Guidance to assist  not-for-profit entities in applying the new requirements AASB 10 – 12  (the new consolidation suite of standards),  has been released by the AASB and is currently available for comment.

The exposure draft can be accessed through the following link:

http://www.aasb.gov.au/admin/file/content105/c9/ACCED238_03-13.pdf

Whilst this guidance is not intended to change the requirements within the Accounting Standards, there are a number of illustrative examples and scenarios included to help a not-for-profit  / public sector entity interpret some of the terminology, such as returns and rights, in their context.

We encourage all not-for-profit entities and public sector entities and their auditors to review this proposed guidance and provide feedback.
 
Comments are due on 30 June 2013 and can either be sent directly to the AASB or can be discussed with Carmen Ridley, contact cridley@afrs.com.au.

The Australian Accounting Standards Board (AASB) has issued Exposure Draft ED 233 Australian Additional Disclosures – Investment Entities which provides constituents with the opportunity to comment on the IASB’s  recently issued exception to consolidation requirements for investment entities in the Australian context.  The exception to consolidation requires an entity that meets the investment entity criteria to account for controlled investees at fair value through profit or loss, rather than consolidate those investees.

Given concerns expressed by a number of constituents and AASB members about the potential impact of the loss of consolidated information on decision making, the AASB decided to delay adoption of the investment entity requirements in Australia until it undertakes further due process to consider additional compensating disclosures.  ED 233 proposes Australian additional disclosures for inclusion in AASB 1054 Australian Additional Disclosures in the form of consolidated financial statements comprising:

1.     a consolidated statement of profit or loss and other comprehensive income;
2.     a consolidated statement of financial position;
3.     a consolidated statement of changes in equity; and
4.     a consolidated statement of cash flows.

This exposure draft has caused lots of discussion around the AASB about whether an exception to a principle makes sense and which is more important – IFRS compliance or accounting principles. This exposure draft tries to find a middle ground by retained IFRS compliance but requiring additional disclosure, as if consolidation was still required.

If you have any comments, either positive or negative, on this proposal, we strongly encourage you to contact the AASB – either through a formal submission or via contacting Carmen Ridley on cridley@afrs.com.au who will happily take your thoughts to the Board.

The release of AASB 2012-10 Amendments to Australian Accounting Standards – Transition Guidance and Other Amendments – has deferred the mandatory application date of the following Accounting Standards for not-for-profit entities to annual reporting periods beginning on or after 1 January 2014.  For December year-ends this means that 31 December 2014 is the first financial report of adoption, (30 June 2015 for June year ends).

The AASB guidance to assist not-for-profit entities to interpret the requirements of AASB 10 in the not-for-profit context is expected to be released in the first half of 2013.

Note: Comparative information is required under the new standards and therefore entities will need to be able to prepare an opening balance sheet in compliance with the new suite of standards at 1 January 2013 or 1 July 2014, depending on their year end.

The accounting standards affected by this deferral are:

• AASB 10 – Consolidated Financial Statements
• AASB 11 – Joint Arrangements
• AASB 12 – Disclosure of Interests in Other Entities
• AASB 127 – Separate Financial Statements
• AASB 128 – Investments in Associates and Joint Ventures

If you require further information on these standards or the impact on you or your clients, please contact Carmen Ridley on cridley@afrs.com.au.

At the AASB meeting in December, the Board agreed to the withdrawal of Australian Interpretation 1039 Substantive Enactment of Major Tax Bills in Australia effective from 1 January 2013.

The interpretation was not deemed to be necessary since it would be rare that significant uncertainty about the passage of a major tax bill through both Houses of Parliament would be removed until it had actually passed through both houses.  The withdrawal is consistent with the policy of removing Australian specific pronouncements.

AASB 1054 Australian Additional Disclosures requires the financial statements to disclose audit fees. One of our other offices does tax work for my client. The offices of our firm share the same name but we are separate legal entities. Does the financial statements of my client need to disclose the fees paid for tax work to our other office?

AASB 1054 includes the following requirement:

10

An entity shall disclose fees to each auditor or reviewer, including any network firm, separately for:

(a) the audit or review of the financial statements; and
(b) all other services performed during the reporting period.

11

For paragraph 10(b) above, an entity shall describe the nature of other services.

There is specific reference to a network firm in the AASB 1054 requirement which is defined in APES 320 Quality Control for Firms as:

Network Firm or Network Assurance Practice means a Firm, practice or entity that belongs to a Network. Network means a larger structure:

(i) that is aimed at cooperation; and
(ii) that is clearly aimed at profit or cost-sharing or shares common ownership, control or management, common quality control policies and procedures, common business strategy, the use of a common brand name, or a significant part of professional resources.

If your other office shares the same name as you and you are operating as one firm through a shared website / increased penetration into the market etc so that the ‘man in the street’ would think you were the same firm, then the fees earned from the other offices would need to be disclosed within the audit fee disclosure note in the financial statements.

For further clarification of this requirement, contact Carmen Ridley, Principal AFRS (cridley@afrs.com.au).

Whilst the Australian Accounting Standards are available through the professional body handbooks, it can be confusing to find the correct version of the standard as we continue to see updated versions of standards issued, but not yet effective.

The easiest and most reliable method of ensuring  that you are using the correct versions of the accounting standards is to via the Australian Accounting Standards Board website.

• Go to www.aasb.gov.au
• Choose ‘search by reporting  period’  from the home page.
• Enter the reporting period you are working on, for example 1 January 2012 to 31 December 2012 .
• All Australian Accounting Standards relevant to that reporting period will then be shown.

If you want to look at the most recent issued standards (which will include those issued not yet effective)  the table of standards on the AASB website show all of these.

As a service to CaseWare Australia & New Zealand customers, we have also undertaken to have a handy summary of these Standards Issued Not Yet Effective on our FAQ database, via our website (dowloadable PDF format).

What type of transactions are covered by AASB 2 Share Based Payments?

Many entities believe that AASB 2 covers only options which are granted to employees, however the definition of share based payments is broader than options and has been reproduced below:

A share-based payment arrangement within the scope of AASB 2 is:

“An agreement between the entity (or another group entity or any shareholder of any group entity) and another party (including an employee) that entitles the other party to receive:

(a) cash or other assets of the entity for amounts that are based on the price (or value) of equity instruments (including shares or share options) of the entity or another group entity; or
(b) equity instruments (including shares or share options) of the entity, or another group entity, provided the specified vesting conditions, if any, are met.”

This means that the following are within the scope of AASB 2:

• Shares provided to employees;
• Options provided to employees;
• Bonuses provided to employees where the amount is based on future share price;
• Bonuses provided to employees, where shares are provided at a future date if certain criteria are satisfied.

Wherever a transaction involves an issue (or potential issue) of shares, or a bonus based on price or value of shares, then an entity needs to determine whether the transaction is within the scope of AASB 2.

Please contact Carmen Ridley on cridley@afrs.com.au if you have any questions on whether a transaction is within the scope of AASB 2.

The AASB held their 127th meeting on 31 October and 1 November and a summary of key points has been provided below.  Further information or discussion on these and other AASB business can be held with Carmen Ridley via email contact: cridley@afrs.com.au.

Investment entities
The IASB standard on investment entities which allow entities who satisfy the definition of an investment entity an exemption from consolidation for their investment and instead to show them at fair value, was released  on 31 October. There was discussion at the AASB regarding the approach in Australia to the release of this standard, with a number of Board members opposing an exception to the principle of control v IFRS compliance.

An exposure draft is being prepared which proposes that the exception be released in Australia. However, additional Australian specific disclosures to show the consolidated numbers would be required.

Other matters discussed:

• Superannuation entities, in particularly the measurement of accrued defined benefit liabilities of superannuation entities (including  disclosures) and specific public sector issues.
• IFRS 8 Operating Segments –the AASB discussed its submission to the IASB on the post implementation review of IFRS 8 (AASB 8).
• AASB 1038 Life Insurance Contracts – discussions re: potential amendments to AASB 1038 due to the implementation of AASB 10.
• Updates on the IASB projects on leases, revenue and financial instruments.

As you are finalising financial statements, it is a good time for a reminder about the disclosure of standards issued not yet effective.  The following entities are required to disclose the impact of standards issued which are not yet effective:

• Tier 1 general purpose financial statements
• Special purpose financial statements prepared in accordance with Chapter 2M of the Corporations Act 2001.

The disclosure needs to include all standards issued up to the date of issue of the financial statements (not just to the year end reporting date). There is a comprehensive, updated monthly list of the “Standards Issued Not Yet Effective” available from the Caseware Australia & New Zealand website at this link (FAQ page – FAQ 744).

On 10 September 2012, the AASB approved Australian Accounting Standard AASB 2012-6 Amendments to Australian Accounting Standards – Mandatory Effective Date of AASB 9 and Transition Disclosures which defers the mandatory date of AASB 9 Financial Instruments to annual reporting periods beginning on or after 1 January 2015.  This is consistent with the IASB timeframe and allows the IASB more time to release the remaining requirements of IFRS 9 (the international equivalent to AASB 9).

AASB 2012-6 applies to annual reporting periods beginning on or after 1 January 2013 but earlier application of the Standard is permitted, with some conditions.

AASB 2012-6 also modifies the relief from restating prior periods by amending AASB 7 Financial Instruments: Disclosures to require additional disclosures on transition from AASB 139 Financial Instruments: Recognition and Measurement to AASB 9 in some circumstances.

For more information, please contact:

Carmen Ridley
Principal, Australian Financial Reporting Solution
www.afrs.com.au
0438 029 867