Pro Audit

Please check out the latest blog on our website - Extension of SMSF annual returns

COVID-19 effect on Trustees and Annual returns for SMSFs COVID-19 is affecting many self-managed super funds (SMSFs) trustees and their service providers as they prepare to lodger their SMSF Annual Returns with the ATO.

ASIC Financial Reporting focuses for 31 December 2019

ASIC has announced its focus areas for 31 December 2019 financial report of listed entities and other entities of public interest with many stakeholders on 6 December 2019. For more details please check out ASIC website under media release section 19-341MR Financial reporting focuses for 31 December 2019. ASIC has also called companies to focus on new requirements that can materially affect reported assets, liabilities and profits.

New accounting standards
1. Impact of the new lease and other standards which will significantly affect reported results of many companies include:
• AASB 16 Leases (applies from years commencing 1 January 2019)
 which can significantly change the financial position and performance of lessees by bring leases formerly classified as operating leases on balance sheet and introduces a new measurement basis.
• AASB 17 Insurance Contracts (applies from years commencing 1 January 2021)
 companies affected by this standard and changes to the conceptual framework need to ensure appropriate disclosures on the future impact of those new requirements in the notes to 31 December 2019 financial reports
• Amendments to standards to apply the new definition and recognition criteria in the Conceptual Framework for Financial Reporting (applies from years commencing 1 January 2020)
• companies affected by this standard and changes to the conceptual framework need to ensure appropriate disclosures on the future impact of those new requirements in the notes to 31 December 2019 financial reports

Please refer to ASIC media release Companies need to respond to major new accounting standards

2. Impairment testing and asset values
• The recoverability of the carrying amounts of assets such as goodwill, other intangibles and property, plant and equipment continues to be an important area of focus.

Please refer to ASIC Information Sheet 203 Impairment of non-financial assets: Material for directors

3. Revenue recognition
• Directors and auditors should review an entity’s revenue recognition and policies to ensure that revenue is recognised in accordance with the substance of the underlying transactions.

4. Expense deferral
• Directors and auditors should ensure that expenses are only deferred where:
a. there is an asset as defined in the accounting standards;
b. it is probable that future economic benefits will arise; and
c. the requirements of the intangibles accounting standard are met, including
i. expensing start-up, training, relocation and research costs;
ii. ensuring that any amounts deferred meet the requirements concerning reliable measurement; and
iii. development costs meet the six strict tests for deferral.

5. Off-balance sheet arrangements
• Directors and auditors should carefully review the treatment of off-balance sheet arrangements, whether other entities are controlled and should be consolidated, the accounting for joint arrangements and disclosures relating to structured entities.

6. Tax accounting
• Preparers of financial reports should ensure that:
a. there is a proper understanding of both the tax and accounting treatments, and how differences between the two affect tax assets, liabilities and expenses;
b. the impact of any recent changes in legislation are considered; and
c. the recoverability of any deferred tax asset is appropriately reviewed.

7. Operating and financial review (OFR)
• Listed companies should provide useful and meaningful information in the OFR about underlying drivers of the results and financial position, as well as business strategies and prospects for future financial years.
• Risks and other matters that may have a material impact on the future financial position or performance of the entity should be disclosed. This could include, for example, matters relating to climate change, market changes, digital disruption, new technologies, Brexit or cyber-security. For more information please refer to ASIC Regulatory Guide 247 Effective disclosure in an operating and financial review.
• Directors may also consider whether it would be worthwhile to disclose additional information that would be relevant under integrated reporting, sustainability reporting or the recommendations of the Task Force on Climate-related Financial Disclosures where that information is not already required for the OFR.

8. Non-IFRS financial information
• Directors should also consider whether any non-IFRS financial information in the OFR or other documents outside the financial report is potentially misleading and is presented in accordance with ASIC Regulatory Guide RG 230 Disclosing non-IFRS financial information. RG 230 also covers limitations on the use of non-IFRS measures in the financial report.

9. Estimates and accounting policy judgements
• Disclosures regarding sources of estimation uncertainty and significant judgements in applying accounting policies are important to allow users of the financial report to assess the reported financial position and performance of an entity. Directors and auditors should ensure disclosures are made and are specific to the assets, liabilities, income and expenses of the entity.
• Disclosure of key assumptions and a sensitivity analysis are important. These enable users of the financial report to make their own assessments about the carrying values of the entity’s assets and risk of impairment given the estimation uncertainty associated with many asset valuations.

ASIC Financial Reporting focuses for 31 December 2019

ASIC has announced its focus areas for 31 December 2019 financial report of listed entities and other entities of public interest with many stakeholders on 6 December 2019. For more details please check out ASIC website under media release section 19-341MR Financial reporting focuses for 31 December 2019. ASIC has also called companies to focus on new requirements that can materially affect reported assets, liabilities and profits.

New accounting standards
1. Impact of the new lease and other standards which will significantly affect reported results of many companies include:
• AASB 16 Leases (applies from years commencing 1 January 2019)
 which can significantly change the financial position and performance of lessees by bring leases formerly classified as operating leases on balance sheet and introduces a new measurement basis.
• AASB 17 Insurance Contracts (applies from years commencing 1 January 2021)
 companies affected by this standard and changes to the conceptual framework need to ensure appropriate disclosures on the future impact of those new requirements in the notes to 31 December 2019 financial reports
• Amendments to standards to apply the new definition and recognition criteria in the Conceptual Framework for Financial Reporting (applies from years commencing 1 January 2020)
• companies affected by this standard and changes to the conceptual framework need to ensure appropriate disclosures on the future impact of those new requirements in the notes to 31 December 2019 financial reports

Please refer to ASIC media release Companies need to respond to major new accounting standards

2. Impairment testing and asset values
• The recoverability of the carrying amounts of assets such as goodwill, other intangibles and property, plant and equipment continues to be an important area of focus.

Please refer to ASIC Information Sheet 203 Impairment of non-financial assets: Material for directors

3. Revenue recognition
• Directors and auditors should review an entity’s revenue recognition and policies to ensure that revenue is recognised in accordance with the substance of the underlying transactions.

4. Expense deferral
• Directors and auditors should ensure that expenses are only deferred where:
a. there is an asset as defined in the accounting standards;
b. it is probable that future economic benefits will arise; and
c. the requirements of the intangibles accounting standard are met, including
i. expensing start-up, training, relocation and research costs;
ii. ensuring that any amounts deferred meet the requirements concerning reliable measurement; and
iii. development costs meet the six strict tests for deferral.

5. Off-balance sheet arrangements
• Directors and auditors should carefully review the treatment of off-balance sheet arrangements, whether other entities are controlled and should be consolidated, the accounting for joint arrangements and disclosures relating to structured entities.

6. Tax accounting
• Preparers of financial reports should ensure that:
a. there is a proper understanding of both the tax and accounting treatments, and how differences between the two affect tax assets, liabilities and expenses;
b. the impact of any recent changes in legislation are considered; and
c. the recoverability of any deferred tax asset is appropriately reviewed.

7. Operating and financial review (OFR)
• Listed companies should provide useful and meaningful information in the OFR about underlying drivers of the results and financial position, as well as business strategies and prospects for future financial years.
• Risks and other matters that may have a material impact on the future financial position or performance of the entity should be disclosed. This could include, for example, matters relating to climate change, market changes, digital disruption, new technologies, Brexit or cyber-security. For more information please refer to ASIC Regulatory Guide 247 Effective disclosure in an operating and financial review.
• Directors may also consider whether it would be worthwhile to disclose additional information that would be relevant under integrated reporting, sustainability reporting or the recommendations of the Task Force on Climate-related Financial Disclosures where that information is not already required for the OFR.

8. Non-IFRS financial information
• Directors should also consider whether any non-IFRS financial information in the OFR or other documents outside the financial report is potentially misleading and is presented in accordance with ASIC Regulatory Guide RG 230 Disclosing non-IFRS financial information. RG 230 also covers limitations on the use of non-IFRS measures in the financial report.

9. Estimates and accounting policy judgements
• Disclosures regarding sources of estimation uncertainty and significant judgements in applying accounting policies are important to allow users of the financial report to assess the reported financial position and performance of an entity. Directors and auditors should ensure disclosures are made and are specific to the assets, liabilities, income and expenses of the entity.
• Disclosure of key assumptions and a sensitivity analysis are important. These enable users of the financial report to make their own assessments about the carrying values of the entity’s assets and risk of impairment given the estimation uncertainty associated with many asset valuations.

Most common SIS contraventions reported to ATO for 2018 financial year
• 21 % reported for loan to members under section 62, 65 and 84 to 85
• 18.70% Investments in house assets under section 84 to 85
• 12.80% Failure to keep personal assets separate from SMSFs under regulations 4.09A
• 10% Administrative contraventions
• 8% Sole purpose test under section 62
• 8% Borrowings under section 67 and 67A
• 7.50% Arm’s length under section 109
• 7% operating standards
• 7% Other

https://mobile.abc.net.au/news/2019-11-06/private-college-reaped-$2m-from-students-but-never-taught-class/11662164?pfmredir=sm&utm_content=buffer7fea6&utm_medium=social&utm_source=linkedin.com&utm_campaign=buffer

The phone call that ended a $2 million fraud lasted less than five minutes This private college reaped $2 million from students. But it never taught a single class.