The Staff of the International Ethics Standards Board for Accountants (IESBA) today released a questions and answers (Q&As) publication to explain key revisions to the non-assurance services (NAS) provisions of the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code). Together with the recently issued fee-related revisions to the Code, the NAS revisions significantly strengthen the International Independence Standards by addressing public interest concerns about independence when firms provide NAS to their audit clients. The development of the Q&As has been informed by the IESBA’s deliberations in the project to revise the NAS provisions and extensive consultations with a wide range of stakeholders, including regulators and audit oversight bodies, the investor and corporate governance communities, national standard setters, firms and professional accountancy organizations.
The publication complements the Basis for Conclusions for the final NAS pronouncement and is intended to assist national standards setters, professional accountancy organizations, and professional accountants in public practice as they adopt and/or implement the revised NAS provisions. The Q&As will also assist other stakeholders, including regulators and audit oversight bodies, those charged with governance, investors, preparers, and academics and other educators better understand the key changes to the NAS provisions of the Code. These changes include the new requirements and guidance that:
Prohibit a firm or a network firm from providing a NAS that might create a self-review threat to an audit client that is a public interest entity.
Explain how firms are to determine when a self-review threat to independence might be created, including in relation to providing advice and recommendations to an audit client.
Are relevant in applying the Code’s conceptual framework to identify, evaluate, and address threats to independence that might be created when an audit firm provides a NAS to an audit client.
Enable and promote more robust communication and engagement about independence matters relating to NAS between audit firms and those charged with governance of public interest entities.
The revised NAS provisions are effective for audits of financial statements for periods beginning on or after December 15, 2022.
Click here to access the revised NAS provisions, and the other recently approved changes to the Code.
New Guidance for Auditors of Public Interest Entities
The IPSASB held its second meeting of the year in New York on June 21-24, 2022.
Transfer Expenses
The IPSASB made significant progress in finalizing its transfer expense model. The IPSASB confirmed that a transfer provider’s enforceable rights in a binding arrangement is an asset that is derecognized as the rights are extinguished. For transfers without binding arrangements, the board decided the transfer expense is recognized when control of the transferred resources is lost.
Revenue
With the revenue accounting models largely shaped in 2021, the IPSASB focused on the application to public sector specific issues. The IPSASB confirmed that existing proposals related to the subsequent measurement of non-contractual receivables and disclosure requirements remain appropriate from a principled perspective. The board also confirmed that accounting principles for binding arrangements should be applied to account for capital transfers.
Measurement
After analyzing the additional information and perspectives from respondents, the IPSASB agreed to continue developing its public sector measurement basis, Current Operational Value (COV), for assets held for their operational capacity. The IPSASB confirmed the core principles of COV and agreed they should be clarified to enhance understandability. With the core principles agreed, the IPSASB will next focus their attention on developing the non-authoritative text to ensure clarity in their intended application in practice.
Conceptual Framework – Phase I
The IPSASB continued its analysis of assumption price, cost of release and net selling price. The IPSASB considered the approach of the International Accounting Standards Board and the broader relevance of these measurement bases to public sector financial reporting and decided not to include these measurement bases in a revised chapter on measurement.
Other Lease–Type Arrangements
The IPSASB agreed on the accounting for concessionary leases. For lessees, the IPSASB agreed to measure the right-of-use asset at fair value on initial recognition. For lessors, the IPSASB decided that the current IPSAS guidance is appropriate for concessionary leases.
ED 78, Property, Plant, and Equipment
The IPSASB performed a detailed review of the responses to ED 78, Property, Plant, and Equipment. The proposals in ED 78 were strongly supported by respondents. The IPSASB agreed to move forward with the proposals related to the structure of the guidance, characteristics of infrastructure assets, additional disclosure of unrecognized heritage assets, and non-authoritative guidance.
