GAAP ALERT No.11/2010                   Having browser problems? Click here to read on line

By Colin Parker B.Bus FCA MAICD
Principal, GAAP Consulting, colin@gaap.com.au
Member of the Australian Accounting Standards Board (2006-2009)

INTRODUCTION

ASIC Provides Relief for Parent Entity Financial Statements
ASIC’s Guidance on a Director’s Duty to Prevent Insolvent Trading
Fundamental Changes to Insurance Accounting Proposed by IASB
AUASB July Meeting Highlights
Impact of Clarity Auditing Standards on SMSF Auditor’s Reports
Applicability of AUASB Pronouncements re Use of Service Organisation
AUASB Chair Kelsall Reappointed
ASIC Accepts Enforceable Undertaking from Brisbane Auditor
New Audit Guidance Statement Prudential Reporting by a Life Company
First Home Savers Account – Audit Report
Corporate Governance Reporting Remains High
ASX Releases Amendments to Corporate Governance Principles
UK FRC Publishes First Stewardship Code
5th Annual Self Managed Superannuation Conference
Hall Chadwick Links With Shinewing, China’s Biggest Domestic Accounting Firm
Addressing Accounting and Auditing Uncertainty

ASIC Provides Relief for Parent Entity Financial Statements

ASIC released a new class order CO 10/654 ‘Inclusion of parent entity financial statements in financial reports’, to allow companies, registered schemes and disclosing entities that present consolidated financial statements to also present parent entity financial statements. In addition to the new class order, a previous class order, has been amended to permit the issuers of stapled securities that present their financial statements in one financial report not to present single entity financial statements for those stapled entities that have consolidated financial statements.

The Corporations Amendment (Corporate Reporting Reform) Act 2010 (CRRA) was given Royal Assent on 28 June 2010 and became effective from 1 July 2010. CRRA amended the Corporations Act 2001 (the Act) so that those entities reporting under Chapter 2M that present consolidated financial statements are no longer required to present parent entity financial statements. This change applies for financial reports for the year ended 30 June 2010.

Australian financial services (AFS) licensees continue to be required to present parent entity financial statements under Chapter 7 of the Act. The Act now prevents entities reporting under Chapter 2M from presenting parent entity financial statements. However, some entities want to present parent entity financial statements: to avoid the cost of changing their reporting formats, particularly for 30 June 2010 year ends; as they are AFS licensees that are required to present parent entity financial statements under Chapter 7 of the Act; or because they believe that the parent entity financial statements provide useful information to users of their financial reports.

CO 10/654 permits entities to continue to include parent entity financial statements in their financial reports. Entities taking advantage of the relief are not required to present the summary parent entity information otherwise required by regulation 2M.3.01. The directors’ declaration and auditor’s report must include the relevant opinions in relation to the parent entity financial statements and related notes.

CO 05/642 allows a stapled security issuer to include the financial statements of the other stapled entities together in a single financial report. The order has been amended by CO 10/655 ‘Variation of Class Orders (CO 01/1455), (CO 04/672) and (CO 05/642)’ to allow the financial report to exclude parent entity financial statements for those stapled entities that prepare consolidated financial statements.

David Sauer, GAAP Consulting, has reminded preparers and auditors to check each entity’s reporting requirements carefully “The Act and Class Order both provide welcome relief, but only in respect of the main reporting part of the Corporations Act. Where entities are subject to other legislation or reporting mandates, the relief may not apply.”

ASIC’s Guidance on a Director’s Duty to Prevent Insolvent Trading

ASIC released regulatory guidance to assist directors to understand and comply with their duty under the Corporations Act 2001 to prevent insolvent trading. Regulatory Guide 217 ‘Duty to prevent insolvent trading: Guide for directors’ sets out four key principles which ASIC considers directors should follow to meet their obligation to prevent insolvent trading:

• Keep informed about the company’s financial position and affairs
• Regularly assess the company’s solvency and investigate financial difficulties immediately
• Obtain appropriate professional advice to help address the company’s financial difficulties where necessary, and
• Consider and act in a timely manner on the advice.

“It is important that directors focus on their obligations to prevent insolvent trading and we expect this guidance will assist directors of small-to-medium enterprises, in particular, to fulfill this fundamental responsibility”, ASIC Commissioner, Mr Dwyer said.

Section 588G of the Corporations Act requires a director of a company to prevent the company from incurring a debt if the company is insolvent, or if the company will become insolvent by incurring the debt or a range of debts including the debt. RG 217 also details factors which ASIC will consider when deciding to bring proceedings against a director for allowing a company to trade while insolvent (including criminal proceedings and proceedings to recover compensation for loss resulting from insolvent trading).

Commenting on the release of the guide, Colin Parker, Principal, GAAP Consulting, stated “It is unfortunate that ASIC missed the opportunity to educate directors on the AASB requirements regarding solvency (such as going concern, debt classification and financial instruments), particularly as going concern is one of ASIC’s focus point for 30 June financial reporting and some previous disclosures have been found wanting”.

Fundamental Changes to Insurance Accounting Proposed by IASB

The IASB released an exposure draft of improvements to the accounting for insurance contracts that proposes a single International Financial Reporting Standard that all insurers, in all jurisdictions, could apply to all contract types on a consistent basis. The ED 2010/8 ‘Insurance Contracts’ is open for comment until 30 November. It is expected that the AASB will shortly release the ED in Australian context.

The proposed IFRS would apply to all insurance contracts as defined. An insurance contract would be recognised at the earlier of: the insurer being on risk to provide coverage to the policyholder for insured events; and the signing of the insurance contract. An insurer would derecognise an insurance liability when it is extinguished.

Measurement of the insurance contract is based on a ‘building block approach’ that portrays a current assessment of the contract, using the following: an unbiased, probability-weighted average (expected value) of future cash flows expected to arise as the insurer fulfills the contract; the effect of time value of money; and a margin. The building blocks would be used to measure the combination of rights and obligations arising from an insurance contract rather than to measure the rights separately from the obligations. The combination of rights and obligations would be presented on a net basis.

For most short-duration contracts, a modified version of the measurement approach would apply; during the coverage period, the insurer would measure the contract using an allocation of the premium received; and the insurer would use the building block approach to measure claims liabilities for insured events that have already occurred.

The ED proposes that entities should disclose qualitative and quantitative information about: the amounts, recognised in its financial statements, arising from insurance contracts; and the nature and extent of risks arising from insurance contracts.

In 2004 the IASB introduced IFRS 4 ‘Insurance Contracts’ as an interim standard that permitted many existing international accounting practices to be retained, whilst beginning a more comprehensive review of insurance accounting as a second phase of the project. The proposals published are the result of that review.

Commenting on the exposure draft, Sir David Tweedie, chairman of the IASB, said: “A fundamental review of insurance accounting was long overdue, with current practice resulting in financial information that is impenetrable to all but the most expert of users. The publication of this exposure draft marks an important milestone in this review process. The proposed standard better reflects the economics of insurance contracts, and would result in more relevant, understandable and comparable information being available to investors.

“From an Australian perspective, insurers will be familiar with several of the concepts proposed in exposure draft as they underpin the existing AASB 1023 ‘General Insurance Contracts’ and AASB 1038 ‘Life Insurance Contracts’, and so will represent less of a fundamental shift than overseas insurers”, stated Michael Cain, GAAP Consulting. “As always the devil is in the detail, and I would expect Australian insurers to take an active interest in contributing to the development of the eventual IFRS”, he concluded.

AUASB July Meeting Highlights

Highlights of the 27 July meeting of the AUASB included:
Recent Changes to AASB Accounting Standards and Corporations Act 2001: Considered recent changes to: AASB 1053 ‘Application of Tiers of Australian Accounting Standards’ and AASB 2010-2 ‘Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements’ and Corporations Act 2001 ‘Changes – Group Financial Reports’, and will issue an information article on the impact of these changes on the Auditing Standards
Going Concern: Considered feedback from practitioners indicating there may be differing interpretations of the decision tree diagram included as Appendix 1 in ASA 570 ‘Going Concern’, and will provide additional guidance, and
Revised Guidance Statements: Approved projects to revise and reissue: AGS 1040 ‘Franchising Code of Conduct’, to include new requirements to the Franchising Code of Conduct effective 1 July 2010; and GS 002 ‘Special Considerations in the Audit of Risk Management Requirements for Registrable Superannuation Entities’, following reissue of the APRA Superannuation Guide SPG 200 ‘Risk Management’.

Our publication ‘The Reduced Disclosure Regime – A Practical Guide to Implementation’, authored by Carmen Ridley, GAAP Consulting Network, will assist accountants, auditors, and other stakeholders to understand and implement these substantive changes to the differential reporting regime as embodied in AASB 1053 and AASB 2010-2 . For convenience, the implementation guide comes into two Parts as word document:

• Part 1: The Understanding (over 50 pages), and
• Part 2: The Checklists (over 150 pages).

Impact of Clarity Auditing Standards on SMSF Auditor’s Reports

The AUASB provided an Explanation of the Impact of Clarity Auditing Standards on SMSF Auditor’s Reports. SMSF audits affected are those for periods commencing on or after 1 January 2010, which will be SMSFs established during 2010.

The Superannuation Industry (Supervision) Act 1993 (SISA) requires the SMSF auditor to provide an auditor’s report to the trustees in the “approved form”, which the Australian Taxation Office (ATO) issues and revises periodically, usually each year prior to 30 June. The AUASB issued a new suite of Australian Auditing Standards (ASAs) in clarity format in October 2009 which must be applied by auditors of financial reports for periods commencing on or after 1 January 2010. The ATO has issued an approved form for 30 June 2010 which addresses the requirements of the ASAs in clarity format.

The key change which SMSF auditors need to be aware of is that Auditor’s Reports for SMSFs are to include an Emphasis of Matter paragraph for periods commencing on or after 1 January 2010 to meet the requirements of ASA 800 ‘Special Considerations – Audits of Financial Reports Prepared in Accordance with Special Purpose Frameworks’. This Emphasis of Matter paragraph alerts the reader that the financial report was prepared in accordance with a special purpose framework. This change will be relevant to audits of SMSFs established during 2010 for 30 June 2010 year ends and audits of all SMSFs for 30 June 2011 year ends.

GS 009 ‘Auditing Self Managed Superannuation Funds’ will be revised by the AUASB during the current financial year to ensure consistency with the new suite of standards, including updating the auditor’s report in Appendix 3 to reflect the ATO’s current approved form.

The Auditing Standards are authoritative for the SMSF’s financial audit and take precedence over the guidance contained in GS 009. Consequently, if there is an inconsistency between the requirements in an Auditing Standard and the guidance provided in GS 009, the standard must be complied with by an auditor in conducting a SMSF financial audit.

Applicability of AUASB Pronouncements re Use of Service Organisation

The AUASB has issued an ‘Explanation of the applicability of AUASB Pronouncements where a User Entity uses a Service Organisation’ to assist auditors in determining which Standards and Guidance Statements are applicable to each circumstance. A number of AUASB pronouncements are relevant to the user auditor or service auditor in these circumstances. These pronouncements have differing application periods and may provide requirements or guidance for the user auditor or service auditor. The explanatory guide is to assist service and user auditors and service auditors in determining which pronouncements are applicable in the circumstances.

User entities may use service organisations to provide services which are relevant to user entities’ internal control as it relates to financial reporting. Consequently, audit evidence may be required by the user entity’s auditor (the “user auditor”) on controls located at the service organisation. The service organisation may engage an auditor (the “service auditor”) to provide a report on controls at the service organisation; or a special purpose financial report of the user entity’s balances or transactions relating to the services provided by the service organisation. The user auditor may seek to rely on the service auditor’s reports as audit evidence.

The following pronouncements may be applicable depending on the circumstances:

• ASAE 3402 ‘Assurance Reports on Controls at a Service Organisation’
• ASA 402 (in Clarity format - Oct 2009) ‘Audit Considerations Relating to an Entity Using a Service Organisation’
• ASA 402 (Apr 2006) ‘Audit Considerations Relating to Entities Using Service Organisations’
• GS 007 ‘Audit Implications of the Use of Service Organisations for Investment Management Services’, and
• AGS 1042 ‘Reporting on Control Procedures at Outsourcing Entities’.

AUASB Chair Kelsall Reappointed

The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen MP, announced the reappointment of Ms Merran Kelsall as the Chairman of the Auditing and Assurance Standards Board (AUASB) for a further three-year term. Mr Bowen said the AUASB played a crucial role in ensuring Australia's auditing framework remained first-class. “I congratulate Ms Kelsall on her reappointment and look forward to her continuing her important work at the helm of the AUASB,” Mr Bowen said.

Ms Kelsall has been the part-time Chairman of AUASB since 2004. During her tenure, she has overseen a number of reforms and initiatives, including the restructuring of the AUASB under the Financial Management and Accountability Act 1997 and the redrafting of the entire suite of the Australian Auditing Standards in Clarity format. Ms Kelsall originally qualified as a chartered accountant and practised in the profession for 20 years, including 10 years as a partner at BDO. She has considerable directorship and corporate governance experience, including working in audit, risk and compliance committees.

ASIC Accepts Enforceable Undertaking from Brisbane Auditor

ASIC accepted an enforceable undertaking (EU) from Brisbane auditor, Mr John William Ashton. This EU follows ASIC’s investigation into Mr Ashton’s conduct in relation to the audits of the following public companies: Property Developers Fund Limited (in liquidation); Investin Secure Developments Limited (in liquidation); Paladin Acquisition Fund Limited; Paladin Property Fund Limited; and Now Finance Limited. At the time, Mr Ashton was a partner with Brisbane firm Hanrick Curran.

Under the EU, Mr Ashton will not perform the role of lead auditor or review auditor for any audits or reviews that are required under the Corporations Act 2001 for 18 months (the period of suspension). The EU also provides that Mr Ashton must: appoint a reviewing auditor to review and report to ASIC about each of the first four audits he is engaged to conduct after the period of suspension; undertake an additional 20 hours of technical external audit training during the period of suspension; and pay $16,000 towards ASIC’s legal and investigative costs.

ASIC identified a number of concerns regarding Mr Ashton’s conduct of the audits and formed a view that Mr Ashton acted in breach of various auditing standards. While he does not agree with ASIC’s contentions, Mr Ashton has acknowledged ASIC’s concerns and offered the EU as an alternative to ASIC making an application to the CALDB.

New Audit Guidance Statement Prudential Reporting by a Life Company

GS 017 ‘Prudential Reporting Requirements for Auditors of a Life Company’ has been developed by the AUASB, in consultation with the APRA, to provide guidance to the auditor of a life company, reporting in accordance with the prudential reporting requirements specified by APRA in its life company Prudential Standard LPS 310 ‘Audit and Related Matters’ (LPS 310).

This Guidance Statement is to be read in conjunction with LPS 310 and other applicable APRA Prudential Requirements and Reporting Standards, including the Life Insurance Act 1995 (Life Act), the Financial Sector (Collection of Data) Act 2001 (FSCODA); applicable AUASB Standards, and relevant ethical and professional standards. This Guidance Statement does not extend the responsibilities of an auditor of a life company beyond those which are imposed by the Life Act, the FSCODA, APRA Prudential and Reporting Standards, AUASB Standards and other applicable legislation.

The 144 paragraph guidance statement addresses the following topics: Application; Issuance Date; Introduction; Definitions; Responsibilities of the Life Company; Role and Responsibilities of the Auditor; Agreeing the Terms of the Annual Prudential Reporting; Engagement; Planning the Annual Prudential Reporting Engagement; Matters to Consider in Conducting the Annual Prudential; Reporting Engagement; Communication; The Auditor’s Annual Prudential Assurance Report; Additional Reporting Requirements under the Life Insurance Act; Special Purpose Engagements; and Conformity with International Pronouncements.

First Home Savers Account – Audit Report

APRA has created an Approved Form of Auditor’s Report for RSE Licencees who provide First Home Saver Accounts. This Form has been created to facilitate compliance with S. 35C of the Superannuation Industry (Supervision) Act (SIS) 1993, under the application of S. 114 of the First Home Savers Act (FHSA) 2008. S. 114(1) of the FHSA applies certain prudential provisions of the SIS Act to RSE Licensees that hold an authorisation as a FHSA provider. S.35C is one of the prudential provisions of the SIS Act which applies to RSE Licensees, requiring that an approved auditor be appointed to give the Trustee a report in the approved form of the operations of the entity for that year.

The Form has been created based on the format of the Approved Form of Auditor’s Report for Superannuation:

• Part 1 of the Form comprises the Auditor’s report on financial statements, and is the same as that of the Superannuation Form, except that no facility is required for non-reporting entities
• Part 2 of the Form comprises the Auditor’s report on compliance for a FHSA provider
• Part 3 of the Form comprises the Auditor’s report on the APRA Annual Return, and
• Guidance and instructions have been provided to facilitate the audit profession in completing the Form.

The Auditor’s Report for FHSA’s is effective for reporting periods commencing on or after 1 July 2009, that is, for the 2009-2010 and subsequent years of income.

In response to industry and Office of Best Practice Regulation’s preference for streamlined reporting, the Annual Return for an RSA Provider has been condensed from 3 parts to 1 part comprising an Approved Form of Auditor’s for RSA Providers. This form subsumes the Annual Return requirements of S.44 of the RSA Act.

The major changes include:

• Part 1 instructions have been updated
• Part 2 Annual Return section has been removed
• Part 3 of the Form has had the RSA Certification requirement removed, however, the compliance section has been expanded and updated to reflect the current compliance obligations of RSA Providers and to reflect current audit practice, and
• The name of the form has been changed from Annual Return for RSA Providers to Approved Form of Auditor’s Report on Compliance for an RSA Provider.

The Auditor’s Report is an Approved Form under the Retirement Savings Account Act 1997. The Auditor’s Report is effective for reporting periods commencing on or after 1 July 2009, that is, for the 2009-2010 and subsequent years of income.

Corporate Governance Reporting Remains High

The latest review by the ASX of reporting against the ASX Corporate Governance Council’s Principles and Recommendations shows that listed entitles continue to have a high level of corporate governance reporting. ASX’s supervision subsidiary, ASX Markets Supervision (ASXMS), reviewed the annual reports of 1,648 listed entities with a 30 June 2009 balance date. This represented 75% of all listed entities at the time and was not limited to a specific entity size or market sector.

ASX listing rules require entities to disclose in their annual report the extent to which they have followed the Recommendations or explain why they have not done so (“if not, why not?” reporting). Overall reporting levels, being the aggregate of the levels of adoption of the Recommendations and the levels of “if not, why not” reporting, continue to be high:

• Overall reporting was 93% for all 27 Recommendations
• Reporting was in excess of 90% for 18 out of the 19 practice-based Recommendations, and
• Reporting was in excess of 80% for 8 out of the 8 information-based Recommendations.

As the revised Principles and Recommendations apply for the first time to companies with a year-end balance date of 30 June 2009, ASX has not made comparisons with the results of previous reviews measured against the original 2003 Principles and Recommendations.

Eric Mayne, Chief Supervision Officer of ASX, said: “The continued high level of reporting against all the recommendations shows that a culture of sound corporate governance transparency has developed among ASX listed entities since the first Principles and Recommendations were introduced in 2003. This is good news for all market stakeholders. Investors are better informed about the corporate governance practices of listed entities, and entities themselves are more aware of the importance of being transparent with their governance arrangements”.

On the issue of poor reporting, he stated “Where corporate governance reporting is deficient, ASX will write to a company’s board and request that the deficiencies be addressed in the next annual report or via disclosure to the market by way of a company announcement.”

The review focused particularly on reporting against these five topics:
Independence of directors: 93% of all entities and 98% of top 300 entities reported on whether the board had a majority of independent directors
Trading policies: 93% of all entities and 99% of top 300 entities reported on whether or not the entity had a policy concerning trading in the entity’s securities. Actual disclosure of the policy or a summary of the policy was lower, with 86% of all entities and 95% of top 300 entities actually disclosing the policy or a summary of the policy
Risk management: 96% of all entities and 99% of top 300 entities reviewed reported in some way on the establishment of risk policies
Remuneration committees: 99% of all entities and 98% of top 300 entities reviewed reporting on this topic. Of the 99% of all entities reporting, 51% adoption reported, 48% “if not, why not” reported and 1% did not report at all on remuneration committees. Among the top 300 entities, 87% adoption reported, 11% “if not, why not” reported and 2% did not report at all, and
Diversity: Those that reported having a female director on the board were found to be: 16% of all 1,648 entities reviewed; 42% of 229 top 300 entities review; and 45% of 149 top 200 entities reviewed. Those that reported having a female chair were found to be: 2% of all entities reviewed; 2% of the top 300 entities reviewed; and 3% of the top 200 entities reviewed.

On 30 June 2010 the ASX Corporate Governance Council released ‘Amendments to the revised Principles and Recommendations’ on diversity, remuneration, trading policies and briefings. The changes take effect for the first financial year of listed entities beginning on or after 1 January 2011 (See GAAP Alert No.92010 30 June).

ASX Releases Amendments to Corporate Governance Principles

The Australian Securities Exchange Corporate Governance Council has released its revised Corporate Governance Principles and Recommendations which make changes to the diversity, remuneration, trading policies and briefings requirements of the existing principles (refer GAAP Alert No.4/2010). The revisions take effect for the first financial year of listed entities beginning on or after 1 January 2011, although the Council encourages early transition from 1 July 2010.

UK FRC Publishes First Stewardship Code

The UK Financial Reporting Council (FRC) publishes the first Stewardship Code for institutional investors following the publication in May of the updated UK Corporate Governance Code for listed companies. The purpose of the Code is to improve the quality of corporate governance through promoting better dialogue between shareholders and company boards, and more transparency about the way in which investors oversee the companies they own. The Code includes principles on: the monitoring of investee companies; the escalation of activities taken to protect or enhance shareholder value; collective engagement; voting policy; managing conflicts of interest; and public reporting and reporting to clients. The FRC is encouraging all institutional investors to report publicly on the extent to which they follow the Code. From the end of September 2010 the FRC will maintain on its website a list of all those who have done so.

Introducing the new Code Baroness Hogg, FRC Chairman, said: “We hope this new Code will be a catalyst for better engagement between shareholders and companies and create a stronger link between governance and the investment process. Disclosures made by institutions under the Code should assist companies to understand the approach and expectations of their major shareholders. They should also assist those issuing mandates to fund managers. Pension funds and other owners may not wish to become directly involved in engagement but they can make a significant contribution by, for example, mandating their fund managers to do so on their behalf.”

5th Annual Self Managed Superannuation Conference

Television Education Network’s 5th annual SMSF conference will be held at the Gold Coast in September (2 and 3 September, Sofitel Gold Coast, Broadbeach, Queensland). Like the first in the series in 2006, this event has a strong reform flavour as it follows in the wake of the Cooper Review and the Government’s changes to superannuation, following the Henry Review.

The conference has four important themes:
Burning issues: Led by the problems we’re all having with the excess contributions tax, followed by practical problems with instalment warrant structure, and SMSFs where there are blended families
Reform: The Cooper recommendations on SMSFs themselves, followed by the Cooper recommendations in relation to auditors and advisers, and the changes consequent upon the Henry Review
Advanced Planning and Structuring: Leveraged joint ventures of SMSFs, pension and recontribution strategies and the use of reserves in SMSFs, and
SMSF Management: How to provide cost effective and efficient management of your clients’ SMSFs and how to manage SMSFs where one or more members lose capacity.

As was the case last year, the curtain-raiser for the conference will be the Annual SMSF Audit Intensive, which will be held the day before. The Intensive will cover current audit hotspots, related party transactions in audit and issues with auditing instalment warrant structures.

For further information about this conference, please contact Bianca Nicholls at Television Education Network on (03) 9670 2055 or you can download the full conference brochure www.tved.com.au.

If you can’t make it to the Gold Coast, Susan Orchard, GAAP Consulting, can take you through the SMSF audit issues in an ‘in house’ training session.

Hall Chadwick Links With Shinewing, China’s Biggest Domestic Accounting Firm

Accounting and business advisory firm, Hall Chadwick, has established a link with China’s biggest domestically owned accounting firm, ShineWing Certified Public Accountants. Together they are establishing ShineWing Hall Chadwick, which becomes a member of the Hall Chadwick national association and will be based in Melbourne.

The new firm combines an accounting practice already established in Victoria two years ago by Mr Chu and ShineWing and achieves an independent, Australia-wide reach by linking with a national firm outside the big four accounting firms. Hall Chadwick’s current national association includes Hall Chadwick in Sydney, Williams Hall Chadwick in Brisbane and Maxim Hall Chadwick in Perth.

The ShineWing practice in Australia has been established by Mr Chu, who came to Australia 18 years ago from Hong Kong where he built a substantial accounting firm with his father. Mr Chu, who will be managing partner of ShineWing Hall Chadwick, is fluent in English, Cantonese and Mandarin, having established the ShineWing Australian practice under the initiative of the Beijing headquarters of ShineWing.

ShineWing’s Australian firm is the first major Chinese firm established outside Asia and marks the beginnings of proposed further expansion into the western world. Indicative of ShineWing’s reach into the Chinese business community is that a recent client of ShineWing in Australia is Yancoal, a subsidiary of China’s Yangzhou Coal Mining Company Limited, one of the top three coal corporations in China and which last year acquired Australia’s Felix Resources for $3.2 billion.

ShineWing, which is owned by 82 partners and chaired by Zhang Ke, formerly the managing partner of Coopers & Lybrand in China, has operations in 15 Chinese provinces, which cover half the country, and more than 2,500 staff in China and 200 in Hong Kong. The firm has a high profile in public company and government audits, with clients across industry sectors including resources, telecommunications, automobile manufacturing, banking, industrial and technology.

Mr Fairfull, Hall Chadwick Chairman, believes the collaboration will allow Hall Chadwick to be more competitive on cross border business to and from Asia, especially in the areas of audit, taxation, valuations and expert opinions for IPOs.

In 2009, Hall Chadwick was one of the fastest growing accounting firms in Australia, with revenue up 57 per cent, and in 2010, growth is expected to be in excess of 20 per cent. Over the past year, Hall Chadwick has expanded its national network, extended its Sydney insolvency practice to Melbourne, Brisbane and Perth and opened two new suburban offices in Sydney’s western suburbs, at Penrith and Parramatta.

In the past 12 months, Mr Kenneth Glynn and Mr Matthew Schofield, former partners of international accounting firms, joined ShineWing and will be instrumental in the expansion of ShineWing Hall Chadwick to around 100 staff to meet expected growth in cross border Australia-China business.

Addressing Accounting and Auditing Uncertainty

Financial reporting and auditing is complex. ASIC, for example, has identified 16 areas of focused attention for 2010 Financial Reports (see GAAP Alert 30 June Special Edition). Peace of mind and risk minimisation comes from independent confirmation on your tentative decision, or a formal opinion from a creditable source. GAAP Consulting’s team of experts is available to assist preparers, governance, and auditors with:

• An independent reasonableness check on the decision intended to be made
• A formal opinion on the issue under consideration, and
• A review of draft financial statement for compliance with AASBs.

Email your issue to Colin Parker, Principal, GAAP Consulting, colin@gaap.com.au, or ring me on 0421 088 61. We have eight partner equivalents to resolve your financial reporting, auditing and superannuation needs. Our team consists of:

• Colin Parker (Financial Reporting and Forensic Accounting)
• David Sauer (Financial Reporting and Auditing)
• Justin Reid (Auditing and Ethics)
• Jim Dixon (Public and Not-for-Profit Sectors)
• Stephen LaGreca (Financial Reporting and Auditing)
• Susan Orchard (Superannuation and SMSF audits)
• Carmen Ridley (Financial Reporting) and
• Michael Cain (Financial Reporting, Auditing and Ethics).

Accounting

• 9 August ED 195 ‘Defined Benefit Plans (proposed amendments to AASB 119)’ –AASB
• 16 August ED 199 ‘Measurement Uncertainty Analysis Disclosure for Fair Value Measurements (Limited re-exposure of proposed disclosure)’ – AASB
• 6 September ED 2010/2 ‘Defined Benefit Plans – Proposed Amendments to IAS 19’ – IASB
• 30 September ED 2010/3 ‘Presentation of items of Other Comprehensive Income (Proposed amendments to IAS 1)’ – IASB
• 8 October ED 200A ‘Proposals to Harmonise Australian and New Zealand Standards in Relation to Entities Applying IFRSs as Adopted in Australia and New Zealand’ and ED 200B ‘Proposed Separate Disclosure Standards’ – AASB
• 22 October 2010 ED 2010/6 ‘Revenue from Contracts with Customers’ – IASB
• 30 November ED 2010/8 ‘Insurance Contracts’ – IASB

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