EDITION 31 | 15 August 2014

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Chartered Accountants news

Getting involved in Financial Literacy
Online audit training available
Social media
Financial reporting news
IASB updates Leases project information
IASB issues equity accounting amendments
New UK report on clear concise reporting
Working towards global accounting standards
International Public Sector news
Financial reporting roundup
Auditing and assurance news
ASIC moves to correct auditor registration
anomalies
Regulatory news
2014 Annual Information Statement guide
Professional and ethics news
Latest International Ethical News

Geraldine Margarey - Head of

Corporate Governance Policy Would a user pay regulator pay off?
READ ARTICLE >

Training & Development Highlight

Query of the Week

Assessing the reporting entity concept
Upcoming meetings
Exposure Drafts for Comment
Member Services

CHARTERED ACCOUNTANTS NEWS

> Getting involved in Financial Literacy
Improving Australians financial literacy is an objective of the Federal Government and one which
Chartered Accountants are well placed to support. For the second year Chartered Accountants Australia
and New Zealand will support the Governments Financial Literacy Strategy as a gold partner for
MoneySmart Week. MoneySmart Week is held in the first week of September each year and highlights
simple ways people are able to help themselves to take a closer look at everyday money management

and how to improve their own financial health. With only two weeks to go, members are encouraged to
investigate how they can be involved in the range of MoneySmart Week activities on offer.
As part of our involvement we are developing resources to help all Australians improve their financial
wellbeing. These can be found on the Financial Literacy pages of our website and we encourage our
members to share these resources with clients, family and friends, helping them on the road to financial
wellbeing. ASICs MoneySmart website also contains a range of tools, ideas, links and calculators to
assist consumers improve their financial literacy.
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> Online audit training available

Recordings of training sessions from the popular Practical Auditor series and Risk based audit series
conducted over the last 6 months are now available on an on demand basis to continue to assist
auditors perform quality audits this reporting season. The Practical auditor series cover auditing assets
values and impairment, professional scepticism and substantive analytical procedures. Session topics
from the Risk based audit series relevant to the risk assessment stages of an audit are available on
demand such as development of an overall audit strategy and understanding and evaluating the overall
control environment, with upcoming sessions relating to year end work including audit documentation
and evaluating audit evidence. The sessions are presented by a variety of members with specific
expertise in these topics and prices vary. More details and a list of all online audit training currently
available can be found on the website (click on the Audit and Assurance tab), or by contacting 1300 137
322 or service@charteredaccountantsanz.com.
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> Social media

Liz Stamford @LizStamford 13/08/14 11:24AM

First 2014 results coming out. Interesting media around key risks. Perhaps showing
direction for future audit reports? @Chartered_Accts
Liz Stamford @LizStamford 13/08/14 7:59AM
@IAASB_News Sept meeting - Audit Reporting and Key Audit Matters final version
@Chartered_Accts
Tweet with:
> Chartered Accountants
> Michael Fraser
> Liz Stamford

Michael Fraser @MichaelFraserCA 12/08/14 6:49PM

Integrated Reporting - Where are we at?
Michael Fraser @MichaelFraserCA 12/08/14 6:45PM
Interesting article on the US/IFRS relationship #financialreporting

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FINANCIAL REPORTING NEWS

> IASB updates Leases project information
A Project Update, and accompanying short project Podcast, prepared by board member Sue Lloyd, have
been released by the International Accounting Standards Board (IASB).
The update explains the nature and significance of the Leases project and summarises the most
important recent tentative decisions reached by the IASB and the US Financial Accounting Standards
Board (FASB) during their joint deliberations of the feedback to the revised ED, issued in May 2013. This
includes the IASBs tentative decision to revert to a single model for the recognition and presentation of

lease expenses as proposed in the original 2010 ED in the interests of reducing complexity. FASB has
not followed this move, continuing to prefer the dual model, contained in the 2013 ED, that distinguishes
between finance and operating leases. The IASB argues that this move will not significantly harm
convergence of this project in practice but will benefit stakeholders who expressed concern that the dual
model was too complex. The update also details the work that remains to be done to ensure the
standard is released in 2015 as planned.
More information on the project, including the Project Update and Podcast is available on the Leases
project page.
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> IASB issues equity accounting amendments

The IASB has issued a narrow scope amendment to IAS 27 Separate Financial Statements (eIFRS
subscription required) to restore the option to use equity accounting for investments in subsidiaries,
associates and joint ventures in an entitys separate financial statements. The amendments are
operative for financial years ending on or after 1 January 2016.
The option to use equity accounting in separate financial statements was removed from IAS 27 in 2003,
with this standard now only allowing cost or valuation in accordance with IFRS 9 Financial Instruments
as accounting treatments for these investments. However responses to the IASBs 2011 agenda
consultation revealed that the removal of this option was a barrier to the adoption of IFRS in some
jurisdictions. This is because legislative requirements for financial statements in these jurisdictions
required the use of the equity method. Accordingly the IASB has revised IAS 27 to help these
jurisdictions reducing their IFRS compliance costs without reducing the information available to
investors. Its plans were exposed as IASB ED 2013/10 Equity Method in Separate Financial Statements
(proposed amendments to IAS 27) and AASB ED 246 in December 2013 for a short 2 month comment
period due to the urgency of the issue.
More details can be found on the project page.
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> New UK report on clear concise reporting

The UK Financial Reporting Councils (FRC) Financial Reporting Lab has published a new report
Towards clear and concise reporting. Part of their clear and concise reporting initiative , the report
examines the progress UK companies have made in the last year on producing reports that provide
better information to investors and how they can continue to improve. The review of annual reports from
FTSE350 companies reveals that entities have particularly focused on the content investors and other
stakeholders want and how best to make sure it is communicated to them. Within the financial report
itself, entities have endeavoured to improve layout and cross referencing and better use materiality to
remove immaterial disclosures and improve the quality of significant accounting policy disclosures.
Illustrative examples indicate how this has been done. The report sets out a continuous process for
making annual reports clearer and more concise and provides practical steps which companies can use
in their own process of improvement.
More details can be found in the UK FRC's media release.
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> Working towards global accounting standards

The IASB has released the text of a speech by Vice Chairman Ian Mackintosh on the topic of Are global
accounting standards truly achievable? It argues that the highly interconnected nature of national capital

markets makes a compelling case for a global financial reporting language and discusses the IASBs
efforts to achieve this. They have also released an article on US GAAP and IFRS by Scott Taub, a
former member of IFRIC. The article discusses some commonly held misconceptions about the
relationship between the two.
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> International Public Sector news

The August IPSASB newsletter has been released, announcing the availability of its 2014 Handbook of
International Public Sector Accounting Pronouncements , and providing updates on its latest projects.
These include its new Improvements ED 55, the consultation paper on Government Business
Enterprises due for release soon and the progress on its conceptual framework project, which is due for
completion later this year. The IPSASB is also now on Twitter, enabling followers to keep up to date with
its activities. Follow them at @IPSASB_News.
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> Financial reporting roundup

The following international reporting items may be of interest to ANT readers:

AASB international update Issue 27, 28 and 29

New Canadian study links good governance and climate change disclosures
Japan recommends adoption of modified IFRS

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AUDITING AND ASSURANCE NEWS

> ASIC moves to correct auditor registration anomalies
Relief to deal with a recently identified potential technical defect in the auditor registration process has
been announced by the Australian Securities and Investments Commission (ASIC). The defect relates to
ASICs use of the audit competency standard for auditor registration purposes after 1 December 2005.
ASIC has released a new class order that will partially resolve the issue pending a legislative correction
by the Federal government. [CO 14/757] Relief in relation to the registration of auditors, which has
immediate effect, enables, to the maximum extent possible, affected auditors and their clients to
continue to conduct their affairs despite the potential defect. It confirms that acts and things that must be
done by registered company auditors may also be done by auditors whose registration may have been
adversely affected. The audit competency standard has also been reissued as ASIC Class Order [CO
14/784] Approval of auditing standard) so it can continue to be used. Remedial legislation is now being
prepared.
Auditors registered prior to 1 December 2005 and those registered since 1 December 2005 using the
hours based experience test are unaffected. More information is available in the ASIC media release.
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REGULATORY NEWS
> 2014 Annual Information Statement guide
Charities reporting to the Australian Charities and Not-for-profits Commission (ACNC) can now access a
new guide to assist them prepare the required 2014 Annual Information Statement (AIS). This statement
is the first that will require financial as well as general information about the charity, and in the case of
medium and large charities, lodgement of financial reports. The new guide explains what has changed
for 2014, and provides details on the differing questions that will apply to small, medium and large
charities, including how the types of charities are defined and how the information required maps to the
National Standard Chart of Accounts. Charities have 6 months after the end of their 2014 financial year
to lodge their 2014 AIS. In planning for the 2014 AIS charities may also find the new Reporting Guide for
ACNC registered charities, recently issued by Chartered Accountants Australia and New Zealand a
useful tool.
The latest Commissioner's column discusses the new ACNC guide and the 2014 reporting
arrangements, reminding those charities that already lodge financial reports with state and territory
regulators that these are acceptable for lodgement with the ACNC. It also discusses the progress of the
regional information sessions being conducted nationwide and continues to seek help in locating 3000
missing charities, ahead of the planned deregistration of the first 250. More details on both these types
of charities are contained in the ACNC notice of revocation.
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PROFESSIONAL AND ETHICS NEWS

> Latest International Ethical News
The August eNewsletter of the International Ethical Standards Board for Accountants (IESBA) is now
available. The newsletter provides detail on the progress on its major projects including long association
of senior audit personnel, non assurance services and its restructure and revision of the Code of Ethics
following its July meeting. It also discusses the release of the 2014 Handbook of the Code of Ethics for
Professional Accountants and ethics resources, discussions and news available on IFAC Global
Knowledge Gateway, the new digital hub for the global accountancy profession. The Code of Ethics is
also a topic for discussion at the World Congress of Accountants 2014 in Rome, Italy in November.
IESBA is also now on Twitter as a means of increasing its engagement with the public and with
professional accountants worldwide. Follow them at @Ethics_Board.
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QUERY OF THE WEEK

> Assessing the reporting entity concept
Q: My client determined that it was a non reporting entity several years ago and produces its
financial statements on this basis. As their auditor, how often should I be reassessing this
decision?
A: The requirement for an auditor to assess the appropriateness of the use of the reporting entity
concept as a basis for the preparation of financial statements is contained in ASA 210 Agreeing the
Terms of Audit Engagements.
Paragraph 6 of ASA 210 sets out the preconditions for the performance of audit work on an entitys

financial report which include that:

The auditor must determine whether the financial reporting framework to be applied in the
preparation of the financial report is acceptable, and
The auditor must obtain agreement from management that it acknowledges and understands its
responsibility for the preparation of the financial report in accordance with the applicable
financial reporting framework.

Further guidance on these requirements is contained in paragraphs A4 A15 of ASA 210.

In the case of recurring audits, paragraph 13 requires the auditor to assess whether circumstances
require the terms of the audit engagement to be revised. Identification of the applicable financial
reporting framework for the preparation of the financial report is specifically included as an audit
engagement term under paragraph 10. The importance of this decision is further emphasised by the
need to refer to the financial reporting framework in any audit report issued on special purpose financial
statements. Paragraph 14 of ASA 800 Special Considerations Audits of Financial Reports Prepared in
Accordance with Special Purpose Frameworks requires that the audit report includes an emphasis of
matter paragraph alerting users to the basis of preparation, thereby indicating that they may not be
suitable for another purpose. A typical heading for such a paragraph would be Basis of Accounting. For
more details on this issue see our previous Q and A on the topic of audit reports for special purpose
financial statements.
Determining the applicability of the reporting entity concept is initially the responsibility of management
since they are responsible for the preparation and presentation of the financial statements on which the
auditor gives his or her opinion. They must also specifically disclose the fact that they have prepared a
special purpose report in the notes to their financial statements in accordance with paragraph 9 of AASB
1054 Australian Additional Disclosures (formerly paragraph 15.4 of AASB 101 Presentation of Financial
Statements ). Auditors should discuss this decision with management prior to accepting the audit,
ensure that management clearly understands how the concept of reporting entity applies to their
particular and current circumstances and document the results of these discussions in order to support
the wording of the audit opinion.
An additional relevant requirement is contained in ASA 580 Written Representations which requires the
auditor to request management to provide a written representation that it has fulfilled its responsibility for
the preparation of the financial report in accordance with the applicable financial reporting framework,
that it has provided the auditor with all relevant information and access as agreed, and that all
transactions have been recorded and are reflected in the financial report. If management does not
provide this written representation, the auditor is obliged by paragraph 20 to disclaim the opinion.
Guidance on the application of the reporting entity concept is contained in SAC 1 Definition of the
Reporting Entity. The key determinant of a reporting entity, as set out in paragraph 19 is the existence
or not of users who are dependent on general purpose financial reports in order to satisfy their
information needs. Significant factors in this decision, as explained in paragraphs 19 and following will
be the degree of separation of ownership and control, the influence the entity has on third parties, and its
financial characteristics.
It is possible that changes in any of these factors can occur at any time and so paragraph 28 of SAC 1
recognises that the classification may not be constant and that the decision needs to be reassessed
when circumstances indicate a change in status is possible. Regular reassessment will ensure that the
financial statements being prepared, do meet the needs of the users for whom they are intended.
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UPCOMING MEETINGS
> Details on upcoming and previous meetings of the AASB, FRC, IASB and IPSASB. READ ARTICLE>
> Details on upcoming and previous meetings of the AUASB, FRC and IAASB. READ ARTICLE>
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EXPOSURE DRAFTS FOR COMMENT

View the domestic and international exposure drafts open for comment:
> Accounting exposure drafts open for comment
> Assurance exposure drafts open for comment
> Professional and ethical exposure drafts open for comment
Members are encouraged to prepare their own submission on any document and submit them to
techsubmissions@charteredaccountantsanz.com no later than one week before the closing date
shown.
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TRAINING & DEVELOPMENT HIGHLIGHT

Risk Based Audit Series Creating Clarity
Using a combination of the Institute of Chartered Accountants latest audit manual and toolkit to
demonstrate a risk based approach to audit, this series will cover the ABCs of a risk based audit
focusing specifically on NFPs and small private companies. By attending this series you will gain a
detailed overview on how to conduct a risk based audit appropriately, enabling you to achieve overall
audit efficiency while maintaining audit quality.
LiveOne, 2 September 2014 3 March 2015
Check out Navigate Online >
SEE ALL TRAINING >
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MEMBER SERVICES
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Zealand. Feedback on ANT is welcome to our enquiry service email address (see below).
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Members can use this service to make enquiries on auditing and financial reporting issues . It provides
general assistance and guidance on standards only. Members have the responsibility to apply their own
professional judgment. The service can be contacted on (02) 9290 5702 or via email in Australia and via
technical@nzica.com in New Zealand.
Professional Standards Enquiry Service
Queries on issues involving the application of APES requirements including independence, ethics, and
members trust accounts (APES 310) should be directed to the Professional Standards team enquiry
service. This service can be contacted on (02) 9290 5627 or via email In Australia or via 04 474 7895
or frank.owen@nzica.com for New Zealand.

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