Reporting Risk Results

Contacts

Melbourne
Dianne Azoor-Hughes
dianne.azoor-hughes@pitcher.com.au
03 8610 5384

Stephen Whitchurch
stephen.whitchurch@pitcher.com.au
03 8610 5549

Sydney
Carl Millington
cmillington@pitcher-nsw.com.au
02 9228 2249

Adelaide
Andrew Faulkner
andrew.faulkner@pitcher-sa.com.au
08 8179 2800 

Brisbane
Jason Evans
jevans@jr.com.au
07 3222 8444

 

Welcome to the first issue of our new newsletter – Reporting Risk Results. 

The purpose of this newsletter is to provide the latest information relevant and of assistance to larger businesses.

One of the most frequent discussions we have with our clients relates to the cost and complexity of compliance.  Pitcher Partners is at the forefront of these issues advocating strongly for our market and endeavouring to ease the burden and help clients achieve their business goals.  Reporting Risk Results is designed to assist in this process.

We hope you will find Reporting Risk Results useful and informative.


Economic Reality

With the next wave of accounting standards rapidly approaching our shores, the IASB is continuing a theme based on reflecting “economic reality” through a “faithful representation of an entity’s financial position and performance”. The new standards introduce a different perspective to current accounting practice. The transition process will require early examination of all contractual arrangements, not only to derive the accounting numbers, but to understand their meaning as delivered through consistent application, which will be essential for comparability.  more  




Timing of impacts

The first wave of financial reporting standards will be operative for annual reporting periods beginning on or after 1 January 2013. This means that when entities have a financial year ending 30 June, opening balances for transition to the standards operative in 2013 will be established at 1 July 2012. Contractual arrangements that are currently in place are likely to impact the opening financial position when the new standards become operative. more  




Strategy

Whether or not a business has a documented business strategy or a formal business plan, the disclosures required by IFRS provide a good insight to an entity’s business model. The financial statements report the financial performance and financial position that is delivered through the operation of that business model. more  
 




Group Financial Reports

The new financial reporting standards relating to consolidations and joint arrangements are based on a new concept of control. The standards recognise that legal ownership of an entity and control of voting rights is not the only way to secure control. “Control” can also be established through contractual arrangements and in some circumstances contractual arrangement are overlaid on operating structures that have been implemented to satisfy taxation, asset protection or other legal objectives. more 
 




Joint Arrangements

AASB 11 Joint Arrangements distinguishes between parties that have joint control of a joint arrangement (joint operators or joint venturers) and parties that participate in, but do not have joint control of a joint arrangement.

Given that this new perspective on control will change ‘group boundaries’ AASB 12 Disclosure of Interests in Other Entities introduces extensive new disclosures to explain the arrangements in place. more 

 




 Financial Instruments

AASB 9 introduced the first stage of reforms to simplify accounting for financial instruments by improving and simplifying the classification and measurement of financial assets. AASB 9 replaces the various classifications of financial assets in AASB 139 and requires that classification is based on the entity’s business model for managing financial assets. In particular the classification should reflect the characteristics of the contractual cash flows such that all financial assets will be measured either at amortised cost or fair value. more 
 
 





Fair Value Measurements

AASB 13 Fair Value Measurement establishes one methodology for fair value measurement, for all assets and liabilities, taking exit prices in an active market as the starting point. more  

 




Revenue Recognition

Revenue is a critical metric for users of financial statements, as it provides an insight into the nature and extent of operations and the entity’s performance. The IASB issued a second revenue exposure draft this month, pursuant to its objective to introduce a single revenue recognition standard. When issued, this standard will replace the suite of standards on revenue, construction contracts and related interpretations issued by the IASB and FASB in the US. more  




Leases

The objective of the leases project is to develop a single approach to lease accounting to eliminate the sometimes arbitrary differentiation between operating and finance leases. The first exposure draft proposed that all assets and liabilities arising under all lease contracts should be recognised in the statement of financial position. more