ASSESSMENT OF EMBEDDED DERIVATIVES ON RECLASSIFIED FINANCIAL ASSETS
The Accounting Practices Board (APB) approved Embedded Derivatives – Amendments to IFRIC 9(AC 442) – Reassessment of Embedded Derivatives and IAS 39(AC 133) – Financial Instruments: Recognition and Measurement, as amendments to Statements of Generally Accepted Accounting Practice (GAAP) on 23 April 2009. These amendments clarify the accounting treatment of embedded derivatives for financial assets that have been reclassified out of the ‘fair value through profit and loss’ category in terms of an amendment that was issued in October 2008. This amendment, Reclassification of Financial Assets (Amendments to IAS 39(AC 133) – Financial Instruments: Recognition and Measurement and IFRS 7(144) – Financial Instruments: Disclosures), permitted entities to reclassify financial assets out of the ‘fair value through profit and loss’ category to another financial asset category only in specific circumstances.
The amendments to IFRIC 9(AC 442) and IAS 39(AC 133) require an entity to assess whether an embedded derivative should be separated from a host contract on reclassification of a financial asset out of the ‘fair value through profit and loss’ category to another financial asset category. Such an assessment is made based on circumstances that exist at the later date of:
• when the entity first became a party to the contract; and
• a change in the terms of the contract, which significantly modified the cash flows that otherwise would have been required under the contract.
These amendments prohibit an entity from reclassifying a financial asset out of the ‘fair value through profit and loss’ category when an entity is unable to measure separately the embedded derivative that would have to be separated on reclassification. In that instance, the hybrid contract would remain classified as ‘at fair value’ through profit or loss in its entirety.
The amendments apply retrospectively for annual periods ending on or after 30 June 2009.
The technical information and the IASB press release can be found on the SAICA website.
Embedded Derivatives – Amendments to IFRIC 9(AC 442) and IAS 39(AC 133) can be downloaded from the SAICA on-line handbook.
Reclassification of Financial Assets (Amendments to IAS 39(AC 144) – Financial Instruments: Recognition and Measurement and IFRS 7(AC 144) – Financial Instruments: Disclosures), can be found in the SAICA on-line handbook.
CFA CONSTITUENTS SUPPORT A SINGLE SET OF ACCOUNTING STANDARDS
The results from the recent global member poll conducted by the Certified Financial Analysts (CFA) Institute have revealed that a significant majority in the US supports the current steps aimed at achieving global convergence between IFRS and US GAAP. Furthermore, half of these respondents had preferred a progressive stage adoption of IFRS, whilst the other half had supported adoption of IFRSs at the same date by all entities. Detailed results of the survey can be found on www.cfainstitute.org.
CORE ACCOUNTING STANDARDS FREELY AVAILABLE
Following the constitutional review conducted in 2008 by the Trustees of the International Accounting Standards Committee Foundation (IASCF), core standards (excluding additional material such as the Basis for Conclusions and Implementation Guidance) are now freely available on the IASB website, for anyone to access and use.
The additional material including the Basis for Conclusion and Implementation Guidance can be downloaded from the SAICA handbook.
LATEST/UPDATED LIST OF ACCOUNTING STANDARDS/INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE
IAS 8(AC 103) – Accounting Policies, Changes in Accounting Estimates and Errors, prescribes disclosure requirements for Standards or Interpretations that have been issued but are not yet effective at the reporting date. The SAICA website accounting technical section now provides a permanent link to the latest list of Standards/Interpretations that have been issued, with their effective dates. This list reflects up-to-date information of the Standards/Interpretations that an entity should disclose in terms of IAS 8(AC 103).
This list of Standards-Interpretations can be found on the SAICA website.
NEW IMPLEMENTATION GUIDE FOR SMPs AID IN IMPLEMENTATION OF ISQC 1
The International Federation of Accountants (IFAC) has published a new implementation guide; Guide to Quality Control for Use by Small- and Medium-sized Practices. This non-authoritative implementation guide is intended to assist small and medium practices (SMPs) in understanding and efficiently applying the International Standard on Quality Control (ISQC) 1, Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services. The guide provides an integrated case study, two sample firm policy manuals, and key checklists and forms.
The redrafted ISQC 1 requires enterprises to establish systems of quality control in compliance with the standard. The guide is not to be used as a substitute for reading ISQC 1, but as a supplement to help practitioners to understand and consistently implement the Standard within their enterprises when developing a system of quality control for audits and reviews of financial information, and other assurance and related service engagements.
The Guide to Quality Control for Use by Small- and Medium-sized Practices may be downloaded free of charge from the IFAC online bookstore at www.ifac.org. A Microsoft Word version has been provided to ease translation and adaptation of the publication.
IFAC’s INternational Public Sector Standards Board proposes new guidance to sTRENGTHEN fINANCIAL rEPORTING BY gOVERNMENTS
The International Public Sector Accounting Standards Board (IPSASB) of the International Federation of Accountants (IFAC) is expanding its guidance in two significant areas: accounting for intangible assets and entity combinations. It has published two new exposure drafts (EDs), ED 40 − Intangible Assets and ED 41 − Entity Combinations from Exchange Transactions, which propose important new guidance for professional accountants working in government and other public sector entities.
“During the current economic crisis, governments around the world have been acquiring business entities that might otherwise be liquidated. These EDs propose financial reporting requirements that will ensure that these transactions are reported in a consistent and transparent manner, ensuring that governments remain accountable for their actions,” explains IPSASB Chairperson Mike Hathorn.
The issue of the exposure drafts is part of the IPSASB’s global convergence programme that will substantially converge International Public Sector Accounting Standards (IPSASs) with International Financial Reporting Standards (IFRSs) approved at December 31, 2008. The project is scheduled for completion by December 31, 2009.
ED 40 proposes an IPSAS that converges with the International Accounting Standards Board’s (IASB’s) International Accounting Standard 38 − Intangible Assets. ED 40 also incorporates guidance on website costs set out in the Interpretation 32 of the IASB’s Standing Interpretations Committee, entitled Intangible Assets – Web Site Costs. It also includes guidance on intangible heritage assets.
Because ED 41 addresses entity combinations that are similar in nature to those in the private sector, it is converged with the IASB’s IFRS 3 − Business Combinations. Entity combinations that arise from non-exchange transactions are being addressed in a separate public sector-specific project.
The exposure drafts are being issued concurrently because ED 40 addresses issues related to intangible assets acquired in an entity combination arising from an exchange transaction. Both exposure drafts contain limited changes from the relevant IFRSs; these changes are mainly to ensure consistency with other IPSASs and to address specific public sector issues.
“Converging IPSASs with IFRSs, where appropriate for the public sector, is one of the key objectives of our standards development programme,” states Hathorn. “These two exposure drafts propose clear financial reporting requirements for an entity in the public sector in order to ensure that the private and public sectors report similar activities in a consistent fashion.”
Comments on EDs 40 and 41 are requested by August 15, 2009. The EDs may be viewed by going to www.ifac.org/EDs. Comments may be submitted by email to EDComments@ifac.org and firstname.lastname@example.org. All comments will be considered a matter of public record and will ultimately be posted on the IFAC website.
SAICA’s National Tax Committee submissions
SAICA made the following submissions to SARS/National Treasury during April/May 2009:
|Submission name||Date submitted||Deadline|
|SAICA Submission to SARS Draft VAT Interpretation Note s8(25) of the Act||N/A||22 May 2009|
|SAICA Submission to SARS Call for comment Interpretation Note 35 Personal Service Providers||N/A||15 May 2009|
|SAICA Submission to SARS on VAT Interpretation Note 30 Issue 2||N/A||22 May 2009|
|SAICA Submission to SARS on Call for comment Draft Interpretation Note 17 Independent Contractors||N/A||15 May 2009|
|SAICA Submission to SARS on Differential Timelines for Tax Practitioners New Zealand extension dates||N/A||8 May 2009|
|SAICA Submission to Treasury on PAYE Issues||N/A||5 May 2009|
|SAICA Submission to SARS on PAYE Issues||N/A||5 May 2009|
|SAICA Submission to National Treasury on Dividends Tax||N/A||23 April 2009|
|SAICA Submission to National Treasury on Learnership Allowances: Section 12H of the Income Tax Act||17 April 2009||21 April 2009|
|SAICA Submission to SARS on changes to Provisional Tax: Paragraph 20 of the Fourth Schedule to the Income Tax Act||N/A||9 April 2009|
Copies of these and previous submissions are available on our website at
Practitioners Engaging with SARS
In its latest updated guide titled, “Practitioners Engaging with SARS: An Overview Guide 2009”, SARS has outlined the detailed escalation process for tax practitioners to lodge an official complaint.
The previous issue was released during August 2008. A copy of the updated guide is now available on the SARS website at www.sars.gov.za. The updated guide includes updated contact details of the relevant staff members. This is included in the contacts and escalation lists attached to this document
The escalation procedures are as follows:
Complaints about service in branches:
SARS recommends logging the initial service request at a branch office. The practitioner may also speak to the Branch Manager. If these channels have failed to resolve your service-related issues, you can then escalate your concern to the SARS Service Monitoring Office.
Complaints about service in the Practitioners Call Centre:
After logging the initial service request, SARS recommends that you follow up on your service request with a second call or email to the Practitioners Call Centre, quoting your initial call reference number. Should this fail to resolve your issue, SARS recommends that you escalate the matter to the Practitioners Call Centre complaints escalation address at email@example.com (you must be in possession of an earlier unresolved call reference number to escalate issues to this email address). If these channels have failed to resolve your service-related issues, you can then escalate your concern to the SARS Service Monitoring Office.
Complaints about returns not yet assessed:
SARS recommends that you contact the Call Centre for a status update. Should you still have remaining concerns about returns that have not been assessed within the stated turnaround times, SARS recommends that you escalate your concern to the SSMO (SARS Service Monitoring Office).
Complaints about service in the Enforcement Division:
The Enforcement Division is responsible for audits and criminal investigations. Should your complaint or concern relate to these business areas, SARS recommends that you first address it to the relevant auditor or investigator, and then to escalate your concern to the relevant Enforcement Centre Manager, and then to the Senior Operations Manager in Enforcement. If these channels have failed to resolve your service-related issue, you can then escalate your concern to the SARS Service Monitoring Office.
Complaints about apparent systems errors:
If you encounter an issue where you believe that there is a trend or pattern of a systems-based issue or error, and which is not an isolated incident that affects only a few taxpayers, you may log a call with SARS to investigate whether there is in fact an error on the SARS system. In order for SARS to investigate systems-based complaints they need a completed “Request to Investigate a Suspected Systems Error” that can be accessed on the SARS webpage.
Please note that without at least five examples SARS unfortunately cannot investigate suspected systems errors.
Completed “Request to Investigate a Suspected Systems Error” forms can be sent to the Practitioners Unit (firstname.lastname@example.org), although SARS advises that you check with the Call Centre on the status of your query first.
Raising an issue with the SSMO:
When you wish to raise an issue, it is best to do it in writing, or by phone or fax, or even by visiting your local Taxpayer Service Centre/Branch Office, which will try to resolve the issue as quickly as possible.
If your issue has not been resolved within a reasonable time, you can ask the SSMO to look into the issue.