2. WHAT’S ON THE HORIZON?
• AASB107 Cash Flow
• AASB136 Impairment of
assets
2017-18
• Financial instruments
• Leases
• Revenue & income of NFP
• SCAs
And
beyond ….
3. AND BEYOND ….
2018 -19 2019 beyond
AASB 15 Revenue
(for profits)
AASB 9 Financial
instruments
AASB 15 Revenue
(not for profits)
AASB1058
Income of NFPs
AASB 16 Leases
AASB1059 SCAs
(2020)
Reporting entities
concept
AASB 17
Insurance
4. REVENUE
• AASB 15 applies
next yearFor
profit
• AASB 15 and AASB
1058 apply from 1
January 2019
Not for
profit
5. AASB 15 REVENUE
Applies to both for profit and not for profit entities
Sections of AASB 1004 has been replaced ….. but perhaps not with the outcomes
hoped by some
Grantor
Recipient
Current model –
If the benefit was not provided by the
recipient to the grantor, then up front
income had to be recognised
$ Benefit
6. AASB 15 REVENUE
Grantor
Recipient
If the grantor directs the recipient on
where to provide the benefits, then the
grant may be eligible for deferral$
Benefit
Other party
7. REVENUE RECOGNITION
4. Allocate transaction price to performance ob
1. Identify contract
2. Identify performance obligations
5. Revenue rec when performance ob satisfied
3. Determine price
8. MEETING THE SCOPE
Rights and obligations under the agreement must be
May not be a contract … what about implied threats of withdrawal?
Need to know what goods are being provided and to what extent they have been delivered
2. Sufficiently specific
1. Enforceable
9. CAPITAL CONTRIBUTIONS
Not sufficient to meet the
requirements for deferral
Can defer over construction
period only
Must fair value contributed
assets
Capital grants
• Consideration for
assets < fair value
• To enable the entity to
further objectives
• Enable an entity to
acquire/construct an
asset
• Asset to be
conditionally used
10. REVENUE AND INCOME
Rates
Taxes
Interest
Dividends
Recurrent grants
Special purpose grants
Capital grants
Fees
Levies
Fees for service
Sale of goods
Licences
Royalties
Performance management
fees
Contributed services
Sponsorship
Appropriations
11. AASB 15 and AASB1058 aren’t policy choices
PREPARATION
Start implementation plans
ASAP
Review key revenue, income
and grant streams
Activities are in a different
financial year from cash
12. TRANSITION PROVISIONS NFPS
For both AASB15 and AASB1058
Not required to restate comparatives
Retrospective application to all contracts, including completed contracts
For AASB1058, agencies will not remeasure assets acquired for significantly less than
fair value prior to 1 July 2019
Ensures all deferred revenue can be recognised on
transition
13. LEASES – RIGHT TO USE
Putting operating leases on balance sheet
Less than 12 months Low value
14. RIGHT TO USE
“A contract is, or contains, a lease if the contract conveys the right to control the use of
an identified asset for a period of time in exchange for consideration.”
Right to direct the use of the asset
Obtain substantially all of the economic benefits
15. RECOGNITION AND MEASUREMENT
Lease liability at PV of future cash flows
Corresponding asset recognised to same value
Asset is then subject to AASB16 – revaluation?, depreciation
CPI escalation brings calculation complexity
Present value based on term, rental payments and discount rate
16. PROFIT AND LOSS IMPACT
Timing differences identified
Be ready to explain impact on profit
18. TRANSITION ARRANGEMENTS
Transitional practical expedient
provision so no need to restate (C5)
All adjustments through equity
Transitional practical expedient
provision so no need to assess pre 1
July 2019 contracts (C3)
Low value $10,000
19. OTHER QT ARRANGEMENTS
ROU at cost
Incremental borrowing rate – QTC
fixed rate loans
Internal to government leases still
being assessed
Assessing feasibility of software
20. SERVICE CONCESSION ARRANGEMENTS
Grantors of PPPs
Can result in assets being brought on
balance sheet
With a corresponding liability
(unearned revenue – tolling
rights, financial liability)
21. SERVICE CONCESSION ARRANGEMENTS
Accounting for life cycle costs – timing may vary from actual payment
stream
Requires assets being brought on balance sheet to be valued using
FV - CRC
Hospital car
parks
Student
accommodation
Child care
Toll roads
Rail links
Rolling
stock
22. YOUR INTERNAL CONTROL STRUCTURE
Management function Assurance
Operating management Limited independence
Reports primarily to
management
Internal audit
Greater independence
23. ENTITY WIDE CONTROLS
Issues identified
Passwords Access
security
Change
management
IT control environment Entity control environment
Culture, management
and structure
Risk management
Monitoring of controls
& internal audit
Issues identified
Independence Maturity Structure
27. 2 & 3 MANUAL AND AUTOMATED CONTROLS
Risk Manual Control Automated control
Invalid
purchase
order is
processed
A purchase order is approved by an
appropriate person.
A purchase order in the system
is submitted for approval – the
system automatically routes the
PO to the appropriate person
based on an in-built matrix of
authorisation.
Invoice value
incorrectly
calculated
Employee calculates the value of an
invoice used to bill a contract based
on variables. Manager reviews to
agree calculation is accurate
System calculates automatically
the value of invoice
28. 4. KEY APPLICATION CONTROLS
• Hard-coded workflows
• Input validation
• Matching with the database eg, duplicate check
• Mathematical accuracy
Automated
functions
• System settings
• User access restrictions /
• Reference tables (pay rates / delegations)
• Override thresholds
Application
Configuration
• Data transfer between systems
• On-line, batch or via database connectivity
• Automated reconciliation
• Error handling
Interfaces
• Generated from the system
• Analysis and Variances
• Auditor can evaluate the logic to ensure report is
correct
Reports