Tropical Financial

Statement

Information Session

2013-2014

Welcome & Overview

• Aims of the workshop

• Department/Legislative changes

• Tropical Financial Statements 2013-14

• Accounting Standards Update

• Queensland Audit Office

• State Valuation Service

• Evaluation and Close 3:30pm

Aims of the Workshop • Share knowledge and experience

• Develop understanding of changes in AASBs, legislation & Tropical

• Explore solutions, processes and answers to issues raised.

• Learn about emerging issues from the Queensland Audit Office

Samantha Cieslar

What’s new in the Department

Legislative changes….

Tropical Financial Statements 2013-14

Australian Accounting Standard update

What’s New in the Department

Department of Local Government, Community Recovery and Resilience

Director-General Craig Evans

Legislative Changes….

National Competition Policy

New thresholds

CCC threshold increased

Audit Committees

• All Councils from 1 July 2014

• Requirements for an audit committee

De-amalgamation

Tropical Illustrative Financial Statements 2013-14

What is Tropical? • Example

• For Queensland councils

• Produced by Department

• Reviewed by QAO

• Not mandatory

• Does not cover every scenario

How should Tropical be used? • Reference guide or input model?

• Remember,

they are

your financial

statements

So what has changed?

AASB Requirements

• Note 1G disclosures updated

- Effect of AASB 13

- Accounting Standards

issued but not yet adopted

• New Note 19 Fair Value

Enhanced disclosure

• Controlled but not consolidated

• Changed formats

• Minor fixes

• Order for annual report

Carbon Pricing

Summary of changes

• Highlighted in Orange

• Note 1

• Note 19

• Controlled but not consolidated

• Minor fixes

Financial statements 2013-14

Questions?

Reflection?

Australian Accounting Standards Update

Why Comply?

• Local Government Regulation 2012

• Council’s annual general purpose financial statement must comply with:

– Australian Accounting Standards

– Statements of Accounting Concepts

– Interpretations

– Framework for the Preparation and Presentation of Financial Statements

What are Australian Accounting Standards?

• Issued by the Australian Accounting Standards Board (AASB)

• Continually updated by issuing amendments or revised and new standards

• Changes have specified application date

Why So Many Changes? • Harmonisation with International Accounting

Standards Board (IASB) + International Financial Reporting Standards Interpretations Committee (IFRSIC)

• Convergence between IASB/IFRSIC & US Financial Accounting Standards Board (US FASB)

• Pressure from G20 post Global Financial Crisis

• Harmonisation between Australia (AASB) & New Zealand (NZ ASB)

2013-14 IMPACTS

2013-14 - Major Changes Standard Change In Tropical

13/14?

AASB 13 Fair Value Measurement

Lots!

AASB 1053 Application of Tiers of Australian Accounting Standards

Introduces tiers with reduced disclosure requirements applicable to tier 2. Local Governments are tier 1 (full IFRS still required)

Revised AASB 119 Employee Benefits

Short-term/long-term benefits, defined benefit plans, termination payments

Disclosure

Level

Fair

Value

AASB 13 Fair Value Measurement effective from reporting periods beginning on or after

1 January 2013

• New definition

• Measurement guidance

• New disclosures

Fair value - price received to

sell asset, or paid to transfer

liability, in orderly transaction

between market participants

at measurement date (“exit

price”)

Valuation Methods

• Market approaches • Income approaches • Cost approaches

MUST maximise use of observable inputs,

minimise use of unobservable inputs

Assume transaction to sell asset/transfer liability occurs in the principal market for asset/liability

where no principal market, use the most advantageous market

Fair Value

Exclude transaction costs

Include necessary transport costs

Non-Financial Assets

Assume highest & best use

by market participant that

is physically possible,

legally permissible

& financially feasible

May differ from current entity use

Liabilities

• Assume remains outstanding

after transfer & market

participant would fulfil

obligation

• Fair value of liability to reflect

non-performance risk

Fair Value Hierarchy

Classify inputs

Unadjusted quoted market prices for identical assets/liabilities in active markets

Other inputs directly or indirectly observable in market

Inputs not observable in market

Level 1

Level 2

Level 3

Fair Value Hierarchy

Categorise valuation

Based on lowest level input significant to entire fair value measurement

• Eg. Estimate of useful life = level 3 input

Valuation Level 2 input

Level 3

input

Category Level 3

Disclosure

Depends upon

• Measured @ FV vs Disclosed @ FV

• Recurring vs non-recurring

• Categorisation in FV hierarchy

• Must disclose policy for

transfer between levels

BEYOND 2013-14 …

Future changes - remember to …

• Identify & disclose material expected impacts for YOUR Council (AASB 108.30)

• Watch out for new/amended standards/interpretations issued between March 2014 & issue of financial statements

AASB 9 Financial Instruments

Assets after initial recognition – amortised cost or fair value

Consolidation/ Joint arrangements/ Associates

AASB 10 Consolidated Financial Statements

Investor controls investee when investor exposed, or has rights, to variable returns from involvement with investee & has ability to affect those returns through power over investee

AASB 11 Joint Arrangements • “Joint operation” (direct interest in assets/liabilities)

– account for share of assets/liabilities/revenue /expenses in own books according to relevant standards etc

• “Joint venture” (interest in net assets) – equity accounting as per revised AASB 128

• Accounting for both associates & “joint ventures” in revised AASB 128 -only equity accounting

AASB 12 Disclosure of Interests in Other Entities

Contains disclosure requirements:

• Subsidiaries

• Joint arrangements

• Associates

• Unconsolidated structured entities

Materiality

On the horizon…..

Related Parties

AASB ED 214 Extending Related Party Disclosures to the Not-for-Profit

Public Sector • Councils no longer be exempt from AASB 124 Related Party

Disclosures disclosures concerning:

– key management personnel remuneration – including Councillors, CEOs, Senior Management??

– transactions with other related parties (inc. family members)

• Amendment expected by March 2014 to apply for 2014/15?

Income from transactions of NFP entities

• ED expected by

June 2014

• Will this replace

AASB 1004????

AASB ED 222 Revenue from Contracts with Customers

• Replaces AASB 111 Construction Contracts, AASB 118 Revenue, Interpretation 13 Customer Loyalty Programmes, Interpretation 15 Agreements for the Construction of Real Estate, Interpretation 18 Transfers of Assets from Customers & Interpretation 131 Revenue – Barter Transactions Involving Advertising Services

Where to find accounting standards

• www.aasb.com.au

• Current year version:

• http://www.aasb.gov.au/Pronouncements/Search-by-reporting-period.aspx

Keeping up to date

• councils responsible for keeping up to date

• time savers

– review accounting firm websites

for quick summaries

– if topic looks relevant, read

“main features” section of

standard first

Useful websites • Australian accounting standards www.aasb.com.au • Departmental bulletins www.dlgcrr.qld.gov.au/resources-

lg/local-government-bulletins.html • PriceWaterhouse Coopers

www.pwc.com.au/assurance/index.htm • Deloitte

http://www.deloitte.com/view/en_AU/au/services/assurance/accountingtechnical/index.htm

• Queensland Treasury (applicable to State Government, not local government) http://www.treasury.qld.gov.au/office/knowledge/docs/fin-reporting-req/index.shtml

Department of Local Government, Community Recovery and Resilience

Po Box 15009

City East QLD 4002

Samantha Cieslar

Phone: 3452 6721

Email: samantha.cieslar@dlgcrr.qld.gov.au

Morning

Tea