Post on 04-Apr-2018
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Snapshot
Accounting Pronouncements
Accounting Standard for Local Bodies (ASLB) 3 on
Revenue from Exchange Transactions
ASLB 4 on Borrowing Costs
Auditing Pronouncements
Revised Standard on Auditing (SA) 250 on
Consideration of Laws and Regulations in an Audit
of Financial Statements
SA 260 on Communication with Those Charged
with Governance
SA 570 on Going Concern
SA 560 on Subsequent Events
SA 230 on Audit Documentation
Exposure Draft of Revised SA 210 on Agreeing the
Terms of Audit Engagement
Exposure Draft of SA 720 on The Auditors
Responsibility in Relation to Other Information in
Documents Containing Audited Financial Statements
Exposure Draft of Revised SA 320 on Materiality in
Planning and Performing an Audit
Exposure Draft of Revised SA 450 on Evaluation of
Misstatements Identified During the Audit Exposure Draft of Revised SA 610 on Using the
Work of Internal Auditors
Standard on Internal Audit (SIA) 8 on Terms of
Internal Audit Engagement
SIA 9 on Communication with Management
SIA 10 on Internal Audit Evidence
SIA 11 on Consideration of Fraud in an Internal
Audit
Exposure Draft of SIA on Enterprise Risk
Management
Exposure Draft of SIA on Internal Control Evaluation
Exposure Draft of SIA on Using The Work Of AnExpert
Exposure Draft of SIA on Internal Audit in an
Information Technology Environment
Exposure Draft of SIA on Knowledge of the Entity
and its Environment
Other Pronouncements of ICAI
Internal Auditor can not be appointed as a Tax
Auditor
Technical Guide on Review and Certification of
Investment Risk Management Systems and Processes
of Insurance Companies
Implementation Guide to Risk-based Audit of
Financial Statements
Handbook on Foreign Trade Policy and Guide to
Export and Import
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Book on Principles and Practice of Life Insurance
Book on Principles and Practice of General Insurance
Book on Risk Management and Reinsurance
Book on Business Strategic Planning and Information
Technology for Insurance Sector
Recent Developments
Peer Review of Audit Work Papers of Listed
Companies
Amendments to Clause 49 of the Listing Agreement
with Stock Exchanges
Modifications in the Valuation Norms of Debt
Securities by Mutual Funds
Classification of Loans to Housing Finance
Companies (HFCs) as Priority Sector Lending
Prudential Norms for Off-Balance Sheet Exposure of
Banks
Buyback / prepayment of Foreign Currency
Convertible Bonds (FCCBs)
US GAAP
FASB Staff Position (FSP)
Emerging Issues Task Force (EITF) Issue No.08-6 on Equity Method Investment Accounting
Considerations
EITF Issue No. 08-7 on Accounting for Defensive
Intangible Assets
EITF Issue No. 08-8 on Accounting for an Instrument
(or an Embedded Feature) with a Settlement Amount
that is based on the Stock of an Entitys Consolidated
Subsidiary
Securities and Exchange Commission (SEC) releases
new Financial Reporting Manual
SEC Issues Interpretation on References to Third-Party
Experts and Consents
International Financial Reporting Standards
Restructured version of International Financial
Reporting Standard (IFRS) 1
Reclassification of Financial Assets Amendments to
IAS 39 and IFRS 7
IFRIC 17 on Distributions of non-cash assets to
owners
Final report of the IASBs Expert Advisory Panel on
valuing financial instruments when markets are no
longer active
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Accounting Pronouncements
Accounting Standard for Local Bodies (ASLB) 3
on Revenue from Exchange Transactions
The ICAI has issued the above Standard, the Exposure
Draft of which was published in the July 2008 edition of
Audit News. The Standard will be mandatory for local
bodies in a state from the date specified in this regard
by the concerned State Government.
Accounting Standard for Local Bodies (ASLB) 4
on Borrowing Costs
The ICAI has issued the above Standard, the Exposure
Draft of which was published in the July 2008 edition of
Audit News. The Standard will be mandatory for local
bodies in a state from the date specified in this regard
by the concerned State Government.
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Revised Standard on Auditing (SA) 250 on
Consideration of Laws and Regulations in an
Audit of Financial Statements
The ICAI has issued the above Standard, the Exposure
Draft of which was published in the April 2008 edition
of Audit News. The Exposure Draft was named as
The Auditors Responsibilities Relating to Laws and
Regulations in an Audit of Financial Statements The
Standard is effective for audits of financial statements
for periods beginning on or after 1 April 2009.
Revised Standard on Auditing (SA) 260 on
Communication with Those Charged with
Governance
The ICAI has issued the above Standard, the Exposure
Draft of which was published in the July 2008 edition
of Audit News. The Standard is effective for audits of
financial statements for periods beginning on or after
1 April 2009.
Revised Standard on Auditing (SA) 570 on Going
Concern
The ICAI has issued the above Standard, the ExposureDraft of which was published in the October 2007
edition of Audit News. The Standard is effective for
audits of financial statements for periods beginning on
or after 1 April 2009.
Revised Standard on Auditing (SA) 560 on
Subsequent Events
The ICAI has issued the above Standard, the Exposure
Draft of which was published in the October 2006
edition of Audit News as Exposure Draft of Revised
AAS 19. The Standard is effective for audits of financial
statements for periods beginning on or after 1 April2009.
Revised Standard on Auditing (SA) 230 on Audit
Documentation
The ICAI has issued the above Standard which is
effective for audits of financial statements for periods
beginning on or after 1 April 2009. The Standard
replaces the earlier Auditing and Assurance Standard
(AAS) 3 on Documentation.
The Standard deals with the auditors responsibility to
prepare audit documentation for an audit of financial
statements. It does not limit the specific documentation
requirements contained in other Standards or required
by any laws and regulations.
The Standard defines the following terms:
Audit Documentation - It is a record of the audit
procedures performed, relevant audit evidence obtained
and conclusions reached.
Audit File - It comprises of one or more folders or other
storage media, in physical or electronic form containing
the records that comprise the audit documentation for a
specific engagement.
Experienced Auditor - He is an individual (whether
internal or external to the firm) who has practical audit
experience, and reasonable understanding of:
Audit processes;
Standards on Auditing and applicable legal and
regulatory requirements;
Business environment in which the entity operates;
and
Auditing and financial reporting issues relevant to theentitys industry.
The Standard identifies the following purposes of audit
documentation:
Evidence of the auditors basis for a conclusion
reached about the achievement of the overall audit
objective and planning and performance of the audit
in accordance with the Standards on Auditing and
the applicable legal and regulatory requirements.
Assisting the engagement team in planning and
performing the audit.
Facilitating the supervision and review of the audit
work.
Enabling the engagement team to be accountable
for its work.
Retaining a record of matters of continuing
significance to future audits.
Enabling the conduct of quality control reviews
and external inspections in accordance with the
applicable legal, regulatory and other requirements.
Auditing Pronouncements
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The Standard provides detailed guidance in respect of
the following matters:
Timely preparation of audit documentation.
Form, content and extent of documentation.
Documentation where there are departures from a
relevant requirement.
Documentation of matters arising after the date of
the audit report.
The auditor should assemble the audit documentation
in an audit file and complete the assembling of final
audit file on a timely basis which is recommended to be
within 60 days of the date of the auditors report. Once
the final file is assembled, the auditor should not delete
or discard audit documentation of any nature before the
end of its retention period which is recommended to be
not shorter than ten years from the date of the auditors
report, or, if later, the date of the group auditors report.
Exposure Draft of Revised SA 210 on Agreeingthe Terms of Audit Engagement
The Exposure Draft of the SA deals with the auditors
responsibilities in agreeing the terms of the audit
engagement with the entity and also to respond to a
request by the entity to change the terms of an audit
engagement.
The salient features of the Exposure Draft are as follows:
An auditor should accept an audit engagement only
when the preconditions for an audit and the common
understanding between him and the client exist.
An auditor should not accept engagements where
the management or those charged with governance
imposes limitations on the scope of the engagement
that leads to a disclaimer of opinion by the auditor,
unless required by law.
The auditor should discuss with the Management
and those charged with governance when there is
a conflict between the financial reporting standards
and the additional requirements of the applicable
laws and regulations and provide effect of the same
in the audit opinion.
In case of recurring audits, the auditor should look
at various factors before deciding whether a revised
letter of engagement needs to be issued.
The SA provides detailed guidance on the Financial
and General Reporting Framework and its
acceptability that the auditor should consider while
accepting the audit engagement.
Exposure Draft of SA 720 on The Auditors
Responsibility in Relation to Other Information
in Documents Containing Audited Financial
Statements
The Exposure Draft of the SA deals with the auditors
responsibilities in relation to the other information in
documents containing audited financial statements and
the auditors report thereon.
The salient features of the Exposure Draft are as follows:
Other Information for the purpose of this SA is
defined as financial and non- financial information
(other than the financial statements and auditors
report thereon) which is included either by law,
regulation or custom, in a document containing
audited financial statements and the auditors report
thereon.
The auditor is not required to give his opinion on the
other information or to determine whether or not
other information is properly stated unless there is a
specific requirement.
The auditor should read the other information to
identify material inconsistencies and assess whether,
as a result thereof, the financial statements or other
information needs to be revised.
If material inconsistencies are identified prior to
the date of the audit report which requires revisionof the financial statements and the Management
refuses to make the revisions, the auditor should
modify his opinion. If the revision of the other
information is necessary, and the revision is
refused by the management, the auditor should
communicate the matter to those charged with
governance and also provide paragraph in auditors
report on other matter or withdraw from the
engagement.
If any material inconsistencies are identified
subsequent to the date of the audit report, and
revision of audited financial statements is necessary,
the auditor should perform the procedures as
provided in SA 560 on Subsequent Events.
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The other information should be obtained prior
to the date of the auditors report or as soon as
practicable.
Exposure Draft of Revised SA 320 on Materiality
in Planning and Performing an Audit
The Exposure Draft of the SA deals with the auditors
responsibility to apply the concept of materiality
in planning and performing an audit of financial
statements. The Standard defines Performance
Materiality as the amount or amounts set by the auditor
at less than materiality for the financial statements as
a whole to reduce to an appropriately low level the
probability that the aggregate of uncorrected and
undetected misstatements exceeds materiality for the
financial statements as a whole.
The key changes envisaged in the Exposure Draft are as
follows:
The auditor should determine the materiality for the
financial statements as a whole and also for one
or more particular classes of transactions, account
balances or disclosures after considering the risksof material misstatement, in specific circumstances.
The materiality should be revised if circumstances so
warrant.
The above aspects should be adequately and
appropriately documented.
Exposure Draft of Revised SA 450 on Evaluation
of Misstatements Identified During the Audit
The Exposure Draft of SA deals with the auditors
responsibilities to evaluate the effect of identified
misstatements on the audit and of uncorrectedmisstatements, if any, on the financial statements.
The salient features of the Exposure Draft are as follows:
The auditor should accumulate misstatements
identified during the audit, other than those that are
clearly trivial and evaluate the nature thereof.
The auditor should consider the impact of the
identified misstatements as the audit progresses to
determine whether the overall audit strategy and
audit plan needs to be revised.
The auditor should communicate all misstatements
on a timely basis to the appropriate level of
management, request the management to correct
the same and in case management refuses for the
correction, obtain understanding of managements
reasons for not making corrections.
The auditor shall evaluate the effect of uncorrected
misstatements and determine whether the materiality
needs to be revised.
The auditor should request a written representation
from the management and where appropriate, those
charged with governance whether they believe the
effects of uncorrected misstatements are immaterial,
individually and in the aggregate, to the financial
statements as a whole and a summary thereof
should be attached to the representation.
The auditor should document the amount below
which misstatements would be clearly regarded
as trivial, all misstatements identified during the
audit and whether they have been corrected
and a conclusion as to whether the uncorrected
misstatements are material, individually or in
aggregate, and the basis for that conclusion.
Exposure Draft of Revised SA 610 on Using the
Work of Internal Auditors
The Exposure Draft of SA deals with the external auditors
responsibilities regarding the work of internal auditors
when the external auditor has determined that the
internal audit function is likely to be relevant to the audit.
The Exposure Draft deals with the following matters:
Determining whether and to what extent to use the
work of the Internal Auditors.
Using specific work of the Internal Auditors
Documentation of the conclusions and the audit
procedures performed.
Standard on Internal Audit (SIA) 8 on Terms of
Internal Audit Engagement
The ICAI has issued the above Standard, the Exposure
Draft of which was published in the October
2008 edition of Audit News. The Standard is
recommendatory in nature.
Standard on Internal Audit (SIA) 9 on
Communication with Management
The ICAI has issued the above Standard, the Exposure
Draft of which was published in the October
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2008 edition of Audit News. The Standard is
recommendatory in nature.
Standard on Internal Audit (SIA) 10 on Internal
Audit Evidence
The ICAI has issued the above Standard, the Exposure
Draft of which was published in the October
2008 edition of Audit News. The Standard is
recommendatory in nature.
Standard on Internal Audit (SIA) 11 on
Consideration of Fraud in an Internal Audit
The ICAI has issued the above Standard, the Exposure
Draft of which was published in the October
2008 edition of Audit News. The Standard is
recommendatory in nature.
Exposure Draft of SIA on Enterprise Risk
Management
The purpose of the SIA is to establish standards
and provide guidance for review of an entitys risk
management initiatives during an internal audit or such
other review exercise with the objective of providing anassurance thereon.
The nature of the internal audits responsibilities should
be adequately documented and approved by those
charged with governance. The internal auditor should not
manage any of the risks on behalf of the management
or take risk management decisions. The internal
auditor should not assume any accountability for risk
management decisions taken by the management. The
internal auditor should review the structure, effectiveness
and maturity of an enterprise risk management system
and ensure that a risk management policy setting outRoles and responsibilities and framing a Risk management
activity calendar has been framed. The internal
auditor should also review whether the enterprise risk
management coordinators in the entity report on the
results of the assessment of key risks at the appropriate
levels viz. Risk Management Committee, Enterprise
Business and Unit Heads and Audit Committee.
The internal audit plan should be approved by the audit
committee and should be based on the risk assessment
as well as on issues highlighted by the audit committee
and the senior management.
The internal auditor should submit his report to the
Committee of the Board delineating the information on
Assurance rating, Test conducted, Samples covered and
Detailed assurance comments.
Exposure Draft of SIA on Internal Control
Evaluation
The purpose of the SIA is to establish standards and
provide guidance on the procedures to be followed by
the internal auditor in evaluating the system of internal
control in an entity and for communicating weaknesses
therein to those charged with governance.
The internal auditor should examine and contribute to
the ongoing effectiveness of the internal control system
through evaluation and recommendations.
The internal auditor should obtain an understanding of
the significant processes and internal control systems
sufficient to plan the engagement and develop an
effective audit approach. He should also understand and
document the design and operations of internal control
to evaluate the effectiveness of the control environment.
The following aspects need to be considered whilstevaluating the internal control system in an entity:
Ascertaining whether the entity has a mission
statement and written goals and objectives.
Assessing risks at the entity and the process level.
Completing a Business Controls Worksheet for
each significant process / activity in each function/
department with documentation of the associated
controls and their degree of effectiveness and also
identifying the control gaps.
The Internal auditor should ensure that in general
adequate segregation of duties exists and in case of a
small department size he should ensure that a detailed
supervisory review of related activities is in practice, as a
compensating control activ ity.
While evaluating the information technology controls in
a system-driven environment, the internal auditor should
determine whether the entity uses tools that protect
confidential or sensitive information from unauthorized
individuals, back-up and restore facility, virus protection
software and passwords that restrict user access to
networks, data and applications.
The internal auditor should evaluate whether the
internal controls are designed and operating as
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contemplated in the preliminary assessment of control risk
and whether same were in use throughout the period.
He should identify internal control weaknesses that
have not been corrected and make recommendations
to correct the same. He should also document the
rational in deciding which audit recommendations
should be followed up on and when, in contrast with
recommendations where no follow-up is needed.
The internal auditor, in his report to the management,
should provide a description of the significant deficiency
or material weakness in internal control and his opinion
on the possible effect of such weakness on the entitys
control environment.
Exposure Draft of SIA on Using The Work Of An
Expert
The purpose of the SIA is to establish standards and
guidelines in cases where the internal auditor uses the
work performed by an expert.
An internal auditor should obtain technical assistanceand advice from experts if the internal audit team does
not possess the necessary knowledge, skills, experience
or expertise needed to perform all or part of internal
audit engagement.
An expert is defined as a person, firm or association of
persons possessing special skill, expertise, knowledge
and experience in a particular field.
The following are the various aspects which need to be
considered before an internal auditor decides to use the
work performed by an expert: The independence of the expert.
Skills, competence and objectivity of the expert
The materiality, nature and complexity of the item on
which advice or assistance is sought.
Evaluating the work of the expert
The SIA provides that the internal auditor should not,
normally, refer to the work of an expert in the internal
audit report. In case of referring to work of the expert,
the internal auditor should outline the assumptions,
broad methodology and conclusion of the expert. The
Internal Auditor should obtain prior consent of the
expert in case his identity is disclosed in the report.
Exposure Draft of SIA on Internal Audit in an
Information Technology Environment
The purpose of the SIA is to establish standards on
procedures to be followed when an internal audit
is conducted in an information technology (IT)
environment.
The internal auditor should evaluate the extent to which
the IT environment is used to record, compile, process
and analyse information and study the internal control
system in existence. He should also consider whether he
has the necessary skills and competence to work in an
IT environment or else he should seek the assistance of
an expert.
The internal auditor should obtain an understanding of
the IT environment at the planning stage to determine
the nature, timing and extent of audit procedures to
be performed and also evaluate the nature of inherent
and control risks which are prevalent. He should also
perform audit procedures based on the review of the
robustness of the IT environment. The extent of reliance
which can be placed when the information is processedby an outsourced agency together with the risks
associated thereon should also be considered.
The internal auditor should document the internal audit
plan, the nature, timing and extent of audit procedures
performed and the conclusions drawn from the
evidence obtained. He should also satisfy himself that
evidence in the electronic form is adequately and safely
stored and is retrievable in its entirety when required.
Exposure Draft of SIA on Knowledge of the
Entity and its EnvironmentThe purpose of the SIA is to establish standards and
guidelines on the knowledge of the entitys business and
the techniques to be adopted by the internal auditor
in acquiring such knowledge about the client entity
and its environment, prior to commencing the audit
engagement and subsequently thereafter, at all stages
of the internal audit process.
The internal auditor whilst performing an internal audit
should obtain knowledge of the entitys business and
its operating environment to enable him to review the
key risks, processes, systems, procedures and controls.
The standard deals with the information that internal
auditor should obtain prior to and after acceptance of
an engagement.
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In case of FCCBs issued under the automatic route,
the buyback value should be at a minimum discount
of 15% of the book value, the funds whereof shall
be out of the existing foreign currency funds held
either in India or abroad or out of fresh ECBs raised.
In case of FCCBs issued under the approval route,
the buyback value shall be at a minimum discount of
25% of the book value, the funds whereof shall be
out of internal accruals as certified by the Statutory
Auditor and the total amount shall not exceed USD
50 million per company.
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guidance because of the significant changes to the
guidance on business combinations and subsidiary
equity transactions and the increased use of fair value
measurements as a result of these Statements.
The Task Force reached a consensus that:
An entity should determine the initial carrying value
of an equity method investment by applying the cost
accumulation model described in paragraphs D3D7
of Statement 141(R).
An entity should use the other-than-temporary
impairment model of Opinion 18, not some other
method that disaggregates the investment into the
individual assets of the investee, when testing equity
method investments for impairment.
However, investors should adjust any impairments
recorded by an investee for existing differences between
the investors basis and the underlying investees basis
in such impaired assets. Share issuances by the investee
should be accounted for as if the equity method investorhad sold a proportionate share of its investment (i.e.,
any gain or loss is recognized in earnings).
When an investment is no longer within the scope of
equity method accounting and instead is within the
scope of cost method accounting or Statement 115,
the investor should prospectively apply the provisions
of Opinion 18 or Statement 115 and use the current
carrying amount of the investment as its initial cost.
To coincide with the effective dates of Statements
141(R) and 160, the consensus is effective fortransactions occurring in fiscal years, and interim periods
within those fiscal years, beginning on or after
15 December 2008. Early adoption is not permitted.
EITF Issue No. 08-7 on Accounting for Defensive
Intangible Assets
The Task Force reached a consensus that
an acquired defensive asset should be accounted
for as a separate unit of accounting (i.e., an asset
separate from other assets of the acquirer);
an acquired research and development asset is
outside this Issues scope and should be accounted
for pursuant to paragraph 16 of Statement 142;
the useful life assigned to an acquired defensive asset
should be based on the period during which the
asset would diminish in value; and
it would be rare for an entity to conclude that a
defensive asset has an indefinite life.
The Issue includes examples illustrating how to
determine the assets amortization period.
To coincide with the effective date of Statement 141(R),
the consensus is effective for defensive intangible assets
acquired in fiscal years beginning on or after
15 December 2008.
EITF Issue No. 08-8 on Accounting for an
Instrument (or an Embedded Feature) with a
Settlement Amount that is based on the Stock of
an Entitys Consolidated Subsidiary
Reporting entities that enter into freestanding financial
instruments (or instruments that
contain embedded features) for which the payoff to the
counterparty is indexed to thestock of a consolidated subsidiary.
The Task Force reached a consensus that freestanding
financial instruments or embedded features) that
are indexed to, in whole or in part, the stock of a
consolidated subsidiary are considered indexed to
the entitys own stock in the consolidated financial
statements if the requirements of Issue 07-5 are met
and the subsidiary is a substantive entity.
This Issue requires that any subsidiary referenced in
the freestanding instrument (or embedded feature) besubstantive to ensure that entities cannot receive equity
classification for a financial instrument referenced to
a subsidiary that has no business purpose (e.g., the
subsidiary was formed to hold a derivative instrument or
a commodity).
The Task Force also reached a consensus that an equity-
classified instrument (including
an embedded feature that is separately recorded
in equity) within the scope of this Issue should be
presented as a component of non controlling interest
in the consolidated financial statements in a manner
consistent with the conclusions in Statement 160.
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However, if an equity-classified instrument within the
scope of this Issue is entered into by the parent and
expires without being exercised, the carrying amount of
the instrument at expiration would be reclassified from
non controlling interest to controlling interest.
To coincide with the effective date of Statement 160,
the consensus is effective for fiscal years, and interim
periods within those fiscal years, beginning on or after
15 December 2008. At transition, the carrying value
of the instrument (or separated embedded feature)
previously classified as a liability will be reclassified to
non controlling interest. Early adoption is not permitted.
Securities and Exchange Commission (SEC)
releases new Financial Reporting Manual
The SECs Division of Corporation Finance released
its updated Financial Reporting Manual. The new
manual supersedes the Division of Corporation
Finances Accounting Disclosure Rules and Practices:
An Overview (also known as the SEC Staff Training
Manual), which had not been updated since 2000. The
Financial Reporting Manual provides helpful insight intohow the SEC staff applies SEC rules and regulations to
topics such as SEC registrants and acquired businesses
financial statements, pro forma financial statements,
MD&A, and non-GAAP measures.
SEC Issues Interpretation on References to Third-
Party Experts and Consents
The SECs Division of Corporation Finance issued
several new and revised Compliance and Disclosure
Interpretations (C&DIs) on Securities Act sections. The
following are two notable new questions from the
C&DIs:
Question 141.01, which indicates that a registration
statement that describes or includes an investment
bankers fairness opinion must also include the bankers
consent to being named in the registration statement.
Question 141.02, which addresses whether a registrant
that chooses to refer to a third-party expert must name
the third party and obtain the third partys consent.
It also distinguishes between statements of the
registrant, which do not require a consent, and
statements attributed to a third-party expert, which
would require a consent.
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Restructured version of International Financial
Reporting Standard (IFRS) 1
The International Accounting Standards Board (IASB)
has released a restructured version of IFRS 1 on First-
time Adoption of International Financial Reporting
Standards. IFRS 1 was first issued in June 2003, and
since then it has been amended frequently. As a result,
the Standard has become more complex and less clear.
In 2007, therefore, the Board proposed, as part of its
annual improvements project, to change IFRS 1 to make
it easier for the reader to understand and to design it to
better accommodate future changes. This new version
of IFRS 1 retains the substance of the previous version,
but within a changed structure. It replaces the previous
version and is effective for entities applying IFRSs for the
first time for annual periods beginning on or after 1 July
2009. Earlier application is permitted.
Reclassification of Financial Assets
Amendments to IAS 39 and IFRS 7
The IASB has issued amendments to International
Accounting Standard (IAS) 39 on Financial
Instruments: Recognition and Measurement and IFRS7 on Financial Instruments: Disclosures that permit
reclassification of some financial assets out of the fair
value through profit or loss-category and out of the
available-for-sale-category as defined in IAS 39. The
amendments introduce into IFRSs the same possibility
of reclassifications that is already permitted under US
GAAP in certain circumstances. Reclassifications made
under the amendment require additional disclosures in
accordance with IFRS 7.
The amendments are effective on 1 July 2008. Any
reclassification made on or after 1 November 2008 takeseffect from the date of reclassification. However, any
reclassification before 1 November 2008 can take effect
from 1 July 2008 or a subsequent date. A reclassification
cannot be applied retrospectively before 1 July 2008.
IFRIC 17 on Distributions of non-cash assets to
owners
The International Financial Reporting Interpretations
Committee (IFRIC) has issued IFRIC 17 on Distributions
of Non-cash Assets to Owners. IFRIC 17 aims to provide
accounting guidance when a distribution to owners is
not in cash. The interpretation clarifies:
a dividend payable should be recognised when the
dividend is appropriately authorised and is no longer
at the discretion of the entity.
an entity should measure the liability for the dividend
payable at the fair value of the net assets to be
distributed.
an entity should recognise the difference between
the dividend paid and the carrying amount of the net
assets distributed in profit or loss when the dividend
is distributed.
an entity should provide additional disclosures about
the net assets being held for distribution to owners
when the entity is committed to distribute them.
The scope section clarifies that only pro-rata
distributions in non-common control situations are
within the scope of the IFRIC 17. IFRIC 17 is applicable
prospectively for annual periods beginning on or after
1 July 2009 with earlier application permitted.
Final report of the IASBs Expert Advisory Panel
on valuing financial instruments when markets
are no longer active
The IASB has published educational guidance on the
application of fair value measurement when markets
become inactive. The report is a summary of seven
meetings held by the IASBs Expert Advisory Panel.
While not mandatory, the document aims to provide
useful information and educational guidance about the
processes used and judgements made when measuring
and disclosing fair value.
International Financial
Reporting Standards
7/29/2019 Audit News January 2009
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