Welcome to IFAC’s International Auditing and Assurance Standards Board (IAASB) eNews.

In This Issue:

1. IAASB June Meeting
2. Auditor Reporting Exposure Draft
3. Auditor Reporting in the News
4. Post-Implementation Review of the Clarified ISAs
5. IAASB Chairman Speaks at CReCER 2013
6. IAASB 2012 Annual Report
7. Constructive Cooperation for International Standards
8. Other Relevant Standard-Setting Board and IFAC Initiatives
9. The IAASB is Hiring
10. Share IAASB eNews with Your Colleagues
11. World Congress of Accountants 2014 to be Held in Rome; Sponsorship Opportunities Available

1. IAASB June Meeting

The IAASB met June 24-28, 2013, in New York, USA. Please visit the IAASB Meeting Page for relevant agenda items. Meeting highlights and an audio podcast are also available. For more detailed information about IAASB projects, please refer to the project summaries under Active Projects.

2. Auditor Reporting Exposure Draft

At its June Meeting, the IAASB approved Reporting on Audited Financial Statements: Proposed New and Revised International Standards on Auditing (ISAs). This exposure draft includes proposed new ISA 701, Communicating Key Audit Matters in the Independent Auditor’s Report, proposed revised ISA 700, Forming an Opinion and Reporting on Financial Statements, and revisions to ISAs 260, 570, 705, and 706. Example reports illustrating various circumstances are included.

The Staff of the IAASB has provided additional, non-authoritative documents: an At A Glance; guidance to audit firms for field-testing proposed ISA 701; and two supplements to illustrate the changes made to ISA 700 and ISA 705 to assist those translating the exposure draft.

Comments are due by:  November 22, 2013.

3. Auditor Reporting in the News

The IAASB’s Auditor Reporting exposure draft has been highlighted in a number of news articles, including:

• The Accountant
• Bloomberg BNA
• CFO.com
• CorporateCounsel.net (podcast)
• Financial Executive

4. Post-Implementation Review of the Clarified ISAs
The IAASB recently released its final report on the Post-Implementation Review of the Clarified ISAs. This report summarizes feedback and the main themes that have emerged, and will be an important input to the IAASB’s future planning process, including its 2015–2019 strategy deliberations.

5. IAASB Chairman Speaks at CReCER 2013

In “The Evolving Role of Auditors and Auditor Reporting,” at CReCER in Cartagena, Colombia (August 2013), Prof. Arnold Schilder highlighted key aspects of the auditor reporting proposals.

6. IAASB 2012 Annual Report

The IAASB’s 2012 Annual Report, Responding to the Needs of an Interconnected World, highlights the board’s work in the public interest to enhance the quality and consistency of practice throughout the world, and thereby strengthen the public’s confidence in the global auditing and assurance profession. The report covers new and enhanced international standards issued by the IAASB during the year, the board’s progress on its current standard-setting projects and related initiatives, and its outreach activities to obtain input on its deliberations and to keep stakeholders informed of its activities. 

7. Constructive Cooperation for International Standards
In May, the IAASB joined IFAC and the International Accounting Standards Board (IASB) to gather more than 70 representatives from over 10 national organizations from former Soviet republics in Europe and Central Asia in London at a two-day conference. Hosted by the Association of Chartered Certified Accountants (ACCA), the event brought together organizations with responsibilities relating to the adoption or implementation of ISAs and IFRS.

The IAASB and IASB have been actively liaising on other initiatives of mutual interest. In March 2013, the IAASB submitted further comments concerning the auditability of recent IASB exposure drafts. The IAASB also welcomed IASB and IASB Staff representatives to its June 2013 Board meeting to discuss current developments, including in relation to going concern

8. Other Relevant Standard-Setting Board and IFAC Initiatives

Initiatives of IFAC committees and other independent standard-setting boards supported by IFAC may be of interest to those who follow the work of the IAASB, including the following:

• Kristian Koktvedgaard Appointed Chair of Ethics Board Consultative Advisory Group
• IPSASB Publishes Public Sector Conceptual Framework Exposure Draft
• IFAC Global Forum Focuses on Innovations to Support the Growth of Small Businesses and the Accountants That Serve Them
• IFAC Signs Strategic Agreement with The IIA
• Integrating ASEAN Capital Markets: Need for Strong Financial Reporting Environment and Building Investor Confidence

9. The IAASB is Hiring

The IAASB has open positions within its technical staff team. Interested individuals are invited to submit their resumes to: jobs@ifac.org. Further information about the positions is available on the IAASB home page.

10. Share IAASB eNews with Your Colleagues

The IAASB issues regular eNews updates to keep you apprised of the board's activities and recent publications. Please forward this eNews to any interested colleagues and let them know they can register and subscribe to this and other eNews bulletins on the IFAC website.

11. World Congress of Accountants 2014 to be Held in Rome; Sponsorship Opportunities Available

The next World Congress of Accountants (WCOA) will be hosted by the Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili (CNDCEC) in Rome, Italy in 2014. Themed 2020 Vision: Learning from the Past, Building the Future, the 2014 WCOA will be held November 10-13 at the Auditorium Parco della Musica. More than 4,000 professionals from all over the world will convene at this IFAC event, which is held every four years. WCOA 2014 will look back to explore the evolution of the accountancy profession and forward to showcase the innovations that will shape the future of the profession.

The WCOA also provides a global platform for organizations and firms to share their projects and visions via various sponsorship opportunities. For more information, please contact info@wcoa2014rome.com or Dimarco@wcoa2014rome.com.

Good afternoon ladies and gentlemen, it is my pleasure to be with you again. I say ‘again’ as there are many familiar faces in the audience from the 2012 CReCER Conference in Nicaragua. For me, this in and of itself is a clear signal of the commitment of stakeholders in Latin America to engage in dialogue on international developments.

At last year’s conference, I noted a number of important challenges in financial reporting and auditing, and in the surrounding environment. For example, today’s financial reporting involves more complexity, more areas of judgment, and more qualitative disclosures; and users have higher expectations than ever before, with many saying “We want to hear more.” Perhaps most importantly, the global financial crisis has triggered questions concerning the quality of audits, their effectiveness, and the role of professional judgment and skepticism – which have given way to fundamental questions to the profession about relevance and trust.

So why change the auditor’s report now? What we learned from research is a positive message: the auditor’s opinion is valued, and users want to hear more from the auditor – more pertinent, and more tailored, information about the specific audit performed on an entity’s financial statements. There is symbolic value in the current report, but little communicative value – and users see the potential for the auditor to provide more value and more transparency. So, now is the time to lay the foundation for the auditor’s report of the future.

The Professional Accountants in Business (PAIB) Committee of the International Federation of Accountants (IFAC), the global organization for the accountancy profession, today released International Good Practice Guidance, Project and Investment Appraisal for Sustainable Value Creation.

The guidance supports the accountancy profession’s facilitation of sustainable organizations, financial markets, and economies by providing guiding principles to manage the complexities of performing a robust project and investment appraisal. Greater rigor in the appraisal and decision process can be achieved by using the principles as a benchmark against which to assess an organization’s current practice.

“In today’s world, it is no longer sufficient for investment decisions to be appraised on financial criteria alone. While this guidance reinforces the importance of rigorous and robust project and investment appraisal, it does so  with a specific emphasis on facilitating long-term decision making and incorporating economic, environmental, and social considerations,” said Roger Tabor, chair of the PAIB Committee. “The revised guidance also sets out the critical role professional accountants in business play in advising on the application of financial principles and theory that are being tested during this current period of market instability.”

Accountants in business play a crucial role in helping organizations ensure a systematic and analytical approach to project and investment appraisal. In practice, fundamental principles of corporate finance are often breached, leading to the destruction of value for shareholders and other stakeholders. Far too frequently, decisions ignore the costs and benefits associated with wider external impacts—social (e.g., labor practices), economic (e.g., in communities), and environmental (e.g., pollution). By introducing greater rigor, organizations can assess all important aspects of a project or investment.

“Traditionally, project and investment appraisal is taught and discussed in purely financial terms, which helps an organization focus on decisions that create the most economic value,” said Athalanallur Natarajan Raman, chair of the PAIB Committee Sustainability Advisory Group. “To create sustainable value, it is essential to also take into account every aspect of the project or investment and consider all facets of sustainability.”

About International Good Practice Guidance
International Good Practice Guidance (IGPG) issued by the PAIB Committee cover areas of international and strategic importance in which professional accountants in business are likely to engage. In issuing principles-based guidance, IFAC seeks to foster a common and consistent approach to those aspects of the work of professional accountants in business not covered by international standards. IFAC seeks to clearly identify principles that are generally accepted internationally and applicable to organizations of all sizes in commerce, industry, education, and the public and not-for-profit sectors. Previously issued IGPGs are available on the IFAC website, including Preface to IFAC’s International Good Practice Guidance.

About the PAIB Committee
The PAIB Committee serves IFAC member bodies and professional accountants worldwide who work in commerce, industry, financial services, education, and the public and the not-for-profit sectors. Its aim is to promote and contribute to the value of professional accountants in business by increasing awareness of the important roles professional accountants play, supporting member bodies in enhancing the competence of their members, and facilitating the communication and sharing of good practices and ideas.

About IFAC
IFAC is the global organization for the accountancy profession, dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. It is comprised of 173 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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Accountants in business play a crucial role in helping organizations ensure a systematic and analytical approach to project and investment appraisal. In practice, fundamental principles of corporate finance are often breached, leading to the destruction of value for shareholders and other stakeholders. Far too frequently, decisions ignore the costs and benefits associated with wider external impacts—social (e.g., labor practices), economic (e.g., in communities), and environmental (e.g., pollution).

Thank you for subscribing to the eNews from the International Public Sector Accounting Standards Board (IPSASB). This edition provides a summary of decisions made at the IPSASB’s meeting held June 17-20, 2013, in Toronto, Canada. Please visit the IPSASB Meeting Page for the meeting highlights and relevant agenda items.

An audio podcast of Meeting Highlights is also available.

1. Reporting on the Long-Term Sustainability of an Entity’s Finances
2. Financial Statement Discussion and Analysis
3. Reporting Service Performance Information
4. Governance and Oversight Update
5. Relationship to IASB Conceptual Framework and Development of the Preface to the Conceptual Framework
6. IPSAS 6-8 Update
7. First-Time Adoption of Accrual Basis IPSASs
8. Government Business Enterprises
9. Next Meeting

1. Reporting on the Long-Term Sustainability of an Entity’s Finances

The IPSASB reviewed a further version of draft Recommended Practice Guideline (RPG), Reporting on the Long-Term Sustainability of an Entity’s Finances. This version reflected the direction at the March 2013 meeting that capacity and vulnerability are aspects of each of the three dimensions of long-term fiscal sustainability: service, revenue and debt. The IPSASB directed that a definition of the term “current policy assumptions” be inserted and other minor modifications be made. The IPSASB approved RPG 1 for issuance as a final pronouncement; it was published on July 24.

2. Financial Statement Discussion and Analysis

The IPSASB reviewed a further version of draft RPG, Financial Statement Discussion and Analysis, including a substantially modified Basis for Conclusions. The RPG provides guidance to public sector entities for preparing and presenting financial statement discussion and analysis, which will assist users in understanding the financial position and financial performance described by the general purpose financial statements.

The RPG recommends that financial statement discussion and analysis include:

• An overview of the entity’s operations and the environment in which it operates;
• Information about the entity’s objectives and strategies that relate to the financial statements;
• An analysis of the entity’s financial statements, including significant changes and trends; and
• A description of the entity’s principal risks and uncertainties that relate to the financial statements, an explanation of changes in those risks and uncertainties since the last reporting date, and its strategies for bearing or mitigating those risks and uncertainties.

The IPSASB approved RPG 2 for issuance as a final pronouncement; it was published on July 26.

3. Reporting Service Performance Information

The IPSASB considered issues with respect to development of a draft RPG, Reporting Service Performance Information, directing that it should provide a mixture of guidance on decisions and identification of minimum characteristics for reporting service performance information. Additionally, the IPSASB recommended the RPG acknowledge that some selection of services for reporting information will always be necessary. The RPG should, therefore, provide guidance on how this should be done and on relevant factors or criteria for such selection. It should also provide guidance on which types of performance indicators are chosen—inputs, outputs, outcomes, efficiency indicators, and/or effectiveness indicators. The guidance should:

• Tie the choice of indicators back to objectives;
• Encourage reporting that goes beyond outputs to outcomes; and
• Note that the circumstances in which an entity is reporting could be important.

With respect to information organization, the RPG should focus on principles rather than choices between particular approaches to information organization. Information organization will need to be appropriate for the types of services reported, their outcomes, and objectives.

An Exposure Draft (ED) of an RPG will be further developed for consideration at the IPSASB’s September 2013 meeting.

4. Governance and Oversight Update

The IPSASB received an update from the observers from the Organisation for Economic Co-operation and Development (OECD) and the World Bank regarding the formation of the IPSASB Governance Review Group, including a report on their first meeting, held May 31, 2013, in Paris, France. The Review Group will be chaired by representatives of the International Monetary Fund (IMF), the OECD, and the World Bank and its members will include the Financial Stability Board (FSB), International Organization of Securities Commissions (IOSCO), and International Organisation of Supreme Audit Institutions (INTOSAI). A consultation paper is planned for September, with final recommendations anticipated during the first half of 2014. These recommendations will be reported to the G-20 and the FSB.

The review will consider oversight arrangements as well as the broader questions of IPSASB governance and measures to enhance the perceived relevance, quality, and legitimacy of International Public Sector Accounting Standards (IPSASs).

5. Relationship of IPSASB Conceptual Framework to IASB Conceptual Framework and Development of the Preface to the Conceptual Framework

The IPSASB discussed the relationship of the Conceptual Framework to the International Accounting Standards Board (IASB)’s Framework project in light of the anticipated issue of an integrated Discussion Paper by the IASB; it was released in July 2013. The IPSASB reaffirmed that the Conceptual Framework is a critical project for the public sector, and neither an interpretation of the IASB’s current and evolving Framework nor an International Financial Reporting Standards (IFRS) convergence project.

IPSASB staff will review the IASB's Discussion Paper in order to avoid differences in definitions and terminology that are unwarranted by public sector circumstances.

The IPSASB also agreed the reason why the IPSASB Framework will differ from the IASB Framework should be communicated clearly. As part of this communication, the IPSASB agreed to publish The Preface to the Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities as a Preliminary Board View in July 2013.

6. IPSAS 6-8 Update

At previous meetings, the IPSASB has considered a range of issues associated with the development of the five EDs to be issued as part of this project. The June meeting focused on which reporting entities should be required to comply with the consolidation requirements in the ED based on IFRS 10, Consolidated Financial Statements.

The IPSASB considered the IASB’s exception from consolidation for investment entities. Although the IPSASB noted that relatively few public sector investment entities are expected to be applying IPSASs, the IPSASB agreed to propose that investment entities be required to recognize their controlled investments at fair value, as required by IFRS 10.

The IPSASB also considered a proposal for optional whole of government consolidated financial statements, in conjunction with mandatory statistical sector reporting. The IPSASB agreed not to proceed with this proposal, although it noted that the interaction between IPSAS 18, Segment Reporting, and IPSAS 22, Disclosure of Financial Information about the General Government Sector, could be explored in the future and might form part of future work program public consultations.

The IPSASB directed staff to proceed with drafting an ED, based on IFRS 10, which:

• Requires that investment entities account for their controlled investments at fair value; and
• Sets out the possibility of permitting the retention of fair value investment entity accounting by a non-investment controlling entity.

The IPSASB is expected to vote on the EDs at its September meeting.

7. First-Time Adoption of Accrual-Basis IPSASs

The IPSASB discussed an analysis of the transitional accounting issues related to IPSAS 28, Financial Instruments: Presentation; IPSAS 29, Financial Instruments: Recognition and Measurement; and IPSAS 30, Financial Instruments: Disclosure, and provided direction to staff on various aspects.

The IPSASB agreed to grant a first-time adopter a three-year relief period for the recognition of financial instruments that were not recognized under its previous basis of accounting. A first-time adopter that recognized financial instruments under its previous basis of accounting may adopt a three-year relief period for the measurement of such financial instruments. The board further agreed that all disclosure requirements relating to financial instruments should be applied prospectively as and when the financial instruments are recognized and/or measured.

The IPSASB debated various overarching issues that impact the finalization of the proposed ED and agreed that a first-time adopter should only apply deemed cost where the cost information of the asset is not available.

The IPSASB reviewed the first draft of the proposed ED and agreed that an updated version should be presented at the September 2013 meeting.

8. Government Business Enterprises

The IPSASB further discussed the Government Business Entities (GBEs) project, commencing with a history of the term, which dates back to 1989. The survey of board members in December 2012 revealed a number of issues with the definition of GBEs, ranging from the inclusion of entities that have a full cost recovery rather than profit objective; the meaning of not being fully reliant on government funding to be a going concern; the consistency in interpreting the definition across jurisdictions; whether the control criterion is appropriate; and whether a definition based on services or objectives would be better.

The IPSASB noted the wide spectrum of entities being treated as GBEs across jurisdictions and considered four options on the way forward:

• Not to define GBEs, leaving jurisdictions to make their own decisions on which entities are profit–oriented and should apply IFRS or national private sector GAAP;
• Clarify the existing definition to make it easier to apply and achieve greater consistency;
• Narrow the existing definition to seek to reduce the current diversity in terminology and practice; or
• Redefine GBEs based on services or objectives.

The IPSASB directed staff to prepare a consultation paper proposing the characteristics of entities which jurisdictions should consider when deciding whether to apply IPSASs to public sector entities.

9. Next Meeting

The next IPSASB meeting will be held in Toronto, Canada, Sept. 16-19, 2013. Members of the public may register to observe the meetings. Registration will close Sept. 9.

The 2012 International Accounting Education Standards Board (IAESB) Annual Report, Enhancing Professional Accounting Education, highlights the IAESB’s work in the public interest to enhance the quality and consistency of accounting education practices throughout the world, and thereby strengthen the public’s confidence in the competence of the global accounting profession.       

The International Federation of Accountants (IFAC), the global organization for the accountancy profession, along with the World Bank, the Inter-American Development Bank, and the Global Public Policy Committee, held the seventh Conference for Accounting and Accountability for Regional Economic Growth, or CReCER (Contabilidad y Responsabilidad para el Crecimiento Económico Regional) in Cartagena, Colombia, this week. IFAC member body the Instituto Nacional de Contadores Públicos de Colombia hosted and executed the 2013 CReCER event.

Themed Integrating Approaches to Financial Reporting to Advance Regional Economic Growth: An Exchange between Public and Private Sector, the conference drew more than 350 attendees and speakers and covered important topics, such as national and regional initiatives to advance adoption and implementation of international standards; global perspectives on the evolving role of auditors and accountants; recent capital market developments to support investment; and the future of business reporting, including integrated reporting.

IFAC supports this important event as part of overall efforts to strengthen professional accountancy organizations and their role in contributing to high-quality financial reporting and serving as centers of excellence for the auditing and accountancy profession. This year’s event was especially important because of the timeliness of the sessions on strategies for integrating International Public Sector Accounting Standards with public sector financial management systems and the recent Exposure Draft on auditor reporting from the International Auditing and Assurance Standards Board.

“The discussions, collaborations, and learning that takes place at CReCER by the profession and its key stakeholders have a lasting impact on accountancy and the economies in the region,” according to IFAC President Warren Allen. “These three days set up the next few years of work on the ground for professional accountancy organizations and international standard setters.”

IFAC looks forward to continuing to collaborate with nations and organizations in the region to advance the global and local issues of importance to accountancy and accountants, especially strengthening public sector financial management.

About IFAC
IFAC is the global organization for the accountancy profession, dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. It is comprised of 173 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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