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Updated IFAC guide to the audit of SMEs

11 Nov 2011

The Small and Medium Practices (SMP) Committee of the International Federation of Accountants (IFAC) has published the third edition of its Guide to Using International Standards on Auditing in the Audits of Small- and Medium-Sized Entities.

The implementation guide is intended to help practitioners understand and efficiently apply the clarified International Standards on Auditing (ISAs) to audits of small- and medium-sized entities (SMEs).

The updated guide is broken into two volumes. Volume 1 covers the core concepts of a risk-based audit; Volume 2 contains practical guidance on performing SME audits, including two case studies.

Click for IFAC press release (link to IFAC website). The guide may be downloaded from IFAC's website.

Online investor survey on the IASB's agenda consultation

11 Nov 2011

As part of its outreach activities in connection with its Request for Views Agenda Consultation 2011, the IASB has created an online survey to understand from the investor community which areas of accounting are in the most urgent need of improvement.

The survey asks for views on the relative importance and urgency of the various projects suggested as additions to the IASB's agenda and, more generally, what works and doesn't work in financial statements.

The IASB believes that the survey should take no longer than 20 minutes to complete. It is available until Monday 19 December 2011 via the IASB website. Comments on the IASB's agenda consultation are due by 30 November 2011.

Click for our previous story on the IASB's future work programme.

Calls for Australia to drop 'domestic' Interpretations

11 Nov 2011

A recent submission made by Deloitte (Australia) to the Australian Accounting Standards Board (AASB) asks the AASB to consider withdrawing Australian 'domestic' Interpretations.

The submission deals with accounting for the proposed Mineral Resource Rent Tax (MRRT) and extension of Petroleum Resource Rent Tax (PRRT) that are currently being considered by the Australian Parliament.

Under the MRRT and PRRT, the Australian Government would seek to access a proportion of the 'economic rent' inherent in coal, iron ore and oil and gas operations. In response to diversity in practice that emerged on Australia's transition to IFRSs in accounting for the existing smaller scoped form of PRRT, the AASB issued Interpretation 1003 Australian Petroleum Resource Rent Tax, which requires PRRT to be accounted for as an income tax.

The submission argues the Interpretation "effectively represents the elimination of accounting policy options under Australian Accounting Standards that are available to entities that report under International Financial Reporting Standards (IFRS) as promulgated by the IASB".

The submission notes the following on the efficacy of domestic Interpretations:

"... we believe that Interpretation 1003 (along with other Australian 'domestic' Interpretations) should be reassessed by the AASB for possible withdrawal. Such a withdrawal would deal with issues such as inconsistencies with the AASB's own objectives in relation to full convergence with IFRS and permit Australian entities to consider global practice in this area when setting their accounting policies. It would also serve to address misconceptions Australia is 'not fully compliant' with IFRSs, and set a leading example for other jurisdictions in Asia-Oceania and more broadly."

The submission also notes a number of significant accounting issues that arise in accounting for PRRT or MRRT as an income tax, arising from the unique features encompassed in a resource rent regime, such as the ability of affected entities to elect to use a measure of 'market value' in their tax calculations, the indexation ('augmentation') of unused allowances, and the proposed rebateability of royalties paid to Australian States.

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ESMA Consultation Paper on materiality

10 Nov 2011

The European Securities and Markets Authority (ESMA) has published a consultation paper entitled Considerations of materiality in financial reporting.

The apparent differing views regarding the practical application of the concept of materiality amongst preparers, auditors, possibly users of the financial reports and, in some instances, accounting enforcers is a recurring theme of discussions at the European Enforcers Coordination Sessions (a forum in which all European National Enforcers of financial information meet to exchange views and discuss experiences of enforcement of IFRS). ESMA has therefore decided to publish a consultation paper in order to seek comments from interested parties on their understanding of various aspects of materiality in an effort to contribute to a consistent application of this important concept in financial reporting.

The consultation paper is structured around the chapters IFRS provisions, Characteristics of Primary Users and the Objective of Financial Reports, Attributes of the information, Errors, omissions and misstatements and aggregation, Note disclosures, and Interim reports - each with detailed analyses and questions. An annex to the paper (Annex II) provides a list of IFRS references to materiality and a list of selected references to users of financial statements in IFRS.

Responses to the consultation paper should be submitted by 29 February 2012.

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DPOC publishes working draft of protocol for due process oversight

10 Nov 2011

The IFRS Foundation Trustees' Due Process Oversight Committee (DPOC) has posted to their website a working draft of a protocol for due process oversight.

This document creates a framework for the Trustees to use when (1) reviewing the effectiveness of due process and (2) monitoring the IASB's compliance with due process.

The DPOC will publish a final draft of the operating protocol in 2012 for public comment, along with proposed enhancements to the Due Process Handbook.

Please click here to view the working draft on the IASB's website.

Summary of the October 2011 Trustees' meeting

10 Nov 2011

The Trustees of the IFRS Foundation have announced the conclusions of their meeting in Paris, France on 13 October 2011.

The Trustees discussed their own regional outreach activities, especially in Europe, and received reports of the Chair of the IASB and the Chair of the IFRS Advisory Council. They also reviewed feedback received in response to the publication of the preliminary conclusions of the Trustees’ strategy review.

The Trustees also discussed the progress made in relation to the appointment of a new Chair of the IFRS Foundation Trustees. A shortlist of candidates has been agreed by the Trustees and the Monitoring Board and the candidates were interviewed in the third quarter of 2011. The Trustees will now submit their preferred candidate for approval by the Monitoring Board.

Please click here to read the summary on the IFRS Foundation's website. An audio recording of the meeting can be accessed by clicking here.

ESMA publishes 'Review of European enforcers on the implementation of IFRS 8'

10 Nov 2011

The European Securities and Markets Authority (ESMA) has released a Report on its post-implementation review of IFRS 8 Operating Segments.

The Report discusses the application of IFRS 8 requirements by European issuers, and explores the areas posing significant challenges to investors, preparers and/or enforcers. The Report also provides ESMA’s tentative recommendations to enhance the application of the standard.

The conclusions reached by European enforcers in the Report are that '(i) the implementation of IFRS 8 resulted in a fairly similar level of information compared to its predecessor IAS 14 and that (ii) there is homogeneity in the issues faced by European enforcers when enforcing this standard. This stems from a combination of weaknesses in the standard and a failure to fully comply with its requirements by issuers.'

Please click here to read the Report on the ESMA website.

IASB issues response to G20 conclusions

09 Nov 2011

The IASB has released an updated response to the conclusions reached at the G20 Leaders Summit held in Cannes, France on 3-4 November 2011.

In the response document, the IASB details its progress in the following areas:

  • Completed its review of off balance sheet financing
  • Completed its reform of fair value measurement requirements
  • Completed the first phase of the reform of financial instruments accounting
  • Completed the majority of projects described by its Memorandum of Understanding with the FASB
  • Significantly enhanced its outreach and stakeholder engagement activities

Click for Update of response to G20 conclusions (link to the IASB website).

Standard setters from China, Japan and Korea meet

09 Nov 2011

Standard setters from China, Japan and the Republic of Korea met in Xiamen, China on 26 October 2011.

Representatives were present from the China Accounting Standard Committee (CASC), Accounting Standards Board of Japan (ASBJ), Korea Accounting Standards Board (KASB), International Accounting Standards Board (IASB), along with other delegates from the three countries and Hong Kong and Macau.

The meeting discussed the process of convergence of accounting standards, the IASB's projects and its future agenda and the prospective efforts of the Asian-Oceanian Standard Setters Group (AOSSG).

The delegates agreed to maintain communication between the countries (on projects, convergence and issues), to coordinate perspectives on the IASB's projects, and to enhance regional communication and cooperation in Asia-Oceania. Full support was expressed for the IASB's Asia-Oceanian regional liaison office to be established in Tokyo in October 2012.

The next meeting will be held in Korea in 2012. Click for press release (link to ASBJ website).

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Notes from the special November IASB meeting

08 Nov 2011

The IASB held a supplemental meeting on 7 November 2011 in London. We have posted Deloitte observer notes from the meeting.

Click through for direct access to the notes:

Monday, 7 November 2011

Click here to go to the preliminary and unofficial Notes Taken by Deloitte Observers for the entire meeting. The next IASB meeting is scheduled to occur on 15-16 November 2011.

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