GAAP ALERT No.25/2011 To read on line please click here

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

Front Page
IFRS 9 ‘Financial Instruments’ Effective Date Deferred to 2015
AASB’s Work Program Complements Work of the ACNC
BDOs NFP Survey Measures Reaction to Government Proposals

Financial Reporting
IASB and FASB Can Only Agree Offsetting Disclosure
Government Financial Reporting Improvements
Reporting Service Performance Information Consultation Paper
European Financial Reporting Surveillance
Implementation of IFRS 8 ‘Operating Segments’ European Enforcers Review
Public Sector Annual Improvements Standards
Financial Reporting by NFPs Added to FASB Agenda

Audit
AUASB Questions European Plan to Improve Audit Quality
Financial Instruments – Auditing Considerations

Ethics
Valuation Services Standard – Proposed Revisions

Superannuation
SMSF Auditor Independence
SMSF ATO Releases Statistical Summary

Regulation
New National Personal Property Securities Commences on 30 January
AFS Licence of Equititrust Ltd Suspended by ASIC
Insolvency Reform Package

GAAP Consulting
Spotlight: Carmen Ridley – Team Leader – Corporate Financial Reporting
GAAS Insight Audit Resource
GAAP Alert – A Year in Review
Follow Us on Twitter and LinkedIn

Front Page

IFRS 9 ‘Financial Instruments’ Effective Date Deferred to 2015

The IASB issued amendments to IFRS 9 ‘Financial Instruments’ that defer the mandatory effective date from 1 January 2013 to 1 January 2015. The AASB is expected to similarly defer AASB 9. The deferral will make it possible for all phases of the project to have the same mandatory effective date. The amendments also provide relief from the requirement to restate comparative financial statements for the effect of applying IFRS 9. This relief was originally only available to companies that chose to apply IFRS 9 prior to 2012. Instead, additional transition disclosures will be required to help investors understand the effect that the initial application of IFRS 9 has on the classification and measurement of financial instruments. Early application of IFRS 9 is still permitted.

AASB’s Work Program Complements Work of the ACNC

The Australian Charities and Not-for-profits Commission Implementation Taskforce recently issued a Discussion Paper on the key aspects of the Australian Charities and Not-for-profits Commission (ACNC), including the new reporting framework that it will administer. The AASB is investigating ways to improve, from a cost/benefit perspective, the quality of general purpose financial reports prepared by charities and other not-for-profit (NFP) entities, which should complement the work of the ACNC. Mr Kevin Stevenson, Chairman of the AASB, said “The AASB is actively working on various projects directly relevant to the NFP sector and will consult closely with the ACNC and the NFP sector.”

The NFP related projects the AASB currently has on its agenda are:
Accounting for Income of NFP Entities: The AASB is reviewing the current requirements by assessing an approach whereby income is not recognised as being earned until performance obligations are fulfilled. Under this approach, in some instances, the income would be recognised later than under current requirements. The AASB expects to issue an Exposure Draft of this approach in 2012
Control in the NFP Sector: This project seeks to address issues relating to control in the NFP sector, in particular, which entities a NFP entity should consolidate in its financial statements. The AASB expects to issue an Exposure Draft on its proposals in the first half of 2012
Disclosures by NFP Entities: The AASB recently introduced a second, significantly less onerous, Tier of general purpose financial reporting requirements (RDR), retaining the full recognition and measurement requirements of Australian Accounting Standards, but substantially reducing disclosure requirements. This second Tier of reporting is available to NFP entities (and certain for-profit entities) immediately, subject to the requirements that might be imposed by other regulators. In addition to this second Tier initiative, the AASB plans to further examine opportunities for reducing the disclosure burden on NFP entities, and
Service Performance Reporting: The AASB is considering the information needs of users of NFP financial reports and has identified information about service performance as an area needing focus. In particular, the AASB is considering issues related to the reporting of inputs, outputs, outcomes and performance measures; it is not just looking at financial information. The AASB is considering what role it should play in perhaps specifying mandatory or non-mandatory non-financial disclosures that would provide input for decision makers.

BDOs NFP Survey Measures Reaction to Government Proposals

BDO released results of a sector-wide survey of not-for-profit bodies to seek their reaction to the Federal Government’s proposed changes to the sector. The survey of 90 respondent shows approximately 40% of those surveyed believe proposed changes to their tax status will significantly increase their costs, reduce the services they deliver and have greater reliance on the government for funding as a result. The survey found broad support for the key initiatives of the establishment of the proposed ACNC and the introduction of a statutory definition of “charity” across all government agencies.

Key findings:

Just under 10% of respondents thought the proposed changes would be of benefit to their organisation
40% believe the changes would impose significant cost
29% believe administrative costs will rise
42% consider there will be a greater reliance on Government support
40% consider the changes will result in reduced provision of services
60% support or strongly support the introduction of the ACNC, and
Over 75% support or strongly support the concept of a statutory definition of “charity”.

According to James Winter, BDO Not-For-Profit Partner, the survey results point to a groundswell of concern among NFPs over the proposed removal of the current concessions applicable to an NFP’s commercial activities. “The commercial activities of a charity are vital to its ability to fund programs and provide services.

Proposals that limit these concessions may be both costly to implement and manage and at the same time reduce net funding available to the sector,” Mr Winter said. “Other consequences from the proposed changes will require NFP's to review their structures and constitutional arrangements, as well as potentially having a negative impact on sound capital and liquidity management,” he added.

Financial Reporting

IASB and FASB Can Only Agree Offsetting Disclosure

The IASB and FASB issued common disclosure requirements that are intended to help investors and other financial statement users to better assess the effect or potential effect of offsetting arrangements on a company’s financial position. The eligibility criteria for offsetting are different in IFRSs and US GAAP. Offsetting, otherwise known as netting, is the presentation of assets and liabilities as a single net amount in the statement of financial position. Unlike IFRSs, US GAAP allows companies the option to present net in their balance sheets derivatives that are subject to a legally enforceable netting arrangement with the same party where rights of set-off are only available in the event of default or bankruptcy.

To address these differences between IFRSs and US GAAP, in January 2011 the IASB and the FASB issued an exposure draft that proposed new criteria for netting that were narrower than the current conditions currently in US GAAP. However, in response to feedback from their respective stakeholders, the boards decided to retain their existing offsetting models and issue new disclosure requirements to allow investors to better compare financial statements prepared in accordance with IFRSs or US GAAP. The common disclosure requirements also improve transparency in the reporting of how companies mitigate credit risk, including disclosure of related collateral pledged or received.

Hans Hoogervorst, Chairman of the IASB, said: “These disclosures will help investors to bridge differences in the offsetting reporting requirements of IFRSs and US GAAP, while the additional requirements will also provide better information on how companies mitigate credit risk related to offsetting. That said, using disclosures to bridge differences in offsetting requirements was plan “B” for both boards.” Leslie F. Seidman, Chairman of the FASB, said “The expanded disclosures are responsive to the feedback we received from investors, who wanted to understand both the gross and the net amounts for items offset in accordance with legally enforceable netting arrangements. We are also requiring expanded information about the collateral pledged and held in these arrangements.”

Companies and other entities are required to apply the amendments for annual reporting periods beginning on or after 1 January 2013, and interim periods within those annual periods. The required disclosures should be provided retrospectively.

IASB also clarified its requirements for offsetting financial instruments by issuing ‘Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32)’. The amendments address inconsistencies in current practice when applying the offsetting criteria in IAS 32 ‘Financial Instruments: Presentation’. The amendments clarify: the meaning of ‘currently has a legally enforceable right of set-off’; and that some gross settlement systems may be considered equivalent to net settlement. The amendments are effective for annual periods beginning on or after 1 January 2014 and are required to be applied retrospectively.

Government Financial Reporting Improvements

The AASB issued AASB 2011-13 ‘Amendments to Australian Accounting Standard – Improvements to AASB 1049’, which clarifies some of the requirements in AASB 1049 ‘Whole of Government and General Government Sector Financial Reporting’. The amendments will improve the GAAP/GFS harmonisation financial reporting requirements of the Commonwealth, State and Territory Governments. The issue of AASB 2011-13 follows a post-implementation review of AASB 1049 that identified application issues not previously addressed in AASB 2011-3 ‘Amendments to Australian Accounting Standards – Orderly Adoption of Changes to the ABS GFS Manual and Related Amendments [AASB 1049]’. AASB 2011-13 applies to annual reporting periods beginning on or after 1 July 2012, and early adoption is permitted.

The main improvements to AASB 1049 reflected in AASB 2011-13 include:

key fiscal aggregates (which include net operating balance and net lending/(borrowing)) that are not measured in accordance with AASB 1049 or GFS can now be disclosed, as long as they are clearly distinguishable from the key fiscal aggregates that are required to be disclosed and measured in accordance with AASB 1049 or GFS, and
additional guidance and examples to clarify the application of GFS principles from a GAAP perspective in classifying income and expenses between transactions and other economic flows, especially for GAAP items that are treated differently under GFS.

Kevin Stevenson, Chairman of the AASB, said: “AASB 1049 is one of the specific public sector standards that place Australia at the leading edge in public sector financial reporting. The changes brought about by AASB 2011-13 provide greater clarity on the requirements of AASB 1049, leading to greater consistency and comparability in its applications by different jurisdictions – thus improving the quality of information for users of financial reports.”

Reporting Service Performance Information Consultation Paper

The IPSASB released a Consultation Paper ‘Reporting Service Performance’. The IPSASB considers that reporting service performance information is necessary to meet the objectives of financial reporting, which are to provide information that is useful to users of General Purpose Financial Reports for accountability and decision making. This project aims to present a principles-based approach to developing a consistent framework for public sector entities. The Consultation Paper is open for public comment until 15 March.

Various public sector entities around the world currently report service performance information. In practice, such reporting is diverse. The objective of the IPSASB’s service performance information project has been to improve the consistency and comparability of such information across jurisdictions and between entities. Overall, the Consultation Paper proposes a framework for reporting service performance information. The framework includes information on the scope of the service performance information reported, the public sector entity’s objectives, the achievement of those objectives, and a narrative discussion of the achievement of all the objectives. The Consultation Paper also proposes a standardised service performance information terminology and working definitions to enhance users’ understanding of service performance information reported as outlined in the proposed framework.

IPSASB Chair Andreas Bergmann stressed “Service performance information is essential for accountability for the efficient and effective use of resources, service provision, and achievement public sector entities’ objectives. Service performance reporting can provide financial and non-financial, as well as quantitative and qualitative, information about the achievement of service delivery objectives in the current reporting period, as well as anticipated future service delivery activities and resource needs.”

European Financial Reporting Surveillance

European Securities and Markets Authority (ESMA) published its second annual activity report on the enforcement of IFRS of European enforcers in 2010. The report gives a review of the 2010 activities of accounting enforcers within the European Economic Area (EEA), showing that overall the level of enforcement activity in 2010 was similar to 2009. About 1,700 financial reports were reviewed, of which 1,000 (compared to 1,200 in 2009) were subject to a full review and 700 (900 in 2009) to a partial review. These reviews resulted in around 700 (2009: 730) enforcement actions by national enforcers of which one out of five were subject to European co-ordination. Enforcers recognised that during a period of continuous deterioration of economic conditions, impact of risks and uncertainties on estimates and judgements used in the preparation of financial information are key for giving a proper understanding of the financial information.

Steven Maijoor, Chair of ESMA, noted: “The main objective of financial reporting is to provide transparency on the financial performance and position of a company to investors and the wider public. Enforcing the correct application of international accounting standards is a key regulatory tool to ensure this. This report shows the important role ESMA plays in the European co-ordination of coherent enforcement through co-ordinating the numerous actions taken by national competent authorities. With increased responsibilities assigned, ESMA, together with national competent authorities will continue to further improve its activities ensuring consistent application of IFRS in Europe and ensure that accurate, clear and consistent information is provided to investors.”

The main issues arising from the accounts subject to partial review (700 accounts) and full review (1000 accounts) representing 10% and respectively 15% of all listed entities in the EEA were in relation to the following: impairment of assets, financial instruments disclosure, operating segments, going concern, and current/ non-current classification of liabilities. Other accounting areas identified by enforcers and discussed within EECS were: disclosure on impairment of non-financial assets, measurement and presentation of non-current assets held for sale and discontinued operations or aspects related to share-based payments.

The enforcement actions taken by enforcers as a result of their reviews included actions requiring the issuance of revised financial statements, corrective notes or other public announcement. Around 240 of the actions taken by enforcers required public corrective notes, or, in some cases issuance of revised financial statements.

Implementation of IFRS 8 ‘Operating Segments’ European Enforcers Review

European Securities and Markets Authority released a Report on its post-implementation review of IFRS 8 ‘Operating Segments’. The Report provides the main findings of the review of European enforcers on the implementation of IFRS 8 ‘Operating Segments’ and ESMA’s tentative recommendations to enhance the application of the standard. On the basis of this review, the overall conclusion reached by European enforcers is that:

the implementation of IFRS 8 resulted in a fairly similar level of information compared to its predecessor IAS 14, and
there is homogeneity in the issues faced by European enforcers when enforcing this standard. This stems from a combination of weaknesses in the standard and a failure to fully comply with its requirements by issuers.

Public Sector Annual Improvements Standards

The IPSASB published ‘Improvements to IPSASS 2011’. The 2011 amendments relate primarily to improving consistency between the standards. They do not represent substantive revisions to existing IPSASs.

The IPSASB’s improvements project is modelled on the IASB’s annual update program. Improvements are made to existing IPSASs to maintain alignment with IFRS, as well as other general improvements. The amendments made by ‘Improvements to IPSASs 2011’ are applied for annual financial statements covering periods beginning on or after 1 January 2013, but may be applied earlier.

Financial Reporting by NFPs Added to FASB Agenda

Ms Leslie F. Seidman, chairman of the US FASB announced the addition of two agenda projects, a standard-setting project and a research project, intended to improve financial reporting of not-for-profit entities. The objectives of these projects encompass suggestions received by the Board from its Not-for-Profit Advisory Committee at the Committee’s September 2011 meeting.

“The FASB shares the Committee’s belief that, while sound, the existing standards for financial statements of not-for-profit organisations can be updated and improved to provide better information to donors, creditors, and others,” stated Ms. Seidman. “As discussed at today’s Board meeting, FASB members agree it is time to revisit and refresh the not-for-profit financial reporting model, which is nearly two decades old.”

The standard-setting project will focus on the financial statements and related notes that are unique to NFPs. It will re-examine existing standards for financial statement presentation by NFPs with a focus on improving the current net asset classification scheme and information provided in financial statements and notes about an organisation’s liquidity, financial performance, and cash flows.

The research project will study other means of communication that NFPs currently use in telling their financial story. Specifically, the project will:

review best practices followed by NFPs in this area and how such communications enhance the understanding of donors, creditors, and other stakeholders about the financial health and performance of the entity, and
determine whether the Board, through its leadership or standard-setting efforts, can contribute to promoting such communications.

The Not-for-Profit Advisory Committee, an advisory group to the FASB recommended changes in accounting rules that would enable NFPs to better report and explain their finances to donors and other interested parties. Key recommendations advanced by the FASB’s Not-for Profit Advisory Committee (NAC) included:

revisiting current net asset classifications, and how they may be relabelled or redefined, in conjunction with improving how liquidity is portrayed in a NFP’s statement of financial position and related notes
improving the statements of activities and cash flows to more clearly communicate financial performance
creating a framework for NFP directors and managers to provide commentary and analysis about the entity’s financial health and operations, somewhat similar to the “Management Discussion and Analysis” provided by publicly traded companies in their annual reports, to help them bring context to their financial story
streamlining, where possible, existing not-for-profit-specific disclosure requirements to improve their relevance and clarity.

The recommendation to revisit how net assets are classified in a not-for-profit’s financial statements is intended to help to clarify terms that commonly cause confusion, including the definition of an “unrestricted” net asset. This is a critical area for NFPs, since net asset classes are used by many credit analysts and other users to determine an entity’s liquidity and liquidity risks. The issue of liquidity risk is also being addressed by the FASB in its project on accounting for financial instruments.

Finally, the recommendation to improve how information is aggregated and classified within the statement of activities, and to create better cohesiveness between the financial statements, covers ground being considered by the FASB and IASB in their joint project on financial statement presentation for business enterprises. NAC members agreed that more clearly segregating and defining “operating” versus “non-operating” activities, for example, would result in greater comparability in financial reporting of NFPs.

In addition to the recommendations described above, the NAC identified potential ways to create greater awareness among NFPs on ways to improve their financial reporting that are currently permitted by U.S. GAAP.

Audit

AUASB Questions European Plan to Improve Audit Quality

AUASB questioned whether proposed changes to European audit regulation will achieve their stated objective of improving audit quality. The European Commission recently issued a draft proposal on ‘Restoring confidence in financial statements’ that outlined a range of measures that, if adopted by member countries, will significantly change the way audit firms are permitted to operate in Europe.

AUASB Chairman Merran Kelsall said: “A number of the EC recommendations, such as the mandatory separation of auditing and non-auditing services, and mandatory audit firm rotation, are contentious and likely to meet significant resistance from the accounting profession.” “Any measure that results in arbitrary structural changes to the international accounting firms is potentially counterproductive to audit quality.”

However, she welcomed the European Union moving towards the mandatory introduction of international audit standards, issued by the International Auditing and Assurance Standards Board and adopted in Australia in 2010. “As the auditing standards setter in Australia, we welcome any measure that will create a more consistent, robust and reliable system internationally for the delivery of high quality audit services.” “The confidence of capital markets in the standards that govern audit practitioners and statutory financial reporting services is essential to maintaining a stable yet dynamic audit market.”

“Treasury conducted a strategic review of ‘Audit Quality in Australia’ in 2010 and concluded that our system is already sound and robust.” The AUASB looks forward to participating in a robust debate with standard setters internationally and with the profession in Australia on the issues raised by the EC proposal.

Financial Instruments – Auditing Considerations

The International Auditing and Assurance Standards Board (IAASB) released International Auditing Practice Note (IAPN) 1000 ‘Special Considerations in Auditing Financial Instruments’, to provide important practical assistance to auditors when addressing valuation and other considerations pertaining to financial instruments. Financial instruments is an area of financial reporting involving complex issues and which has come under particular focus due to the recent difficult financial market conditions.

“The IAASB remains focused on supporting financial stability and high-quality financial reporting by continuing to help enhance the consistency of audits. Accordingly, IAPN 1000 provides important material that will assist auditors in understanding the nature of, and risks associated with, financial instruments, and the different valuation techniques and types of controls that may be used by entities in relation to them. It then highlights important audit considerations that may be relevant throughout the audit process,” noted Prof. Arnold Schilder, IAASB Chairman. “The IAPN is relevant to audits of entities of all sizes, as all entities may be subject to risks of material misstatement when using financial instruments.”

IAPNs are non-authoritative documents that do not impose additional requirements on auditors beyond those included in the International Standards on Auditing (ISAs), nor do they change the auditor’s responsibility to comply with all ISAs relevant to the audit. In finalising IAPN 1000, the IAASB evaluated the clarity and appropriateness of the authority of the existing International Auditing Practice Statements (IAPSs). The IAASB decided to withdraw the existing category of pronouncements known as IAPSs and to establish IAPN. Accordingly, the six existing IAPSs were also withdrawn as the IAASB determined that they were largely outdated and inconsistent with the text of the clarified ISAs. The IAASB will be considering in its forward plans matters covered in some of the extant IAPSs, for example the relationship between auditors and banking supervisors, as it develops standards, new IAPNs, or other forms of guidance in the future,” commented Prof. Schilder.

Ethics

Valuation Services Standard – Proposed Revisions

The Accounting Professional and Ethical Standards Board (APESB) is seeking feedback from stakeholders on an exposure draft in respect of proposed revisions to the existing APES 225 ‘Valuation Services’. The draft proposes changes, which provide additional guidance in respect of the three types of valuation services engagements and, particularly, the difference between a full scope valuation and a limited scope valuation engagement.

The proposal will also see the introduction of new professional obligations in respect engagement terms, which will require members to disclose:

definitions of the three different types of valuation services engagements and the identification of the type of valuation service engagement the Member is performing
the relevant limitations of the valuation service engagement, and
compliance with APES 225 ‘Valuation Services’.

Also a schematic diagram and new examples have been developed to depict the difference between different types of valuation service engagements and the demarcation between different types of engagements.

APESB Chair Kate Spargo says there are a number of factors professional accountants will need to consider. “Members will need to determine whether their valuation is full or limited scope, and be able to substantiate this on an objective basis. The new requirements will also necessitate amendments to engagement letters and reporting obligations,” she says. “The proposed changes will provide further clarity to valuation practitioners and improve the engagement management process,” Ms Spargo concluded. Feedback on the proposed changes should be received by the APESB by 24 February.

Superannuation

SMSF Auditor Independence

In its response to the Super System Review, Stronger Super the government agreed with the recommendation that ASIC should in consultation with stakeholders determine whether existing auditor independence standards required revision. Subsequent to this the Minister announced that the APESB would be charged with developing a pronouncement that specifies the requirements/guidance for SMSF auditors on how to apply APES 110 ‘Code of Ethics for Professional Accountants’ in the SMSF context. It is anticipated that this will follow a principles based approach and that mandatory outsourcing of audits will not be introduced.

SMSF ATO Releases Statistical Summary

As part of the Super System Review, ‘A Statistical Summary of Self-Managed Superannuation Funds’ was released by ATO. The majority of the Self-Managed Superannuation Funds (SMSFs) information included in that paper was sourced from both publicly available and previously unpublished ATO data. This publication updates the Super System Review statistical summary using 2008–09 year data. ATO proposes to provide annual updates.

Regulation

New National Personal Property Securities Commences on 30 January

From Monday 30 January 2012, the Australian Register of Company Charges will be closed and all company charges (or security interests as they will be known) must be lodged with the PPS Register. The PPS Register is the result of a new Commonwealth law, the ‘Personal Property Securities Act 2009’ (Cth) and will replace numerous existing asset registers of security interests, including state and territory registers of encumbered vehicles and vehicle securities and Australian Government registers including the Australian Register of Company Charges, the Australian Register of Ships (mortgages only) and the Fisheries Register.

AFS Licence of Equititrust Ltd Suspended by ASIC

ASIC suspended the Australian financial services licence of Gold Coast-based Equititrust Ltd for 12 months, for failing to comply with a number of key obligations as a financial services licensee. Equititrust is the responsible entity of the Equititrust Income Fund (EIF) and the Equititrust Priority Class Income Fund (EPCIF). ASIC found that Equititrust has breached its legal obligations and licence conditions in that it failed to:

comply with its obligation to maintain at least $5million net tangible assets
prepare and lodge annual audited financial statements and to provide annual financial reports to members of EIF and EPCIF for the financial year ended 30 June 2011, and
lodge compliance plan audits for EIF and EPCIF for the financial year ended 30 June 2011.

Equititrust is the responsible entity of EIF, a registered managed investment scheme whose primary business is lending retail investors’ pooled funds for property development and taking mortgages over the property. Equititrust is also the responsible entity of EPCIF, another registered scheme, which is dormant. These schemes are to be wound up in accordance with orders made in the Supreme Court of Queensland on 21 November 2011. The suspension of Equititrust’s AFS licence follows earlier action by ASIC to preserve the status quo of the schemes. The suspension of Equititrust’s AFS licence is part of ASIC’s ongoing efforts to improve standards across the financial services industry.

“The compliance of Australian financial services licensees with their obligations is central to the informed and confident participation of consumers in the financial services markets”, ASIC Chairman, Mr Greg Medcraft, said. ASIC may revoke the suspension in the event Equititrust meets its legal obligations and licence conditions. Equititrust has the right to appeal to the Administrative Appeals Tribunal for a review of ASIC’s decision.

Insolvency Reform Package

Attorney-General Robert McClelland and Parliamentary Secretary to the Treasurer David Bradbury announced a package of reforms to modernise and harmonise Australia's insolvency industry. ‘A Modernisation and Harmonisation of the Regulatory Framework Applying to Insolvency Practitioners in Australia’ contains a range of proposals to reform the way insolvency professionals are registered, disciplined and regulated. These proposals will go out to public consultation and form the basis of draft legislation. Consultation on the proposals paper closes on 3 February.

The proposals will provide for a more robust regulatory regime, a more efficient and transparent insolvency industry that delivers a better outcome for creditors, and greater powers for creditors to remove practitioners and curb excessive fees. “This reform package seeks to ensure that Australia's insolvency industry is underpinned by professionalism, efficiency and improved outcomes for creditors,” said Mr McClelland. “Recent high-profile cases of misconduct by corporate insolvency practitioners have had a profound impact on confidence in the insolvency industry,” said Mr Bradbury.

Key reform proposals include:

new powers for ASIC to compel practitioners to answer questions about an administration or their conduct
changes to the standards of entry to require practitioners to have undertaken insolvency specific education and a new registration and disciplinary system based on the personal insolvency regime
changes to the way information is distributed to creditors and a new right for creditors to remove a practitioner
giving creditors the power to pass a resolution capping practitioner fees, and
removing conflicts of interest by preventing practitioners and their related parties from deriving a benefit from the use of disbursements without the approval of creditors.

As part of the reform package, from 1 July 2012, insolvency notices will be required to be posted to a new website to be established as part of the ASIC website, replacing 53,000 newspaper advertisements over the next four years and making it easier for creditors to access information. This measure is expected to save the industry around $15 million over the next four years. The Government will be providing the ASIC with $11.4 million in additional funding to strengthen its surveillance and discipline of practitioners.

GAAP Consulting

Spotlight: Carmen Ridley – Team Leader – Corporate Financial Reporting

Carmen Ridley is the team leader for Corporate Financial Reporting within the GAAP Consulting Network and is passionate about assisting entities and their auditors to understand the accounting implications of business transactions. She was previously an Associate Director in Grant Thornton’s National Audit Support Team and has many years’ experience working both as an external auditor and in the technical teams of a number of accounting firms. Carmen started her own consulting business in January 2010 when her son started school and joined the GAAP Consulting Network in 2011. She is involved in financial reporting training, accounting standards interpretations in relation to particular transactions, financial statement preparation and independent quality reviews of financial statements.

Carmen is a member of the Institute of Chartered Accountants in England and Wales and the Institute of Chartered Accountants in Australia and she also has her Certificate IV in Training and Assessment. Carmen is a regular presenter in financial reporting and also the author of Reduced Disclosure Regime: A Practical Guide.

GAAS Insight Audit Resource

We launched our audit resource ‘GAAS Insight’ earlier this year. ‘GAAS Insight’ with its analysis, implementation guidance and action items is the type of information an audit partner and the audit team would like to see the ‘in-house’ technical team produce to keep the practice informed. ‘GAAS Insight’ saves time and money and, importantly, is written by the GAAP Consulting experts. To date seven topics, and over 90 pages of material, have been covered:

Auditing Fundraising Revenue
Dealing with Client Monies
SMSF Auditing Changes for the 2010/11 Year End
ASIC Audit Inspection Program Report
Risk Management for Firms
Agreed-Upon Procedures Engagements, and
Corporations Legislation Amendment (Audit Enhancement) Bill 2011.

GAAP Alert – A Year in Review

The GAAP Consulting team has brought to you 25 GAAP Alerts with over 500 news items in 250 plus pages and 130,000 words during 2011. Coupled with our tweets, we continue to keep your informed about Australian and international financial reporting, auditing and corporate governance developments.

Follow Us on Twitter and LinkedIn

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Consulting, Training, Information Services

While all reasonable care has been taken in the preparation of information contained in this newsletter, we take no responsibility for any action(s) taken on the basis of information contained herein or for any errors or omissions in that information. We expressly disclaim any liability whatsoever, to any person in relation to any reliance, in whole or in part, on such information. Readers should consult a suitably qualified professional adviser to obtain advice tailored to their particular circumstances.

GAAP ALERT No.25/2011 To read on line please click here

Public Sector Annual Improvements StandardsThe IPSASB published ‘Improvements to IPSASS 2011’. The 2011 amendments relate primarily to improving consistency between the standards. They do not represent substantive revisions to existing IPSASs.

Public Sector Annual Improvements Standards

The IPSASB published ‘Improvements to IPSASS 2011’. The 2011 amendments relate primarily to improving consistency between the standards. They do not represent substantive revisions to existing IPSASs.