GAAP ALERT 30 June 2010                           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)

INTRODUCTION

What are the New Rules to Consider for 30 June 2010?
Fundamental Changes to Differential Reporting Regime
ASIC’s 16 Areas of Focused Attention for 2010 Financial Reports
Superannuation Audits for Years Ending 30 June 2010
Adopting Clarity Auditing Standards Early
A Concluding Comment

What are the New Rules to Consider for 30 June 2010?
David Sauer GAAP Consulting Network, Financial Reporting Specialist

The list of new or revised accounting standards and interpretations applicable for periods ending 30 June 2010 is long. CFOs and Directors should filter the lists to identify which rules are relevant to them. They should also consider issues that may need to be addressed under existing accounting standards arising from the economic and financial conditions, such as going concern, asset valuation, asset impairment and reversals, and disclosure of critical estimates and assumptions. Also, the extent of required new disclosures will depend upon whether the statements are prepared in accordance with Tier 1 or Tier 2 of Australian Accounting Standards.

The main new standards and interpretations include.

Presentation of Financial Statements:

• Requires disclosure of comprehensive income for the total of revenue and expenses (non-owner changes in equity). This is shown either in a single statement of comprehensive income, or a separate income statement reporting profit and loss along with a statement of comprehensive income which includes the profit and loss and “other comprehensive income”. Note that a recent ED proposes allowing only the single statement
• Details disclosed of items of other comprehensive income items must include attributable income tax, and reclassifications to profit or loss
• Transactions with owners must be presented in a statement of changes in equity
• An extra statement of financial position must be presented at the beginning of the earliest comparative period when there is a change to opening balances arising from a change in accounting policy, prior period error, or reclassification, and
• Revised terminology and definitions, such as the titles of the primary statements and references to “outside profit and loss”.

Segments:

• Identification of segments moves away from possible dissection of the financial statements information to be sourced from internal management reporting. There may be a resulting need to improve the systems for gathering and controlling that reported information
• Disclosures are required only from entities which have issued or are issuing debt or equity securities traded in a public market
• There are considerably more disclosures to be made, including “entity-wide” disclosures irrespective of whether there are one or more segments
• Identification of operating segments is required to test impairment of goodwill under AASB 136 ‘Impairment of Assets’, or expenditure capitalised under AASB 6 ‘Exploration for and Evaluation of Mineral Resources’, irrespective of whether disclosures are made, and
• Operating segments may only be aggregated into reportable segments for disclosure under specified conditions.

Business Combinations:

• Replaces the parent entity approach to goodwill with an economic entity approach. Goodwill is only calculated once, on the occasion when control is obtained. There is a choice of recognising full or proportionate interests in goodwill
• In step acquisitions, it is necessary to recognise in income any change in the fair value of existing investments. That fair value forms part of the purchase consideration
• Fair value of consideration includes contingent consideration, which may be remeasured in future periods through profit and loss, and requires expensing of transaction costs Consideration must be dissected between parts relevant to the exchange transaction and parts belonging to other transactions, such as remuneration for future services
• There is expanded guidance on fair values of assets and liabilities acquired, and
• Scope is amended to cover businesses with inputs and processes, but not necessarily outputs. It may therefore include business combinations of not-for-profit entities and single assets.

Consolidated Financial:

• When a change in ownership interest in a subsidiary does not result in a loss of control, it is accounted for within equity of group accounts, resulting in no change to goodwill and no profit or loss will arise
• Losses incurred by the subsidiary are to be allocated between the controlling and non-controlling interests, even if the non-controlling equity investment is less than the losses, and
• When there is loss of control of a subsidiary, any retained interest is remeasured to fair value and does impact gain or loss recognised on disposal.

Cost of Investment in Subsidiary, Associate or Joint Venture:

• Removes definitions of the cost method for investments in subsidiaries, jointly controlled entities and associates
• When restructuring inserts a new parent, the cost of its investment in the subsidiary is not the fair value but is based on the carrying amount of equity by the previous parent
• An associated amendment to first-time adoption rules allows an election to use fair value or existing carrying value as the opening deemed cost of investment
• Dividends declared out of pre-acquisition profits are recognised as income, not deducted from the cost of investment, and
• New impairment indicators exist when a dividend is paid in excess of comprehensive income, or the investment exceeds carrying value of investee’s assets in group accounts.

Financial Instrument Disclosures – Fair Value and Liquidity:

• The basis of fair value measurement of financial instruments must be clearly identified, with any change disclosed along with reasons
• Amounts of instruments measured at fair value are to be disclosed by class within a three level hierarchy of fair values, with supporting details. Detailed disclosures are needed where material inputs to fair value methods are not market-based
• Additional disclosure to be made of financial liability maturities where liquidity risk is not managed on the basis of contractual maturity
• Derivative financial liabilities are to be separately disclosed with the maturity analysis to show expected maturities, and
• Financial guarantee contracts should be included in the maturity analysis for non-derivative financial liabilities whether or not they are recognised in the financial statements.

Amendments from First and Second Improvements Project:

• Investment property under construction is accounted for under AASB 140 ‘Investment Property’ rather than AASB 116 ‘Property, Plant and Equipment’
• Advertising and promotional expenditure is to be expensed when an entity has the right to receive goods or has received services
• Disclosures of key assumptions (including discount rate and growth rate) are required for impairment calculations made using discounted cash flows, irrespective of whether the calculation is of fair value less costs to sell or estimates of value in use
• Current/non-current classification may change due to amendments to the terms ‘short-term employee benefits’ and ‘other long-term employee benefits’, ‘due to be settled’ which replaces ‘fall due’
• Property, plant and equipment held for rental and then routinely sold (e.g. rental cars) are transferred to inventories after usage as a rental asset ceases. Proceeds of sale are recorded as revenue, rather than the profit on sale. Cash flows relating to these items are classified as operating flows
• When there is a plan to sell a controlling interest in a subsidiary, all of its assets and liabilities are classified as held for sale, and
• Guidance added to AASB 118 ‘Revenue’ on determining whether an entity is acting as principal or agent.

Borrowing Costs:

• Choice of expensing borrowing costs on qualifying assets is removed (with some public sector exceptions), and
• Scope is clarified as not applicable to qualifying assets measured at fair value, or inventories manufactured in large quantities on a repetitive basis.

The following interpretations also apply for the first time to financial statements for annual reporting periods ending on 30 June 2010: Interpretation 15 ‘Agreements for the Construction of Real Estate’, Interpretation 16 ‘Hedges of a Net Investment in a Foreign Operation’, Interpretation 17 ‘Distributions of Non-cash Assets to Owners’ and Interpretation 18 ‘Transfers of Assets from Customers’.

Preparers should also note these minor modifications to other standards:

• Share-based Payment - Vesting Conditions and Cancellations – provides new definitions and clarification of when failure to vest is accounted for as a cancellation
• Puttable Financial Instruments – permits classification as equity of some instruments that are only puttable in limited circumstances such as immediately prior to winding up, and
• Financial instruments: Eligible Hedged Items – deals with the designation of a one-sided risk.

Also, the Corporations Amendment (Corporate Reporting Reform) Act was passed by Federal Parliament in June with reforms including the abolition of parent entity accounts, and introduction of a tiered structure to reporting by companies limited by guarantee. A solvency basis for determining eligibility to make dividend payments is another major reform. There are reduced obligations to distribute annual reports for companies limited by guarantee, easing of the current restrictions for changing financial reporting periods, extension to listed registered schemes of directors’ report disclosure of a review of operations, and mandating of an IFRS compliance statement in the Directors’ Declaration.

ASIC’s 16 Areas of Focused Attention for 2010 Financial Reports
Michael Cain GAAP Consulting Network, Financial Reporting Specialist

ASIC released a number of suggested areas of focus for boards and those responsible for preparing 30 June 2010 financial reports. ASIC intends to review the financial reports of 350 entities identified for scrutiny, including 250 listed entities and 100 unlisted entities with large numbers of users. ASIC encourages companies and their auditors to continue to focus on issues such as going concern, asset impairment and fair value determination. In addition to these areas, all entities should focus on how they report their performance, including the appropriate use of any non-statutory profit measures, the quality of the operating and financial review, segment reporting, and the classification of items as other comprehensive income.

Non-statutory profit measures should not be presented in a misleading manner or detract from disclosure of statutory profit. The operating and financial review should be used to explain the statutory result in a meaningful and unbiased manner. New accounting standards deal with segment reporting and other comprehensive income. Increasing numbers of business combinations and a new accounting standard for this complex area, also make this another area of focus.

A summary of ASIC’s findings from reviews of 31 December 2009 financial reports and areas of focus for the upcoming reporting period are:
Going concern: Drawing attention to uncertainties concerning the ability of entities to continue as a going concern, the appropriateness of the going concern assumption in the preparation of financial reports continues to be an important area of focus. There are indications that credit may still be tight for some entities, and entities should continue to focus on the ability to refinance debt within the next 12 months and beyond. Entities should also review compliance with lending covenants.
Asset impairment: Directors should continue to focus on asset values at 30 June 2010. A number of issues of compliance with AASB 136 ‘Impairment of Assets’ identified in previous reviews continued to be prevalent. The most common of these were that: unrealistically optimistic discount and growth rates were used; cash flows were projected for more than five years in “value in use” calculations without any explanation justifying the longer period; cash-generating units (CGUs) used for testing goodwill impairment were not broken down sufficiently to allow accurate testing; no sensitivity analysis disclosed for changes in key assumptions; and a lack of disclosure of assumptions used in DCF calculations, particularly growth rates and discount rates. ASIC notes that given the complexity of this area, it is very important that directors employ an appropriate level of internal or external expertise.
Fair value of assets – Investment properties: Entities should ensure that values reflect current market conditions and are properly supported. A number of entities carrying investment properties at fair value failed to appropriately disclose the methods and significant assumptions applied in determining the fair values.
Fair value of assets – Financial assets: Where quoted prices in active markets are genuinely not available, fair values should be determined with the maximum use of market inputs and key assumptions should be disclosed.
Fair value of assets – Intangible assets: The criteria for an “active market” in accounting standards are strict, and ASIC has not yet seen intangible assets in Australia that would meet those criteria.
Off balance sheet exposures: ASIC continues to identify a small number of cases where entities should have consolidated other entities or should have included assets and liabilities that had been left off their balance sheets. Directors and audit committees should carefully review any off-balance sheet arrangements to ensure that they are correctly treated.
Financial instruments: Entities should ensure that there is sufficient disclosure to enable users of financial reports to evaluate the nature and extent of risks arising from financial instruments. Reviews of full year 31 December 2009 financial reports found a number of entities not disclosing debt maturities for liabilities subject to floating interest rates, as required by AASB 7.
AASB 9 ‘Financial Instruments’: Where 30 June 2010 financial reports have early adopted AASB 9 'Financial Instruments’, entities should ensure: they have correctly applied the transition provisions in the standard; where financial assets are measured at amortised cost, the classification is appropriate; and gains and losses on financial assets carried at fair value are correctly classified between income and expenses included in profit and loss and in “other comprehensive income”.
Current vs non-current classifications: Directors and audit committees should ensure that there are appropriate processes to ensure the correct classification and should review the classification having regard to their knowledge of the business and its funding.
Other issues related to current market conditions: Other focus areas include: adequate disclosure of significant judgements in applying accounting policies, and key assumptions and sources of estimation uncertainty; appropriate revenue recognition, expense recognition; and disclosure of subsequent events.
Non-statutory profits: The financial report should not include alternative profit measures. Disclosure of alternative profit measures in profit announcements should not be misleading and should not be given undue prominence compared to the statutory profit. There should be a reconciliation of any alternative profit to the statutory profit, with explanations of adjustments. Both positive and negative adjustments should be included and should be consistent from period to period.
Operating and financial review: ASIC encourages directors to focus on the quality of the operating and financial review.
Segment reporting: Entities should ensure that the segments reported reflect the segments reported internally to the chief operating decision maker.
Financial statement disclosure: ASIC will be reviewing financial reports to ensure compliance with the revised AASB 101 ‘Presentation of Financial Statements’, including the correct classification of items between profit and loss and other comprehensive income.
Business combinations: With a recent increase in the number of acquisitions, and new business combination and consolidation accounting standards, directors and auditors should focus on the accounting for these transactions, including appropriate treatments of reverse acquisitions and common control transactions.
Employee share plan loans: At 31 December 2009 some entities accounted for non-recourse loans provided to employees to buy shares in the entity as financial assets. Although the accounting for these loans will depend on the individual circumstances, the loans may represent options in substance and, where this is the case, the accounting should reflect this.

Fundamental Changes to Differential Reporting Regime
Carmen Ridley GAAP Consulting Network, Financial Reporting Specialist

What is happening to Differential Reporting Regime? There is a major project in progress at the AASB which will fundamentally change reporting requirements for a number of Australian entities. The AASB are reviewing the concept of reporting entities, general purpose financial statements and transaction-neutrality in light of the release of the IFRS for SME standard by the IASB.

The AASB proposal considers a set of financial statements to be general purpose if: they are publicly available; and they are either: prepared in accordance with Australian Accounting Standards under a legal mandate or held out to be so prepared; or required to be GPFSs under a legal mandate or held out to be GPFSs. This would mean that all entities who lodge their accounts on a public record; i.e. lodgement with ASIC or under the Associations Incorporations Act in their relevant state will have to prepare general purpose financial statements.

If your financial statements satisfy the definition of general purpose financial statements; then you need to determine whether your entity is publicly accountable. The factors used to determine publicly accountable is identical to that used by the IASB “A for-profit private sector entity is publicly accountable if: its debt or equity instruments are traded in a public market or it is in the process of issuing such instruments for trading in a public market; or It holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses. (i.e., banks, credit unions, insurance companies etc).”

Since the IASB standards do not cover not-for-profit entities, the AASB has also deemed certain entities to be publicly accountable; including: Federal, State and Territory Governments, and Local Governments; however they have announced some further research to look at publicly accountability in the public sector.

What is included in the general purpose financial statements? For publicly accountable entity GPFSs: All recognition and measurement criteria in the Australian Accounting Standards; All disclosure requirements from the Australian Accounting Standards; IFRS compliance statement. Non-publicly accountable entity GPFSs: All recognition and measurement criteria in the Australian Accounting Standards; All disclosure requirements from the AASB’s reduced disclosure regime.

What does this mean for entity’s currently preparing special purpose financial statements? All entities need to determine whether they should be preparing GPFS based on the definition above and whether they are publicly accountable entities.

Entities who are currently preparing special purpose financial statements who will be required to prepare general purpose financial statements under this regime, will need to prepare an implementation plan to ensure that their financial statements are in compliance with the new regime. This will involve steps such as:

• Reviewing the existing accounting policies to determine whether they are in compliance with Australian Accounting Standards
• Determining which elements of Accounting Standards are not currently being complied with; i.e. just disclosure requirements or some recognition and measurement requirements
• Training finance and other staff to inform them of the implications of adopting the Accounting Standards and to allow them to prepare and collate the relevant information, and
• Communicating the impacts of the revised numbers (if applicable) to stakeholders such as the bank and the Board of Directors.

The current level of compliance with Australian Accounting Standards will determine the level of change required and whether this change affects the reported financial position and performance or just the disclosures in the notes to the financial statements.

Where an entity is able to continue to prepare special purpose financial statements; the relevant accounting standards are those which are determined by the users of the financial statements.

When is this effective? The AASB have determined that the implementation of this project will be in two stages for those entities who will be required to prepare:

• Stage one – entities who are not publicly accountable who are currently preparing GPFS. The Reduced Disclosure standard will be released in order for these entities to adopt the reduced disclosures for their 30 June 2010 reporting period. These entities will see a reduced burden in the time taken to prepare their financial statements as less disclosures are needed and therefore less information needs to be collated, and
• Stage two – entities who are not publicly accountable who are currently preparing SPFS. Further research is being undertaken by the AASB prior to confirmation of the scope and applicability of the Reduced Disclosure Regime being released for these entities. However, the AASB have determined that the mandatory application date for entities to commence preparation of GPFS under the RDR to be financial years commencing 1 July 2013; i.e. 30 June 2014 year ends.

On 30 June, the AASB made AASB 1053 ‘Application of Tiers of Australian Accounting Standards’ and AASB 2010-2 ‘Amendment to Australian Accounting Standards arising from Reduced Disclosure Requirements’.  The differential reporting framework is operative for annual reporting periods beginning on or after 1 July 2013. Early adoption is available for entities with annual reporting periods beginning on or after 1 July 2009.

Next steps? In order to understand the likely impact of this project on your organisation; we advise you to undertake additional research to explore the details of the proposals. This can be performed by:

• Read and understand AASB 1053 ‘Application of Tiers of Australian Accounting Standards’ and AASB 2010-2 ‘Amendment to Australian Accounting Standards arising from Reduced Disclosure Requirements’
• Purchasing the ‘Reduced Disclosure Regime – A Practical Guide to Implementation’ (www.gaap.com.au) which has been written to assist entities work through the implications of this regime and disclosure checklists
• Organising in house training sessions from GAAP consulting
• Commissioning a professional advisor, such as GAAP consulting, to assist with your impact analysis implementation – note that from an independence perspective, your auditor may be unable to assist you.

Superannuation Audits for Years Ending 30 June 2010
Susan Orchard GAAP Consulting Network, Head of Superannuation

As we begin planning for the audit of SMSFs for 30 June 2010, it is imperative that firms ensure that staff and clients are aware of changes occurring in the audit environment. The changes impacting on the 2010 audit relate to clarity and SIS rulings issued by the ATO.

Funds created after 1 January 2010 are to be audited using the new ‘clarity’ auditing standards. As a result of these changes auditors have a number of actions to undertake. What must you do?

• Become familiar with the new requirements
• Update quality control manuals
• Ensure work programs correctly address the requirements, and
• Review audit documentation, in particular that associated with the planning and conclusion phases to ensure documentation is complete.

The ATO is currently undertaking a review of the audit report to ensure the statutory form complies with the standards. Auditors signing off an audit of a new fund prior to the issue of the ATO report will need to refer to the requirements of ASA 800. This standard will require auditors to include an other matter paragraph for audit reports on entities preparing special purpose financial reports. The scope of the compliance section of the report is not anticipated to change. Other documents which auditors prepare and are likely to require modification to comply with the clarity requirements are engagement letters, representation letters and management letters.

While the SIS sections and regulations audited have not changed there are a number of rulings which will impact on our interpretation of SIS. As a result of these interpretations auditors will need to change the focus of the compliance audit. The recent ATO rulings and other changes which will impact on the way the auditor approaches the audit are:
SMSFR 2010/1 – Section 66 Acquisition from Members: This ruling considers what is an asset, when does an acquisition occur and is the acquisition in compliance with Section 66. In particular, this will impact where the members/ trustee are involved in developing property or have property assets and carryout maintenance and repairs. The ruling indicates it is necessary to separate the provision of the service from the acquisition of the materials. While the provision of the service is permitted under section 66 the acquisition of materials used to perform the work is an acquisition from a related party that will breach Section 66. Auditors will need to change the audit process when assessing these transactions.
SMSFR 2010/2 – Section 17A(3)(b)(ii) Legal Personal Representative Acting as Trustee: This ruling looks at the application of this section in respect of a person holding an enduring power of attorney and acting as a trustee on behalf of a member. When auditing a fund which has a member appointing a legal personal representative to act on their behalf this ruling should be considered.
SMSFD 2010/1 – Section 62 Sole Purpose Test and Trauma Policies: This ruling considers when an SMSF can enter into a trauma policy and not breach the sole purpose test.
Excess Contributions Tax: The ATO has indicated that the tax compliance team will be focusing on contributions reporting and excess contributions tax. In the 2009 return the member was asked did the fund receive in-specie contributions during the year. This information will be used to select cases to ensure that the appropriate value was applied to assets. Auditors need to ensure that cut off testing and valuation testing is clear and finding documented such that the ATO can understand our decision making. We should be auditing these contributions and identifying potential post balance date transactions and where there are back dated transactions aimed at maximising contributions and avoiding excess contributions tax.
Reserves: There is an increasing amount of information encouraging the use of reserves in SMSFs. The auditors of these funds need to consider the implications on the SMSF audit. This includes both the reporting aspects in the financial statements and the SIS compliance obligations.

While the audit report is undergoing some minor wording changes to incorporate the clarity amendments, this is only one part of the change which is occurring. Auditors need to review and revise processes to ensure ongoing compliance with auditing standards and SIS in the year ahead.

Adopting Clarity Auditing Standards Early
Justin Reid, GAAP Consulting Network, Auditing and Professional Standards Specialist

Well 30 June is here again and it’s time for auditors to hit the ground running for the busiest time of the year. The last thing any of you want to think about right now is doing more work this audit season, however with the introduction of Clarity Auditing Standards to hit with full force later this year now is the opportune time to look at getting in early on the extra requirements.

But you were told you can’t adopt Clarity Auditing Standards early right? Wrong! It is absolutely true that the early adoption of Clarity Auditing Standards prior to their operative date is not allowed, however, as long as the auditor complies with the existing requirements of the current auditing standards then adopting any of the new or elevated requirements of the Clarity Auditing Standards will not be a breach.

The Clarity Auditing Standards arguably reflect “best practice” in auditing standards and in no way are they a backward step in the level of auditor requirements or responsibilities. To reduce the impact of applying the Clarity Auditing Standards in one hit for December or next June the following are some ways in which you may be able to start addressing the requirements this season.

Prepare Your Staff for the Changes: The first place to start with Clarity is to make sure your senior audit staff (Partners/Managers) are aware of the major changes that are coming. Many of the changes impact directly on the auditor client relationship, and your senior audit staff need to be aware of these as early as possible. Other changes will greatly impact upon the quality and sufficiency of the audit evidence that your audit staff will have to gather. Some of this information may well be collected for the first time at some clients so the earlier you are prepared the better.

Prepare Your Clients for the Changes: A significant number of the changes under Clarity Auditing Standards will directly impact upon your audit clients. Whilst the auditing standards cannot themselves impose direct responsibilities on management or those charged with governance, they do provide the auditor with clear requirements that impact the client. A stark example of this is that under Clarity if management does not provide written representations regarding certain matters then the auditor must disclaim an opinion on the financial report.

Practical Early Adoption Considerations: There are many practical early adoption consideration and these include:

• Preconditions for an Audit: Under ASA 210 ‘Agreeing the Terms of Audit Engagements’ certain preconditions must be met for the audit engagement to be conducted. For example, when establishing the engagement the auditor should ensure that management understands and acknowledges its responsibility for the preparation of the financial report and other responsibilities such as providing unrestricted access to the financial records etc. If your audit client fails to acknowledge these conditions at present or there is an expectation that management will not meet these in the future then you as auditor should consider the impact upon the audit engagement now, rather than wait for the issue to become a problem next year.
• Revenue Recognition Fraud Risk: Under ASA 240 ‘The Auditor’s Responsibilities Relating to Fraud in an Audit of a Financial Report’, the auditor is to presume that there are fraud risks associated with revenue recognition. This presumption under Clarity requires you as auditor to conduct specific audit procedures to reduce the associated audit risk to an acceptable level. If this fraud risk presumption is not applicable to your client then during this year’s engagement ensure you document the reasons why and pre-empt the requirement to do so next year.
• Communicating with Those Charged with Governance: Both ASA 260 “Communication with Those Charged with Governance’ and ASA 265 ‘Communicating Deficiencies in Internal Control to Those Charged with Governance’, place a significant number of requirements on auditors. Some examples include inter alia: The auditor’s views about significant qualitative aspects of the clients accounting practices; Significant difficulties encountered during the audit; Other matters significant to the oversight of the financial reporting process; Total fees charged for audit and non-audit services by the firm and network firms; Statement of compliance with ethical requirements, and Significant deficiencies in internal control identified during the audit, including a description of the deficiencies and an explanation of their potential effects. It is this last requirement to communicate significant deficiencies in internal control that may create the largest impost next year under Clarity. Given the potential deficiencies that some clients may have, the sooner you begin working with your clients to address these deficiencies the better. A good example is that under Clarity the absence of a risk assessment process by a client requires the auditor to evaluate whether this is a significant deficiency in internal control. Rather than have this discussion next year in the midst of all the other Clarity requirements, discuss the client’s risk assessment process this year and potentially avoid the issue.
• Related Parties: Under ASA 550 ‘Related Parties’ the auditor’s obligations to consider related party transactions is clear. Regardless of the need to disclose related party transactions in the financial statements, the auditor is obligated to obtain an understanding of related party relationships and transactions. There have been a significant number of new and elevated requirements added to the standard. For example, the engagement team must discuss the susceptibility of the financial report to material misstatement due to fraud or error from related parties. If in the past you have dismissed related parties as a low risk item for your audit client and performed little if no audit work, then take this audit season as an opportunity to identify related party relationships and transactions. Not only will you get a head start on the audit work required under Clarity you will also be highlighting to your audit client the risks associated with related party transactions.

The above considerations are a very small portion of the audit areas that you might like to consider this 30 June audit season when it comes to Clarity Auditing Standards. 

A Concluding Comment
Colin Parker Principal GAAP Consulting

There are many challenges for directors, CFOs, the accounting team, and auditors in the forthcoming reporting season. We trust that this Special 30 June Edition of GAAP Alert provides a convenient summary of the financial reporting, regulatory and audit issues that require consideration. Please feel free to forward this newsletter to a colleague or a client. 

The GAAP Consulting team is available to assist you in managing your financial reporting and audit risks though independent advice, training, financial statement compliance reviews, and our information products such as ‘The Reduced Disclosure Regime: A Practical Guide to Implementation’, ‘Clarity Auditing Standards – An Introduction’ and ‘Clarity Auditing Standards – The Detailed Analysis’.

Our colleagues ‘Financial Reporting Specialists’ have teamed up CCH with to bring you the new ‘Master Financial Statements’. This 800 page plus publication will assist accounting professionals in the preparation of upcoming financial statements and will become an invaluable resource every financial reporting period. I was delighted to be asked to prepare the Foreword and also that Carmen Ridley, Associate, GAAP Consulting Network, has made a valuable contribution as a co-author. The Master Financial Statements is available in book form or as an online updating subscription service to suit your needs. 

We have eight partner equivalents to provide independent financial reporting, auditing and superannuation solutions for your year-end financial reporting. 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)
• Carmen Ridley (Financial Reporting) and
• Michael Cain (Financial Reporting, Auditing and Ethics).

Please contact Colin Parker, Principal, GAAP Consulting (‘Excellence in Financial Reporting’), colin@gaap.com.au, 0421 088 611 or visit www.gaap.com.au to see how we can meet your needs.

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