said Minister Sherry.
The FRC will maintain its important strategic oversight role with respect to both Boards. Consequential changes will be made to the FRC’s functions in relation to approval of financial and administrative matters. ‘The Bill will ensure that the FRC’s critical role in Australia’s financial reporting system will continue,’ said Minister Sherry
APRA Finalises Refinements to General Insurance Prudential Framework
The Australian Prudential Regulation Authority (APRA) released its final general insurance refinements package that includes a response paper, prudential standards and prudential practice guides. The key refinements include: recognition of five different categories of insurer, with modifications to the prudential framework tailored to the risk profiles of the categories; and changes to APRA's capital requirements in relation to foreign reinsurance, and also to equity and property investments. The majority of the changes will take effect from 1 July 2008 and the reinsurance changes from 1 January 2009.
AUASB June Meeting Highlights
Highlights of 2-3 June meeting of the AUASB included:
Standard on Compliance Engagements: Considered a revision of the proposed standard ASAE 3100 ‘Compliance Engagements’ based on ED 5/07, and agreed to change the application date to reporting periods or engagements commencing on or after 1 October 2008. The standard will be released in late June Standards on Review Engagements: Final revisions of the proposed standards will be considered for out of session; it is anticipated that the standards will be released in late June. The revised standards are: ASRE 2400 ‘Review of Financial Reports’; ASRE 2405 ‘Review of Other Historical Financial Information’; and ASA 2008-1 ‘Amendments to Australian Auditing Standards (Amendments to ASRE 2410 Review of an Interim Financial Report Performed by the Independent Auditor of the Entity)’ Proposed Guidance Statement on Reporting on Remuneration Disclosures: Considered a draft Guidance Statement on the auditor’s reporting responsibilities regarding the Remuneration Report required under the Corporations Act 2001 (s.300A). The Guidance Statement provides an example auditor’s report which practitioners will be able to use for the upcoming financial year-end reporting ASA Redrafting (Clarity Format): Considered draft versions, in clarity format, of the following proposed auditing standards: ASA 230 ‘Audit Documentation’; ASA 240 ‘The Auditor’s Responsibilities relating to Fraud in an Audit of a Financial Report’; ASA 260 ‘Communicating with Those Charged with Governance’; ASA 300 ‘Planning an Audit of a Financial Report’; ASA 315 ‘Identifying and Assessing the Risks of Material Misstatement Through Understanding the Entity and its Environment’; ASA 600 ‘Special Considerations in Audits of Group Financial Statement Reports (Including the Work of Component Auditors)’. These and six other redrafted standards will be considered at the 21-22 July AUASB meeting for approval to release as exposure drafts Guidance Statement GS 009 ‘Financial and Compliance Audits of Self Managed Superannuation Funds’: Resolved that the Guidance Statement will be finalised when the Australian Taxation Office (ATO) issues the approved form of Auditor’s Report for self managed superannuation funds and other related documents, and ASIC Regulatory Guide 69 Debentures – Improving Disclosures for Retail Investors: Advised that ASIC is in the process of redrafting the Guide to establish the requirement to audit against each of the eight benchmarks outlined in the Guide.
CaseWare Audit and Financial Update
Task Technology distributed their May 2008 update CD to customers throughout Australia and New Zealand. The CD included the 2008 version of CaseWare Working Papers together with the updated Task Audit and Financial Statements templates. The Task Audit template update included the following key changes and enhancements:
Reviewed and updated content to better align the programs and checklists to the Auditing Standards and to improve their practical application A document that contains a summary of all the ASA’s mandatory requirements; as the auditor completes programs and checklists, this document automatically indicates which requirements have been addressed Added a new Audit Guide that demonstrates how to effectively use the CaseWare programs and checklists. The Audit Guide provides information on the overall method required to successfully audit using CaseWare and detailed instructions on specific processes, alternatives and software or document functionality where necessary. This guide can be modified by the firm to their requirements.
The Financial Reporting template included updates and areas for AASB7 disclosures and added Trading Account grouping and accompanying statements to schedules area. For more information visit www.task.com.au.
Changes to SMSFs Contravention Reporting
The ATO has made changes to its procedure that auditors of self managed superannuation funds (SMSFs) must follow to report contraventions to the ATO. The changes to reporting contraventions are effective from 1 July 2008; this is regardless of the financial year being audited. The changes in the superannuation laws mean that the ATO now prescribes the contraventions and associated materiality levels that auditors must report.
From 1 July 2008 the new ACR (NAT 11239) will be the only Auditor Contravention Report that can be used. The ACR is event based. Auditors must report contraventions for an event. An event is something that may lead, or has led to one or more contraventions of the superannuation laws. Auditors must apply a number of tests which will determine the sections and regulations that must be reported. They include a series of questions, the answers to which will clearly define whether a particular contravention should be reported.
Auditors must report all prescribed contraventions for new funds (less than 15 months old) regardless of financial thresholds. This is one of the new tests. The ACR requires auditors to tell the ATO whether the ACR is a new contravention report or a revision of a contravention report which was lodged earlier.
APRA Releases New Superfund Audit Report
The APRA has released a revised version of the audit report (APRA website) on the financial statements and compliance for a reporting entity contained in approved form titled 'Superannuation Industry (Supervision) Act 1993 (SIS Act) Section 35C – Approved Form’. The new report applies to reporting periods commencing on or after 1 July 2007.
Highlights of IASB Financial Instruments Valuation Panel
The IASB’s financial instrument valuation advisory panel met on 13 June to identify specific valuation and disclosure issues encountered in practice in the current market environment. The issues discussed included:
Selection of a valuation technique: How to select an appropriate valuation technique, and when that valuation technique should be changed Calibration of valuation model: When and how a valuation model should be calibrated to actual transactions when applying a particular valuation technique Use of third-party price quotes: The use of, and reliance on, price quotes by third-parties when transactions have occurred and when quotes were indicative and no transactions were occurring, and what to do when those indicative quotes differ from the value derived from a model Adjustments to valuation models: The types of adjustments that should be made to the model to reflect the value of the instrument being valued, and how such adjustments might be determined Meaning of ‘observable’ and ‘significant’ inputs: What ‘observable’ and ‘significant’ meant in the context of inputs to a valuation model Distinguishing between active and inactive markets: How to distinguish between an active market and an inactive market, and the importance of being able to determine when fair value might be based on something other than an observed transaction price Forced transactions and distressed sales: Whether observed market prices could ever clearly identify forced or distressed sales and, if so, the implications of using such prices Measurement of changes in own credit: How to measure changes in own credit Disclosures using the fair value hierarchy: Noted that banks outside the US have begun using the fair value hierarchy terminology in SFAS 157, when discussing disclosures and inputs to valuation techniques; whether any relationships between instruments in different levels of the hierarchy should be disclosed, and Disclosures of valuation techniques, inputs, sensitivities and ranges: Whether disclosures might be improved if the material data inputs used, and the valuation sensitivities of those inputs, were disclosed; and whether sensitivities would be more meaningful if they are presented in the aggregate rather than at an individual input level.
IFAC EDs on Principles-Based Guidance on Governance and Costing
As part of International Federation of Accountants (IFAC) ongoing commitment to support professional accountants in business and their organisations in enhancing governance and in assessing and delivering organisational performance, its Professional Accountants in Business (PAIB) Committee has released two new proposed International Good Practice Guidance documents for public comment by 23 September 2008. The proposed guidance addresses evaluating and improving governance structures and use of costing to support effective decision making.
The exposure draft ‘Evaluating and Improving Governance in Organisations’ sets out a framework, a series of fundamental principles, practical guidance, and references on how to evaluate and improve governance in organisations. The purpose of this guidance is to assist professional accountants and their organisations in creating a balance between conformance with rules and regulations and organisational performance. As part of a pilot project to further encourage user involvement in the development of good practice guidance, the PAIB Committee is inviting all those who are interested to provide comments on via an online feedback form, which can be accessed at http://www.ifac.org/governanceED.
The second proposed International Good Practice Guidance ‘Costing to Drive Organisational Performance’, is designed to assist professional accountants in business in delivering useful cost information to support effective decision making and organisational performance. The proposed guidance sets out eight fundamental principles of costing that encourage a performance-based view of costing to help professional accountants in business to ensure that costing information supports forward-looking strategic and operational decisions.
Justin Reid’s Assurance Expertise on Show
Justin Reid leads our auditing service offerings and since joining GAAP Consulting in April, he has been contributing in the following ways:
Advising clients on the independence issues arising from becoming a ‘network firm’ Providing content for the May 2008 release of the CaseWare Audit AU template, including the drafting of a working guide to the template Presenting at the CPA’s Victorian Public Accountants Convention ‘Latest Auditing Insights’ Presenting at the NIA’s Professional Development Program ‘Planning for 30 June Audit – A Preparer Perspective’ Providing 30 June 2008 audit update training to accounting firms, including sessions on behalf of the ICAA Recording material on the SMSF Competency Standards for Television Education Network Presenting training sessions on the Auditing Standards of fair values, understanding the entity, assessing risk, and documentation, and Performing engagement level quality control file reviews.
Outstanding Exposure Drafts
Accounting
15 July ED 34 ‘Social Benefits: Disclosure of Cash Transfers to Individuals or Households’ – IPSASB 15 July Consultation Paper ‘Social Benefits: Issues in Recognition and Measurement’ – IPSASB 1 August Discussion Paper ‘Financial Instruments with Characteristics of Equity’ – AASB 1 August Consultation Paper ‘Accounting and Financial Reporting for Service Concession Arrangements’ – PSASB 22 August Discussion Paper ‘Reducing Complexity in Reporting Financial Instruments’ – AASB 25 August ED 164 ‘An Improved Conceptual Framework for Financial Reporting: The Objective of Financial Reporting and Qualitative Characteristics and Constraints of Decision-useful Financial Reporting Information’ – AASB 25 August ITC 17 ‘Request for Comment on IASB Discussion Paper Preliminary Views on an improved Conceptual Framework for Financial Reporting: The Reporting Entity’ – AASB 5 September Discussion Paper ‘Financial Instruments with Characteristics of Equity’ – IASB 19 September Discussion Paper ‘Reducing Complexity in Reporting Financial Instruments’ – IASB 19 September Discussion paper ‘Preliminary Views on Amendments to IAS 19 Employee Benefits’ – IASB 29 September ‘An Improved Conceptual Framework for Financial Reporting: Chapter 1: The Objective of Financial Reporting and Chapter 2: Qualitative Characteristics and Constraints of Decision-useful Financial Reporting Information)’ – IASB and FASB 29 September ‘Preliminary Views on an Improved Conceptual Framework for Financial Reporting: The Reporting Entity’ – IASB and FASB
Ethics
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