|Posted in:expert witnessConclavejoint reportexperts conference|
|Posted in:APES 110AUASBaccounting standardsimpairmentASICAASBAmending standardsAASB 101Financial Reportingnot-for-profitIFRS 16disclosureAuditAuditorRDRTier 2Assurance|
WK's office is currently closed but we are continuing to work remotely from home while the crisis continues, using various technologies:
The AASB and AUASB have put out an FAQ publication to assist accountants with the financial reporting and auditing aspects of what we are going through.
We hope our clients and contacts remain healthy and in good spirits.
|Posted in:Financial Reportingexpert witnessAudit|
Hans Hoogeworst, Chair of the IASB, opened this year's IFRS conference with a quote from Lampedusa's novel, The Leopard: "For everything to stay the same, everything must change". He went on to outline the main themes of the IASB's work program and the conference agenda. He emphasised how important it was for the board's standards to stay relevant in an ever-changing world.
Better communication is the key in our complex business environment. The IASB's main projects in this area are:
As part of their work on the income statement, the IASB will address "self-defined subtotals", a.k.a. "management performance measures" or "non-GAAP measurements". Out of a sample of 60 financial reports, they found 41 reported "operating profit" but across the 41, there were no less than 9 different definitions of what operating profit comprised. The IASB has adopted an "if you can't beat them, join them" approach, on the basis that non-GAAP is here to stay, but some of the abuses can be curtailed.
The board is going to define several of the commonly used "non-GAAP" measures, such as operating profit, with separate definitions for non-financial and finance industry reporters. They also plan to require disclosure of profit before finance costs and tax, to enable comparison of entities regardless of their finance structure. These proposals will bring management performance measures (MPMs) within the scope of audit and the regulators. MPMs will have to be explained in a note to the financial statements and if an entity choses to give its own measure priority over an IFRS defined measure, they will have to disclose the reason.
The proposals will also address disaggregation and make excessive disaggregation more difficult. There will be additional guidance on what constitutes unusual items requiring separate disclosure they can only be unusual if they have limited predictive value and should not appear again for several years.
The second big communication project is the update to the Practice Statement on Management Commentary. Management commentary is seen as the vehicle for communicating information that cannot be captured by the financial statements, but will eventually have a financial impact - the broader context in which the financial statements have to be read and the impact of non-financial factors on long-term value creation. It embraces issues such as the business model, the nature and role of intangible assets in the business and the impact of climate change and taps into the impetus gathering around integrated reporting.
Simultaneously, the IASB is continuing to work on its disclosure initiative project to help preparers reduce unnecessary disclosures that blur the message and focus on material issues. It has published a report on how companies have improved communication, showing disclosures before and after and is using IAS 19 Employee Benefits and IFRS 13 Fair Value Measurement as test standards to pilot improvements to disclosure.
The IASB work program
IFRS amendments expected in 2019 are:
Projects at an earlier stage scheduled to result in discussion papers in 2019 are:
We can also expect an exposure draft on primary financial statements.
In 2020 we can expect discussion papers on:
Initial feedback on new standards
A panel of preparers and users commented on how they had found the experience of implementing IFRS 9 on financial instruments and IFRS 15 on revenue. Surprisingly, corporates experienced less volatility as a result of applying IFRS 9 than they had expected. Benefits included more information about fair value and better alignment of accounting with credit risk management.
IFRS 15 had resulted in greater disclosure even when the accounting was unchanged, which has given entities and their users a better understanding of how they derive their revenue.
One of the analysts however commented that much investing now was done by computers tracking indices and the enhanced disclosures were only any use when human beings were reviewing the accounts!
Goodwill and impairment
Hot off the press after the IASB's June meeting was an update on their project on goodwill and impairment arising from the Post Implementation Review of IFRS 3. The project is a response to criticism that impairment losses are being recognised too late and simply confirm something the market already knows and that the mandatory annual test is costly and complex. The Board is aiming to publish a discussion paper in the second half of 2019.
The IASB's own voting was so close on key issues, will contain some radical proposals for comment by the wider community. They will be asking:
As part of the proposals the IASB will be advocating better disclosure of information on acquisitions what was the strategic rationale and what drove the acquisition price? This would be supplemented by disclosures about the subsequent performance of acquisitions over the acqyisition accounting period and the two subsequent years did the acquisition generate the synergies or other benefits that management anticipated when they bought the business?
In our experience an unwillingness to acknowledge impairment of recently acquired assets is a factor in many of the matters we are briefed in. These additional disclosures have the potential to make businesses and auditors focus on what the entity bought and how the acquisition has worked out and can counteract the danger presented by making the current annual impairment test that only takes place when indicators are present.
|Posted in:presentation of financial statementsaccounting standardsExposure draftFinancial Reportingdisclosure|
The long awaited regulation changing the cut off point between small and large proprietary companies has just been issued and is operative from 1 July 2019.
For a proprietary company to be considered small, it together with the entities it controls must now satisfy two of the following three tests: less than $50m consolidated revenue, less than $25m consolidated gross assets and fewer than 100 employees.
|Posted in:Corporations ActFinancial ReportingCompanyReporting|
|Posted in:SMSFAPAPES 110APES 315accounting standardsAssuranceReporting|
CAANZ has uploaded a useful summary of the findings of the Banking Royal Commission and in particular the impact the findings have on the accounting profession, so many of whom act as financial advisers and tax advisers.
As CAANZ put it, "Commissioner Hayne's responses to the issues are informed by the underlying principles he identified in the Interim Report, which reflect six norms of conduct:
As many of the matters we have been involved in have involved interests in schemes that have been aggressively sold by financial advisers to members of their local community who trusted them, we welcome this renewed focus on ethics and transparent charging for advice.
|Posted in:ethicsBanking Royal Commission|
As well as learning more about the new digital world (articles on these subjects had been lying unread in my reading pile for months) from excellent speakers, there were also updates from the international standard setting boards, who are responding to these challenges within their own context.
By Thursday night everyone I spoke to was tired out, but agreed that it had been a wonderful experience that cut across the usual boundaries between professional bodies and enabled everyone to mingle and network outside their usual group. In the words of one participant, "it made you feel proud to be an accountant".
|Posted in:Financial ReportingethicsAssurance|
Chris and Stephanie act as consultants and experts (“clean” and “dirty” experts) in the context of dispute resolution on a variety of financial reporting and audit issues.
Westworth Kemp Consultants can provide support to businesses, professional practices and regulators seeking to implement systems designed to foster compliance
Independent advice on the interpretation of auditing (or assurance) and accounting (or financial reporting) standards can be hard to find.