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					opinions                             SPRING 2010



ANAO Opinions is published to provide our clients with
information on developments in financial reporting and                                 INSIde thIS
disclosure, together with details of recently completed                                edItIoN
performance audits and better practice guides. This                                    ANAO Audit Reports
edition of Opinions provides updated information since                                 •	 Recently tabled reports
the Winter 2010 edition and lists those audits scheduled                               •	 Reports scheduled to be tabled
                                                                                          – October to December 2010
for completion in the October to December 2010 period.
                                                                                       ANAO Better Practice Guides
                                                                                       •	 Recently published guides
                                                                                       •	 Guides scheduled to be tabled –
ANAo AudIt RePoRtS                                                                        October to December 2010

ReceNtly tAbled AudIt RePoRtS                                                          Australian Accounting
                                                                                       Standards Board (AASB)
The following section contains the objectives of ANAO audit reports tabled from        Developments
July to September 2010. A complete copy of all ANAO reports can be obtained
                                                                                       •	 New, revised and amending
from the ANAO website at: www.anao.gov.au. For further details phone the
                                                                                          Accounting Standards and
Publications Officer on (02) 6203 7505.
                                                                                          Interpretations
                                                                                       •	 Exposure Drafts, Invitations to
Audit Report No. 1:                          Audit Report No. 2: Conduct by
                                                                                          Comment and Consultation
Implementation of the Family                 Infrastructure Australia of the First
                                                                                          Papers
Relationship Centres Initiative              National Infrastructure Audit and
                                             Development of the Infrastructure         •	 Feature – The Conceptual
The objective of the audit was to assess                                                  Framework for Financial
                                             Priority List
the effectiveness of the selection,                                                       Reporting
implementation, operation and monitoring     The objective of this performance
of Family Relationship Centres (FRC’s) by    audit was to assess the effectiveness     Department of Finance and
the Attorney General’s Department (AGD)      of the conduct of the first National      Deregulation
and the Department of Families, Housing,     Infrastructure Audit and development of   •	 Finance Circulars
Community Services and Indigenous            the Infrastructure Priority List.         •	 Accounting Guidance Notes
Affairs (FaHCSIA). The three main criteria
                                                                                       •	 Finance Briefs
for this audit assessed whether AGD and
                                             Audit Report No. 3: The
FaHCSIA had effectively:
                                             Establishment, Implementation
•	 planned and implemented the FRC           and Administration of the Strategic
   initiative, including the FRC selection   Projects Component of the
   and funding processes;                    Regional and Local Community
•	 undertaken administration activities to   Infrastructure Program
   guide the operation and progress of
                                             The objective of the audit was to
   the FRC initiative towards meeting its
                                             assess whether the Strategic Projects
   objectives; and
                                             component of the Regional and
•	 monitored, evaluated and reported on      Local Community Infrastructure
   the performance of FRCs.                  Program has been effectively designed
                                             and administered.
ReceNtly tAbled AudIt RePoRtS
(coNtINued)

Audit Report No. 4: National                  With regard to accreditation of general       Audit Report No. 7: Confidentiality
Security Hotline                              practice, the audit scope did not include     in Government Contracts: Senate
                                              an assessment of the Standards nor            Order for Departmental and
The objective of the audit was to assess
                                              the work of the bodies that undertake         Agency Contracts (Calendar
whether:
                                              accreditation of general practices. The       Year 2009 Compliance)
a) the Attorney General’s Department          ANAO’s focus on general practice              The audit objective was to assess the
   effectively manages the operation of       accreditation related to DoHA’s               appropriateness of the use and reporting
   the National Security Hotline (NSH);       management of program entry criteria.         of confidentiality provisions in Australian
   and
                                                                                            Government contracts. This included
b) the Australian Federal Police and                                                        assessing compliance with the Order
                                              Audit Report No. 6: The Tax
   Australian Security Intelligence                                                         and following up on the implementation
                                              Office’s implementation
   Organisation have effective procedures                                                   of recommendations made in previous
                                              of the Client Contact –
   in place to deal with incoming referrals                                                 Senate Order audits.
                                              Work Management – Case
   from the NSH.                                                                            The audit involved three components:
                                              Management System
                                                                                            •	 an examination of a stratified random
                                              The objective of the audit was to assess
Audit Report No. 5: Practice                                                                   sample of 150 contracts listed as
                                              the implementation of the Australian
Incentives Program                                                                             containing confidentiality provisions from
                                              Taxation Office’s Client Contact – Work
                                                                                               material and small agencies across the
The objective of the audit was to assess      Management – Case Management                     Australian Government to determine
the Department of Health and Aging’s          System (CWC). The audit examined four            whether confidentiality provisions were
(DoHA) effectiveness:                         key areas that included:                         used and reported appropriately;
•	 in undertaking the Practice Incentives     •	 progress of the CWC against                •	 an examination of all FMA Act agencies’
   Program (PIP) planning, monitoring and        the endorsed Change Program                   calendar year 2009 contract listings, and
   review; and                                   business case;                                Ministers’ letters of advice, to assess
•	 with Medicare Australia, in ensuring PIP   •	 improvements to the productivity              compliance with the requirements of the
   program delivery to general practices         and efficiency of tax administration          Order, and check reported instances of
   and their medical practitioners.              as a result of the implementation of          excluded contracts; and
                                                 the CWC;                                   •	 a follow-up of the implementation of
In undertaking the audit, the ANAO                                                             previous audit recommendations relating
considered the 12 incentives that             •	 improvements to client experiences
                                                                                               to the administration of the Senate
comprised the PIP up to August 2009.             when dealing with the Tax Office as
                                                                                               Order in four agencies. The selected
The three most recently introduced               a result of the implementation of the         agencies were the: Australian Agency for
incentives at the time of audit fieldwork,       CWC; and                                      International Development; Department
namely, Domestic Violence, GP Aged            •	 effects of the CWC implementation,            of Families, Housing, Community
Care Access and eHealth incentives, were         including additional benefits achievable      Services and Indigenous Affairs;
examined in greater detail and formed            beyond its current capacity to further        Department of Agriculture, Fisheries
case studies to support audit analysis.          improve tax administration.                   and Forestry; and the Federal Court of
The ANAO also sought views on the                                                              Australia. The selected agencies were
program’s administration from industry,                                                        audited in one of the ANAO’s previous
including from general practices directly                                                      five audits of Senate Order compliance.
through an online survey.
                                                                                                            OPINIONS SPRING 2010            2
ReceNtly tAbled AudIt RePoRtS
(coNtINued)

Audit Report No. 8: Multifunctional         Audit Report No. 9: Green Loans                 investigation, prosecution and reporting
Aboriginal Childrens Services               Program                                         of fraud;
(MACS) and Crèches                                                                       •	 had implemented appropriate case
                                            The objective of the audit was to examine
The audit examined the effectiveness        key aspects of the establishment and            selection strategies and controls to
of the Department of Education,             administration of the Green Loans               ensure resources are targeted to the
Employment and Workplace Relations’         program by DEWHA and the program’s              cases of highest priority;
(DEEWR) administrative arrangements         transition to the Department of Climate      •	 complied with relevant external and
supporting the delivery of Indigenous       Change and Energy Efficiency (DCCEE).           internal requirements when investigating
childcare services through MACS and         Particular emphasis was given to the            fraud and referring cases for
crèches, including the approaches           program’s three main elements:                  consideration of prosecution; and
DEEWR uses to monitor the achievement       •	 training, registration and contracting    •	 had implemented an effective training
of the Budget Based Funding (BBF)              of assessors;                                program that supports high quality
sub-program objective.                                                                      investigations and prosecution referrals.
                                            •	 scheduling, conduct, and reporting of
In conducting the audit, ANAO reviewed         home sustainability assessments, and
three key areas:                               the associated payments to assessors;     Audit Report No. 11: Direct Source
•	 program administration – DEEWR’s            and                                       Procurement
   administrative systems and processes     •	 provision of green loans to               The objective of the audit was to assess
   supporting the delivery of Indigenous       householders, and the associated          how well agencies had implemented the
   childcare services through MACS             payments to participating financial       Commonwealth Procurement Guidelines
   and crèches and the broader BBF             institutions.                             (CPG’s) and relevant FMA legislation when
   sub-program;                                                                          undertaking Direct Source procurement.
                                            The audit also examined the extent to
•	 management of service provider           which steps had been taken by DEWHA
   funding agreements – DEEWR’s                                                          The audit examined whether selected
                                            and DCCEE to assess whether the              agencies had developed a sound
   systems and processes for managing       Green Loans program was achieving
   MACS and crèche service providers’                                                    procurement framework; appropriately
                                            its objectives.                              classified procurement methods when
   funding agreements; and
                                                                                         meeting external reporting requirements;
•	 monitoring and reporting performance     Audit Report No. 10: Centrelink              implemented the CPGs and relevant
   – the effectiveness of DEEWR’s           Fraud Investigations                         legislation when Direct Sourcing; and
   processes for monitoring the                                                          established effective procurement
                                            The objective of the audit was to examine
   performance of service providers, and                                                 monitoring and review arrangements.
                                            the effectiveness of Centrelink’s approach
   the achievement of the outputs and
                                            to investigating and responding to           The ANAO selected four FMA Act
   outcomes of the BBF sub-program.
                                            external fraud. The ANAO’s assessment        agencies to provide a cross-section of the
The ANAO sought not to duplicate            was based on four key criteria. In           104 agencies that reported procurement
the work of DEEWR’s internal audit          particular, the ANAO assessed whether        activity in AusTender in 2008–09. The
function, and in doing so referred to       Centrelink:                                  agencies selected for audit were:
the findings of the recent internal audit   •	 had established a management
review of the Child Care Services Support                                                •	 the Department of Families,
                                               framework, and business systems
Program, where these were relevant                                                          Housing, Community Services and
                                               and guidelines that support the
and appropriate.                                                                            Indigenous Affairs;
                                                                                                         OPINIONS SPRING 2010           3
ReceNtly tAbled
AudIt RePoRtS                                 ANAo AudIt RePoRtS Scheduled to
(coNtINued)                                   be tAbled octobeR to decembeR 2010
                                              •	 Capitalisation of Software
                                              •	 CASA Safety Management System Approach
•	 the Department of Innovation, Industry,
                                              •	 Fixing Houses for Better Health
   Science and Research;
                                              •	 Army Aboriginal Community Assistance Program
•	 the Department of Veterans’ Affairs; and
                                              •	 Government Business Managers Initiative
•	 the Australian Crime Commission.
                                              •	 Food Standards Australia New Zealand
The ANAO examined a stratified random
                                              •	 Centrelink’s Management of the Appeals to the Social Security Appeals Tribunal
sample of 645 procurements valued
                                                 and to the Administrative Appeals Tribunal
at $10 000 and over, across the four
agencies. More detailed testing was           •	 Management of Australian Broadband Guarantee Program
undertaken for the 285 Direct Source          •	 Management of the Overseas Leased Estate
procurements in the sample.                   •	 Digital Education Revolution
                                              •	 Trade Training Centres in School
                                              •	 Acceptance into Service of Navy Capability
                                              •	 Explosive Ordnance Services Contract
                                              •	 Accountability for Explosive Ordnance held at the Australian Defence Force Units
                                              •	 AFP Management of New Policy Implementation
                                              •	 The Australian Taxation Office’s Administration of the Wine Equalisation Tax
                                              •	 Restoring the Balance in the Murray-Darling Basin: Purchase of Water
                                                 Entitlements and Subsequent Use of Water Allocations by the Commonwealth
                                                 Environmental Water Holder
                                              •	 Administration of the Better Regions Program
                                              •	 Audits of the Financial Statements of Australian Government Entities for the
                                                 Period Ended 30 June 2010




                                                                                                          OPINIONS SPRING 2010      4
ANAo betteR PRActIce GuIdeS
Better Practice Guides are produced by the ANAO to assist public sector managers in the performance of their responsibilities.
A complete copy of all ANAO Better Practice Guides can be obtained from the ANAO website at: www.anao.gov.au. For further
details phone the Publications Officer on (02) 6203 7505.


ReceNtly                                     on how to establish the condition of
                                             major assets, and the necessary level
                                                                                            GuIdeS Scheduled
PublIShed                                    and frequency of maintenance. These            to be PublIShed
GuIdeS (July to                              indicators represent the parameters            octobeR to
SePtembeR 2010)                              required for optimum efficiency and
                                             management of an entity’s asset portfolio.
                                                                                            decembeR 2010
                                                                                            •	 Managing Human Resource Information
Strategic and Operational                    For entities whose asset base is critical to
                                                                                               Systems – Security and Control Better
Management of Assets by Public               program delivery, a Capital Management
                                                                                               Practice Guide
Sector Entities – Delivering agreed          Plan is a key component of their strategic
outcomes through an efficient and            outlook that provides a snapshot of asset      •	 Fraud Control
optimal asset base                           health and documents how to achieve
The aim of this Guide is to provide a        better practice asset management.
practical asset management framework         Such a document provides a clear
that can be adopted by Australian            blueprint, approved by the executive
Government entities to assist in the         leadership group, to drive strategic asset
effective management, maintenance, and       management throughout the organisation.
use of assets to achieve their goals and     Entities with smaller asset holdings will
agreed program delivery outcomes.            also benefit from understanding how they
In particular, the Guide draws together      can better align these resources with
and illustrates the practical application    expected outcomes. The main message
and essential inter-dependencies of a        is to ensure entities have a disciplined
strategic asset management framework         approach to match their investment
– being asset management, planning and       in assets to program requirements,
the strategic goals of an entity.            and to plan for asset replacement in
                                             a strategic way which accords with
The concept of asset performance             the Government’s capital budgeting
indicators is introduced to guide entities   framework where applicable.




                                                                                                           OPINIONS SPRING 2010        5
AuStRAlIAN AccouNtING
StANdARdS boARd deVeloPmeNtS
New, ReVISed ANd AmeNdING AccouNtING StANdARdS
ANd INteRPRetAtIoNS
Copies of Australian Accounting          AASB 1048 Interpretation and                 lists all Australian Interpretations on issue
Standards and Interpretations are        Application of Standards (Revised)           and is updated when a new or revised
available from the AASB web site at                                                   Interpretation is issued.
                                         A reference in an Australian accounting
www.aasb.com.au.
                                         standard to a second Australian standard     The revised and reissued June 2010
Early adoption of new standards          is, at law, a reference to the current       version of AASB 1048 supersedes
and interpretations by Australian        version of the second standard. A direct     the version released in March 2009.
Government agencies and authorities      reference to an Interpretation, however,     It incorporates Interpretation 19
requires the approval of the Chief       is to the version of the Interpretation in   Extinguishing Financial Instruments with
Executive of the Department of Finance   place at the time the standard was made      Equity Instruments. This revised standard
and Deregulation.                        and does not update for new or changed       applies to reporting periods ending on or
                                         Interpretations made after the standard.     after 30 June 2010.
                                         To overcome this problem, AASB 1048




                                                                                                       OPINIONS SPRING 2010           6
eXPoSuRe dRAFtS (eds), INVItAtIoNS to commeNt (Itcs)
ANd coNSultAtIoN PAPeRS
Exposure Drafts, Invitations to            2. Determine the performance                       may only be recognised after transfer
Comment and Consultation                      obligations that exist in each                  of the finished good to the customer.
Papers mentioned below can be                 contract. A product is a separate
                                                                                           The proposed changes require
downloaded from the AASB website at           performance obligation if it has
                                                                                           management to capitalise directly
www.aasb.com.au.                              a distinct function and a distinct
                                                                                           attributable costs incurred in creating
                                              profit margin. An item has a distinct
                                                                                           a good/service into contract assets
eXPoSuRe dRAFtS                               function if it has utility individually or
                                              in combination with other goods/
                                                                                           until control passes to the customer.
                                                                                           If advanced payments exceed these
                                              services. An item has a distinct profit
ED 198 Revenue from Contracts                                                              costs the entity will recognise a contract
                                              margin if management can separately
with Customers – July 2010                                                                 liability. Disclosure requirements will
                                              identify the resources used to provide
                                                                                           be more detailed under the proposals
ED 198 is the result of a joint project       the good/service.
                                                                                           and include information related to
between the IASB and FASB which            3. Determine the transaction price              disaggregation of revenue, performance
proposes fundamental changes                  for the contract. The transaction            obligations, assumptions used and
to the way entities record revenue            price may not equal the sale price.          reconciliations of contract asset
from customers. These changes will            The transaction price is adjusted for        and liabilities.
affect all entities who currently apply       expected uncollectable amounts,
AASB 118 Revenue and/or AASB111               time value of money and anticipated          While the effective date is unknown,
Construction Contracts.                       refunds/ warranty returns. Where             the revised standard is scheduled to
                                              management can estimate                      be issued by the IASB in the second
Excluded from scope of this
                                              contingent revenue this should               quarter of 2011. Transition is currently
exposure draft is revenue recognised
                                              also be included at the probability          anticipated to require full retrospective
in accordance with AASB 1004
                                              weighted amount.                             application.
Contributions, which is the subject of a
separate AASB project.                     4. Allocate the transaction price to            The AASB sought comments on this ED
                                              each performance obligation.                 by 24 September 2010.
The proposed changes will increase
                                              Examples of how this could be
the use of management estimates in
                                              allocated include consideration              ED 199 Measurement
revenue recognition and could require
                                              of each performance obligation’s             Uncertainty Analysis Disclosure
significant modifications to the way
                                              selling price or using a cost plus           for Fair Value Measurements –
systems collect and report information.
                                              margin approach.                             July 2010
The main steps to be applied under
ED 198 can be summarised as follows:       5. Recognise revenue once control
                                                                                           ED 181 Fair Value Measurements
                                              passes to the customer. This is
1. Identify separate contracts with                                                        released in June 2010 proposed a single
                                              a significant change to previous
   customers. In most cases, each                                                          standard to address measurement and
                                              practice. An entity will only recognise
   individual good or service will be                                                      disclosure requirements of assets and
                                              revenue once control has passed to
   treated as a separate contract.                                                         liabilities carried at fair value. ED 199
                                              the customer (when they have direct
   However, where the goods/services                                                       attempts to further clarify specific
                                              use of and receive benefit from the
   are bundled to provide a significant                                                    disclosure requirements for category 3
                                              good/service). For some construction
   discount they will be treated as a                                                      assets and liabilities as defined in
                                              projects this could mean revenue
   single contract.

                                                                                                            OPINIONS SPRING 2010        7
eds, Itcs ANd coNSultAtIoN PAPeRS (coNtINued)

ED 181. The proposed changes require         reconciliation between operating cash      ED 202R Leases – August 2010
an entity to consider correlation of         flows to the profit and loss.
                                                                                        ED 202R proposes significant changes
unobservable inputs and ignore remote
                                             The proposed effective date of these       to both lessee and lessor accounting
scenarios when preparing measurement
                                             changes is for financial years beginning   which impacts all entities subject to
uncertainty analysis disclosures.
                                             1 July 2011.                               leasing arrangements. The intention
The AASB sought comments on this ED                                                     of the proposed changes is to provide
                                             The AASB sought comments on this ED
by 16 August 2010.                                                                      greater comparability and transparency
                                             by 8 October 2010.
                                                                                        through recognition of the underlying
ED 200A and 200B Proposals                                                              assets and liabilities created through all
                                             ED 201 Insurance Contracts –               leasing arrangements.
to Harmonise Australian and
                                             August 2010
New Zealand Standards in                                                                The exposure draft proposes to remove
Relation to Entities Applying                ED 201 proposes to address diversity       the distinction between operating and
IFRSs as Adopted in Australia                in insurance accounting through            finance leases. Instead, lessees would
and New Zealand                              application of a single measurement        apply a single ‘right-of-use model’ to all
                                             model for insurance contracts. Entities    lease transactions. Upon inception of
ED 200A and 200B propose the first
                                             would recognise insurance liabilities      the lease the lessee would recognise:
stage in harmonisation of Australian and
                                             based upon estimates of future cash        •	 a right-of-use asset which represents
New Zealand accounting standards.
                                             inflows and outflows adjusted for the         the lessee’s right to future economic
The proposed changes would reduce
                                             time value of money and risk. Where           benefits from the underlying leased
the number of jurisdiction-specific
                                             estimated cash inflows exceed the             asset; and
paragraphs and relocate those
                                             adjusted outflows the entity would
considered necessary to separate                                                        •	 a lease liability which represents the
                                             recognise the residual margin as income
national standards.                                                                        lessee’s obligation to make future
                                             over the term of the agreement.
Proposed changes result in reduced                                                         lease payments.
                                             A simplified approach will also be
disclosure requirements related                                                         These are to be recognised at the
                                             applied to short duration insurance
to commitments existing at the                                                          present value of lease payments
                                             contracts. The entity would establish
reporting date. While capital and lease                                                 discounted using the lessee’s
                                             a claims liability for claims incurred
commitments will still require disclosure                                               incremental borrowing rate or the
                                             to date (including those incurred but
under separate standards there will no                                                  rate the lessor charges the lessee (if
                                             not reported) and recognise premium
longer be a requirement for an entity to                                                known). In determining lease payments
                                             revenue systematically over the
disclose other significant commitments                                                  management must consider options to
                                             agreement term.
which may include grants and long term                                                  renew, contingent rentals and residual
service agreements.                          The new standard would replace             guarantees in arriving at the most likely
                                             AASB 4 Insurance Contracts, AASB           payments over the expected term.
Other changes include introduction of
                                             1023 General Insurance Contracts and
a true and fair override principle and                                                  The right of use asset will be amortised
                                             AASB 1038 Life Insurance Contracts.
reduced disclosures related to audit                                                    over the period of the lease or life of
fees and imputation credits. Entities will   The AASB seeks comments by                 the asset, whichever is shorter. Interest
also no longer be required to present a      8 November 2010.


                                                                                                         OPINIONS SPRING 2010        8
eds, Itcs ANd coNSultAtIoN PAPeRS (coNtINued)

expense will be recognised on the            recognised over the term of the lease           than the fixed dates included in the
unwinding of the lease liability.            as the lease receivable unwinds. Any            current standard.
                                             changes to the initial estimate of lease
Where the entity reassesses the lease                                                        The AASB sought comments on this ED
                                             payments is recognised directly to the
term, any adjustment would be made                                                           by 4 October 2010.
                                             profit and loss in most circumstances.
directly to leased assets and liabilities.
Where the entity reassesses contingent       Where the lease term is no longer than
                                                                                             ED 204 Deferred Tax: Recovery
amounts, only the portion related to         12 months a shorthand method will be
                                                                                             of Underlying Assets (proposed
future years can be adjusted against the     available for both lessees and lessors.
                                                                                             amendments to AASB 112) –
assets and liabilities with the remainder    This allows lessees to recognise assets
                                                                                             September 2010
being recognised directly in the profit      and liabilities at their undiscounted
and loss.                                    amount and lessors may recognise                ED 204 proposes that deferred
                                             lease payments directly to revenue over         tax balances be calculated on the
Lessor accounting would depend on
                                             the lease term.                                 presumption that an asset’s carrying
whether significant risks and rewards of
                                                                                             amount will be recovered entirely
ownership have passed to the lessee.          Increased disclosure requirements
                                                                                             through sale. This applies only to
Where risks and rewards are retained,        are also proposed, including details of
                                                                                             investment properties, intangibles and
the lessor will apply a performance          short term leases, assumptions used
                                                                                             property, plant and equipment carried at
obligation approach. This is similar to      and reconciliations of lease assets
                                                                                             fair value.
lessee treatment discussed above with        and liabilities.
the lessor recognising lease and interest                                                    The AASB sought comments by
                                             The proposed transition would require
revenue over the lease term. However,                                                        25 October 2010.
                                             leased assets and liabilities to be
the lessor will only include contingent
                                             recognised on the date of adopting the
components if they can be reliably                                                           ED 205 Extending Relief from
                                             standard rather than at lease inception.
measured. The lessor will also continue                                                      Consolidation, the Equity Method
                                             While the former date is unknown,
to recognise the underlying asset and                                                        and Proportionate Consolidation
                                             the revised standard is expected to
related depreciation expense.                                                                – September 2010
                                             be issued by the IASB in the second
If risks and rewards are considered          quarter of 2011.                                AASB 127 Consolidated and Separate
to pass to the lessee then the lessor                                                        Financial Statements provides relief
                                             The AASB seeks comments by
will apply the derecognition approach.                                                       from the requirement to prepare
                                             30 November 2010.
On transfer of the asset the lessor                                                          consolidated financial statements to an
will recognise revenue and a lease                                                           entity whose ultimate parent complies
receivable equal to the present value        ED 203 Removal of Fixed
                                                                                             with IFRS. With the introduction of the
of lease payments (including reliable        Dates for First-time Adopters                   reduced disclosure regime, situations
estimates of contingent amounts).            (proposed amendments to                         may occur where an entity’s ultimate
The asset, excluding the calculated          AASB 1) – September 2010                        parent no longer complies with
residual value, is derecognised from the     The proposed changes will permit first          IFRS, which prevents parent entities
balance sheet and expensed to cost           time adopters of Australian Accounting          lower in the group having access to
of sales or in some instances offset         Standards to re-measure financial assets        consolidation relief.
against revenue. Interest revenue is then    and liabilities on date of transition, rather

                                                                                                             OPINIONS SPRING 2010       9
eds, Itcs ANd coNSultAtIoN PAPeRS (coNtINued)

ED 205 proposes to extend                     IFRIC D1/2010/1 Stripping Costs               Discussion Paper – IFRSF Aug
consolidation relief to certain entities      in the Production Phase of a                  2010 – The Annual Improvements
depending upon the reporting                  Surface Mine – August 2010                    Process to Amend the Due
requirements of a parent higher in the                                                      Process Handbook for the IASB.
                                              The draft interpretation clarifies the
group. This would result in consolidation
                                              timing and measurement of capitalised         This discussion paper proposes
relief for all government controlled not-
                                              costs related to mine stripping activities.   amendments to the Due Process
for-profit entities and those government
                                                                                            Handbook in order to clarify when
controlled for-profit entities permitted to   The AASB seeks comments by
                                                                                            a correction of an IFRS should
report in accordance with Tier 2 of the       8 November 2010.
                                                                                            be addressed using the annual
reduced disclosure regime.
                                                                                            improvements process.
This change would also apply to
                                                                                            The IFRS foundation seeks comments
consolidation relief under AASB 128
                                                                                            by 30 November 2010.
Investments in Associates and
AASB131 Interests in Joint Ventures.
The AASB seeks comments by
12 January 2011.




FeAtuRe – the coNcePtuAl FRAmewoRk FoR
FINANcIAl RePoRtING
The IASB and FASB have completed              These primary users have been reduced         Enhancing characteristics include
the first phase of their joint project        from the original framework which also        comparability, verifiability, timeliness and
to develop an improved conceptual             considered employees, customers,              understandability. Other changes to
framework for financial reporting . This      government and the public.                    the original framework include removal
phase involved the revision of chapter                                                      of concepts such as substance over
                                              Chapter 3 separates qualitative
1 and 3 of the framework. Phase 7 of                                                        form and prudence, reclassification
                                              characteristics into fundamental and
the project is expected to consider the                                                     of timeliness from a constraint to an
                                              enhancing categories. Under the revised
impact of these revisions on the not-for-                                                   enhancing characteristic and changing
                                              chapter information must satisfy the
profit sector.                                                                              reliability to the broader faithful
                                              two fundamental characteristics (being
                                                                                            representation concept.
Chapter 1 states the objective of             relevance and faithful representation) to
financial reporting is to provide financial   be considered useful, while enhancing         At this stage, there has been no
information about the reporting entity to     characteristics are to be maximised to        indication when the current AASB
existing and potential investors, lenders     the extent possible. This varies from         framework will be amended to reflect
and other creditors in making decisions       the original framework which gave             these changes.
about providing resources to the entity.      equal weighting to each characteristic.


                                                                                                             OPINIONS SPRING 2010          10
dePARtmeNt oF FINANce ANd                                                            coNtAct uS
deReGulAtIoN                                                                         Opinions is published by:
Copies of Finance Circulars, Finance
Briefs and Accounting Guidance Notes
                                     AccouNtING                                      The Australian National Audit Office
                                                                                     GPO Box 707
are available from the Department of GuIdANce NoteS                                  Canberra ACT 2601
Finance and Deregulation website at         There were no Accounting Guidance        and is available on our website at:
www.finance.gov.au.                         Notes issued by the Department of        www.anao.gov.au
                                            Finance and Deregulation in the period   Please contact:
                                                                                     webmaster@anao.gov.au
FINANce                                     July to September 2010.

cIRculARS                                                                            ANAO signing officers and audit

Finance Circular 2010/1 Section 32
                                            FINANceBriefs                            managers are your first point of
                                                                                     contact for technical accounting
of the FMA Act – Transfer of Agency         There were no FinanceBriefs issued       matters. The Professional Services
Functions was released in August 2010.      by the Department of Finance and         Branch in the ANAO provides
This circular replaces Finance Circular     Deregulation in the period July to       technical and policy advice to
2007/03.                                    September 2010.                          financial and performance auditors
This Circular provides advice to agencies                                            and also conducts yearly client
subject to the Financial Management                                                  seminars.
and Accountability Act 1997 on how
annual appropriations can be transferred
between agencies following a transfer
                                                                                     DISCLAIMER
of functions arising from machinery of
government changes, such as changes                                                  This publication has been prepared
to the Administrative Arrangements Order.                                            by the Australian National Audit Office.
                                                                                     While every effort has been made
The circular requires agencies to agree                                              to ensure its accuracy, neither the
on the amount to be transferred within                                               Australian National Audit Office nor
                                                                                     any of its employees shall be liable on
15 working days of the transfer of a                                                 any ground whatsoever to any party in
function. If a final agreement cannot                                                respect of decisions or actions they may
be reached within this timeframe, an                                                 take as a result of using this Bulletin.
interim amount must be agreed within                                                 The information in this publication is of a
15 working days, followed by a final                                                 general nature only and is not intended
agreement within 30 working days.                                                    to be relied upon as, or as a substitute
                                                                                     for, specific professional advice.
The date of effect of section 32
determinations will now generally
be the date of signature of the
determination. The date of effect
will be made retrospective only in
limited circumstances.




                                                                                              OPINIONS SPRING 2010
                                                                                             OPINIONS SPRING 2010 11

				
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