EDITION 38 | 28 September 2012

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Institute news Inquiry into family business Financial Reporting news Is prudence dead in accounting? IFRIC meeting update Improving net debt reconciliations Audit and Assurance news Planned EU audit reforms criticised A Canadian perspective on audit quality Regulatory news FRC meeting 28 August Sir David Tweedie to lead IVSC CAMAC inquiry into AGMs Professional and Ethics news APESB compiled Code of Ethics Proposed guidance on Valuation Services Sustainability news IFAC sustainability reporting resources Query of the Week Disclosure of audit fees Exposure Drafts for Comment Upcoming meetings Contact the Team

25 September 2012 | Blog with Lee White - Chief Executive OfficerAudit in the Asian capital markets
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Training & Development > Face to Face > LiveOne - Online training sessions

INSTITUTE NEWS
> Inquiry into family business The Institute is seeking member feedback for its submission into the Parliamentary Joint Committee on Corporations and Financial Services inquiry into family business in Australia. The inquiry, announced in August 2012, will inquire into and report on the operation of Australia's family business sector, with particular reference to: The definition of 'family business' The availability and reliability of information and statistics about family business in Australia

The contribution of family business to the Australian economy, in terms of financial, social, employment, innovation and sustainability outcomes The structural, cultural, organisational, technological, geographical and governance challenges facing family business The role of family trusts in facilitating family business The access to and the cost of finance and insurance for family business and The responses of family business to the challenges of the GFC and post GFC resilience. The Institute invites contributions from members with an interest in this subject for possible inclusion in our submission. These should be emailed to Jim Malins by 19 October. Submissions to the committee close on 31 October 2012, with a report due in February 2013.
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FINANCIAL REPORTING NEWS

> Is prudence dead in accounting? The Concept of Prudence: dead or alive? was the topic for a recent speech by IASB chairman Hans Hoogervorst to the Federation of European Accountants (FEE) Conference on Corporate Reporting of the Future in Brussels, Belgium. The chairmans speech focused on the removal of the concept of prudence from the IASBs Conceptual Framework in 2010, a controversial decision which saw it replaced by neutrality as a necessary characteristic of financial information. In his remarks he explained the IASBs thinking and argued that, despite its removal, the basic and very important principles underlying the concept of prudence remain clearly evident throughout International Financial Reporting Standards. He also explained the important role prudence is playing in the development of new Standards, outlining the challenges that the IASB faces in building sufficient levels of caution in developing rules for topics such as Financial Instruments, with particular regard to impairment.
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> IFRIC meeting update The IFRS Interpretations Committee (IFRIC) has released the latest IFRIC update detailing the deliberations from their meeting held on 18 and 19 September 2012. A summary of the key issues discussed is set out below. Current agenda items The Committee discussed the following issues making a range of tentative decisions set out in the update but discussions are ongoing: IAS 16 Property, Plant and Equipment, IAS 38 Intangible Assets and IFRIC 12 Service Concession ArrangementsVariable payments for the separate acquisition of PPE and intangible assets and IAS 19 Employee BenefitsAccounting for contribution-based promises, which is reconsideration Draft Interpretation D9 Employee Benefit Plans with a Promised Return on Contributions or Notional Contributions. Final agenda decisions The Committee has formally rejected the following issues from inclusion on its agenda, with reasons explained in the update IAS 16 Property, Plant and Equipment, IAS 38 Intangible Assets and IAS 17 Leases appropriate treatment of a purchase of right to use land IAS 19 Employee Benefitsa request for clarification of the 2011 amendments on risk sharing features as they apply to contribution based promises

IAS 39 Financial Instruments: Recognition and Measurement two separate issues associated with the restructuring of Greek government bonds, concerning derecognition and GDP linked securities. Tentative agenda decisions The Committee has tentatively decided that the following issues will not be added to the agenda. If constituents disagree or consider that the explanations may contribute to divergent practices, comments can be emailed to IFRIC by 26 November 2012. IFRS 3 Business Combinationscontingent payments made to selling shareholders that remain as employees IAS 27 Consolidated and Separate Financial Statements and IFRS 10 Consolidated Financial Statementsaccounting for the purchase of a non-controlling interest by the controlling shareholder when the consideration includes non-cash items IAS 28 Investment in Associatesimpairment of investments in associates in separate financial statements IAS 39 Financial Instruments: Recognition and Measurementthe presentation of income and expenses arising on financial instruments with a negative yield in the statement of comprehensive income.
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> Improving net debt reconciliations Improving debt and cash flow reporting via net debt reconciliations is the topic addressed by the first of a series of reports issued by the UK Financial Reporting Councils Financial Reporting Lab (FRL). The FRL brings together UK companies and investors to identify practical solutions to current reporting issues and is the next stage in the FRCs broader work to progress the removal of unnecessary disclosures in financial reports, highlighted in its Cutting clutter report issued in 2011. This first FRL report on net debt reconciliations, which reconcile net cash flows to net debt, is one of four debt/cash flow reporting issues that have been identified for investigation by the FRL. The other three areas are cash flow statements, economic obligations associated with debt terms and debt maturity schedules. Reports on these topics are due for issue later this year. The net debt reconciliation report involved 5 UK companies, BT Group, National Grid, Royal Dutch Shell, Vodafone and Xchanging, who assisted the Lab to identify their voluntary disclosure practices in this area and facilitated discussions with investors on this topic. The report shows how some companies are defining net debt and disclosing various cash and non-cash movements in net debt that might not otherwise be apparent from their financial reports. It indicates that these voluntary disclosures improve investor confidence around issues relating to the capital structure and the enterprise value of a company attributable to net debt versus shares. More information about the lab and its work is available from the UK FRC media release.
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AUDIT AND ASSURANCE NEWS

> Planned EU audit reforms criticised The European Unions (EU) plans for significant audit reform to inject more competition into the European audit market, should be watered down according to the European Parliaments Legal Affairs Committee. British MP Sajjad Karim, has recommended the following in in his draft report: Auditor rotation should only have to take place every 25 years, rather than the 6 years currently proposed Caps that call for splitting up audit firms if their market share grows beyond a certain size should be scrapped The extent of the ban on non audit services that can be provided to clients by audit forms should be reduced e.g. tax consulting and other audit related services would be permitted and

The proposal for the European Securities and Markets Authority (ESMA) to develop a "Quality Certificate" for auditors so that companies have fewer worries about using less known auditors should be abandoned. Debate on the reforms continue with the European Parliament and EU countries having the final say on what legislation is finally passed. The debate in the UK on this topic is also continuing. The UK Competition Commission is due to reveal the findings of its investigations into the UK audit market later this year.
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> A Canadian perspective on audit quality The Canadian Public Accountability Board and the Canadian Institute of Chartered Accountants (CICA) commenced a consultation process into key audit quality issues. They have released an Initiative Overview paper setting out the work they have completed to date on these issues and what they still plan to do. The paper discusses the topic of audit quality, identifies the key challenges that exist when maintaining audit quality and examines what international initiatives are in progress on the topic. It then addresses the topic from the Canadian perspective, noting that three working groups were established earlier this year to consider the three priority areas in this debate; auditor independence, audit reporting and audit committees. The first working group discussion paper on the Auditor Reporting model, open for comment until 12 October 2012, has also been released. Discussion papers from the independence and audit committee working groups are expected later this year, with final reports due around March 2013.
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REGULATORY NEWS
> FRC meeting 28 August The draft minutes of the Financial Reporting Council (FRC) meeting held on 28 August 2012 are now available on the FRC website. Key points discussed include: The FRC Peer Review of the boards staffing, strategic plan and the operations of the FRC task forces which was positive A report from the AASB on developments in its key projects, including public sector, NFPs and Superannuation, work for the IASB on the regionalisation of standard setting, the current AASB Summary Work program and the AASB Strategic Plan 2012-2016. The AASBs differential reporting project and the AASBs contribution to the Asian regions feedback on the post implementation review of IFRS for SMEs were also discussed A report from the AUASB on key international developments in auditing, the AUASBs strategic objectives and plan, and recent bulletin releases on economic uncertainty and professional scepticism FRC Performance of Functions Document this document was approved out of session and methods to ensure that the FRCs functions were well understood despite its limited resources were discussed Board Education Taskforce the outcomes of its survey of the financial literacy of directors and financial reporting professionals were released in early September. The task force will engage with ASIC, ASX Corporate Governance Council and others in the industry to address issues raised Managing complexity Taskforce the findings from the 15 submissions received from the task forces report exposed in May Audit quality Taskforce the latest FRC and IAASB developments and documents, including a review of Federal Treasurys consultation on the adequacy of the existing audit framework and the task forces intention to respond to the IAASBs ITC on audit reports Public sector Taskforce a paper recommending public sector reporting through international organisations and standards, and publicising key features of the Australian public sector reporting framework was considered

Integrated reporting Taskforce an explanatory paper on financial reporting and its relationship with integrated reporting has been released and is available as an attachment to the minutes of the September Task Force meeting Reports from the IFRS Advisory Council, IASB and New Zealand External Reporting Board (XRB) and a visit from parliamentary Secretary to the Treasurer Hon. Bernie Ripoli MP. The next FRC meeting will be held on 5 December 2012.
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> Sir David Tweedie to lead IVSC The International Valuation Standards Council (IVSC) http://www.ivsc.org/ has announced the appointment of Sir David Tweedie as the Chairman-elect of its Board of Trustees. Sir David will commence in the role of chairman on 29 October, following the IVSCs 2012 AGM. He succeeds Roel Campos. Sir David will be responsible for the strategic direction of the IVSC. Key priorities for the organisation are to promote the recognition and adoption of the International Valuation Standards in the worlds major economies and to lead the development of the valuation profession worldwide, bringing it together with users of valuation, regulators, legislators and opinion-formers.
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> CAMAC inquiry into AGMs The Corporations and Markets Advisory Committee (CAMAC) has released for public comment, a discussion paper titled The AGM and shareholder engagement . Its release is in response to a request from the Federal Government for advice on the role of the annual general meeting (AGM), given the important role the AGM plays in ensuring effective corporate governance in Australia. Comments close on 21 December 2012 and a roundtable is anticipated with major stakeholder groups in 2013. The discussion paper identifies three overarching issues that CAMAC considers are essential to ensuring the effectiveness of the AGMs role in corporate governance and then raises a range of approaches, initiatives and thinking on each of these matters in Australia and elsewhere. These issues are: Shareholder engagement the role of the AGM within the broader context of the ongoing relationship between the board and its institutional and retail shareholders The annual report the principal document considered by the AGM to provides information to shareholders on the state of the company and the stewardship of the board, and The current processes, and possible future functions and formats, of the AGM, taking into account technological developments and opportunities. More information can be found on the CAMAC media release.
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PROFESSIONAL AND ETHICS NEWS

> APESB compiled Code of Ethics A Compiled APES 110 Code of Ethics for Professional Accountants, has been released by the Accounting Professional & Ethics Standards Board (APESB). The compiled code incorporates the December 2011 amendment made to the Codes definition of public interest entity which is applicable from 1 January 2013, with early adoption permitted. This amendment clarified which types of Australian entities are likely to be public interest entities for the purpose of the audit independence requirements. The compilation does not introduce any change to the requirements of the current Code. It merely incorporates the wording of the amendments announced in December 2011 into the main text of the Code.

Prior to the issue of this compilation, those amendments existed in a separate amending document which accompanied the Code.
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> Proposed guidance on Valuation Services Draft guidance to assist valuation practitioners apply APES 225 Valuation Services has also been released by the APESB. Proposed Guidance Note APES GN 20 Scope and Extent of Work for Valuation Services aims to help practitioners use APES 225 to determine the scope, extent of review and analysis, and extent of corroboration appropriate to the valuation services they are providing. It supports the revised version of APES 225, issued in May 2012, which was amended to provided clarity to valuation practitioners on the three different types of Valuation Services that could be performed under the standard. Accordingly the new GN provides examples of different valuation contexts and the type of Valuation Service that will be appropriate to that context. Comments on draft GN 20 are open until 30 November 2012 and are to be submitted through the APESB website.. More information is available in the APESB media release.
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SUSTAINABILITY NEWS
> IFAC sustainability reporting resources The Professional Accountants in Business (PAIB) committee of the International Federation of Accountants (IFAC) has released a special eNewsletter aimed at highlighting the worldwide resources available to accountants on sustainability issues relating to SMEs. The eNewsletter eNews The Role of Professional Accountants in the Sustainability of Small Businesses provides details on a range of activities undertaken by IFAC member organisations that address small and medium-sized entities (SMEs), sustainability and the role accountants can play in improving their environmental, social and governance (ESG) performance. The newsletter contains links to resources and activities covering: Reporting and assurance issues, with a particular focus on integrated reporting developments Guidance and support tools for members wanting to implement sustainability practices in their own businesses and/or advise clients in this area Surveys and reports on sustainability reporting and assurance Events and presentations that are promoting best practice in sustainability issues and Awards recognising excellence in ESG reporting. The newsletter also encourages members with an interest in this area to join the IFAC group on LinkedIn, enabling them to contribute ideas about how accountants can both promote sustainable business practices and provide high quality sustainability advice to their clients.
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QUERY OF THE WEEK

> Disclosure of audit fees Q: I have provided both audit and non-audit services to my client during the year. What disclosures does my client have to make in their financial report in relation to these services? A: Auditor remuneration for audit and non-audit services must be disclosed separately in the financial statements under AASB 1054 Australian Additional Services. Paragraph 10 of AASB 1054 requires the disclosures of fees to each auditor or reviewer, including any network firm, separately for the audit or review of the financial statements and for all other services performed during the reporting period.

AASB 1054.11 requires a description of the nature of the other services provided. The disclosure should include descriptions and amounts for each type of other service provided by each auditor or reviewer. For example, if you prepared the tax return, performed a due diligence engagement and reviewed a regulatory return, the description and fees for each service must be shown separately..
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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 oper for comment: > Accounting exposure drafts open for comment > Assurance exposure drafts open for comment Members are encouraged to prepare their own submission on each document and submit them to the Institute techsubmissions@charteredaccountants.com.au no later than one week before the closing date shown.
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TRAINING & DEVELOPMENT

Face to Face > Audit of SMSFs 2012 Competency and Advanced Workshops Deliver superior and compliance audits and meet your professional accounting body training requirements. Sydney, Brisbane, Melbourne, Perth, Adelaide and LiveOne October and November 2012. > Business Valuation Workshop 2012 Raise the bar on your DCF with this essential two day workshop. Perth, Sydney, Brisbane and Canberra. October and November 2012. > in:Sight Financial Reporting Consolidation Zoom in on IFRS changes including AASB 10 Consolidated Financial Statements and AASB 11 Joint Arrangements. Sydney, Perth, Adelaide, Melbourne and Brisbane. November and December 2012.
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LiveOne - Online training sessions > Risk Management Series: Implementing the Risk Management Principles Learn how to avoid the mistakes that make enterprise risk management (ERM) in many organisations a costly, unused and unnecessary add-on. 7 November.

> Risk Management Series: Understanding the context and using one of the two internationally accepted control frameworks This session will cover practical tips to understand the context and establish the structure for risk management to work in your organisation. 14 November. > Phase A of the Audit - Risk Assessment The second session of the Performing a risk-based audit for SMEs series is designed to improve assessment of risk-based audits. Available OnDemand until 5 December 2012.
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Disclaimer: This is an initiative of, and has been prepared by the Reporting and Assurance Team of the Institute of Chartered Accountants in Australia. While every effort has been made to ensure the accuracy of the information contained therein, neither the Institute nor its employees shall be liable on any grounds whatsoever in respect of decisions or actions taken as a result of using this publication. The information provided is a general guide only and should not be used, relied on or treated as a substitute for specific professional advice or referral to the relevant specific standard. The information is this email is confidential to the named addressee and subject to copyright. No one else may read, print, store, copy, forward or act in reliance on all or any of this email or its attachments. If you are not he intended recipient, any use, reliance upon, disclosure or copying of this email is prohibited and unlawful. If you have received this email in error please notify the sender. The Institute of Chartered Accountants in Australia (ABN 50 084 642 571) does not warrant that this email and any attachments are error or virus free and recommends that all attachments be checked for computer viruses.

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