CCABI developments
The main committee of the Consultative Committee of Accountancy Bodies – Ireland (CCAB-I) met virtually in June and agreed, among other actions, to form an industry-wide working group to promote the profession at secondary level and to lobby for the leaving certificate accountancy syllabus to be updated and modernised.
Tax administration liaison committees
The various committees are currently looking at DAC6, anti-hybrid, transfer pricing, stock lending, section 110 guidance, Irish Real Estate Fund guidance, leasing guidance and trading guidance.
In recent weeks, CCAB-I has also made written submissions to Revenue on tax filing deadlines including the 12 November income tax deadline which has now been extended to 10 December. Submissions were also made on Revenue’s review of compliance interventions and the code of practice for revenue audits and other compliance interventions; draft Revenue guidance on stock lending and repo transactions; and comments on draft anti-hybrid guidance.
Business law committee
Meetings were held with the Department of Finance regarding the transposition of the 5th anti-money laundering directive, outlining concerns in relation to the application of the legislation in respect of trusts.
The committee is also looking at the Office of the Director of Corporate Enforcement and other regulator information requests; obligations of audit committees; charities and the duties of directors and trustees under current legislation; internal reporting of matters of regulatory and legal concern including the requirements of the Protected Disclosures Act; and a review of the practical experience of applying the CCAB-I guidance on anti-money laundering.
Insolvency committee
The group is working on technical guidance on implications of the Register of Beneficial Ownership for insolvency practitioners.
Other matters on the committee’s agenda include restrictions on the exercise of the rights of the data subject, and a number of Statements of Insolvency Practice are being updated.
Audit
A working group led by the Irish Auditing and Accounting Supervisory Authority (IAASA) is working on a compendium of example audit reports.
Separately, there has been engagement with the Strategic Banking Corporation of Ireland (SBCI) on some administrative matters relating to Covid-19 support, including the requirement for audit certificates on some applications. The SBCI is now issuing amended forms.
Calculating turnover in a service business
Revenue should not be recognised for a service company using FRS 102, including a professional accounting practice, unless the entity can satisfy four requirements, which in summary are:
- the sale can be measured reliably
- it is probable that payment will be received
- the stage of completion can be measured
- costs can be measured
The second one of these was problematic during Covid-19. The exact phrase in FRS 102 is ‘…it is probable that the economic benefits associated with the transaction will flow to the entity’. ‘Probable’ is defined in FRS 102 as ‘more likely than not’. That means that even though an invoice has been raised, it is not booked as a sale until there is a 51% or better chance of it being paid.
During the Covid-19 shutdown, many practices were undertaking work on a pro-bono basis or were issuing invoices knowing that there was a less than 51% chance of them being paid.
Payment for many is dependent on the business continuing post-Covid-19 and that is still not certain for many businesses. During the basis period for the wage subsidy, it is likely that in accounting practices in particular there was a considerable amount of pro-bono work or work for which the 51% threshold would not have been exceeded. These sales need to be excluded from any management accounts prepared for the period.
The Labour Court
The 2019 report of the Labour Court has been published, noting that appeals and referrals are now being held in virtual courtrooms.
The report also notes that in 2019 the Labour Court (Employment Rights Enactment) Rules 2016 were replaced with the Labour Court Rules 2019. The court has also updated its decisions database, which is accessible through its website.
Insurance contracts accounting amended
IFRS 17 sets out the requirements for a company reporting information about insurance contracts it issues and reinsurance contracts it holds. The amendments are aimed at helping companies implement the standard and making it easier for them to explain their financial performance.
The changes include deferral to 1 January 2023 of the effective date of IFRS 17, as well as some scope exclusions for credit card and loan insurance. Find out more on IFRS’s website.
Financial reporting decisions
The IAASA has published a compendium of financial reporting decisions covering reviews of the financial statements of Aminex, Datalex, Astute Capital and Bank of Cyprus Holdings.
In respect of Aminex, IAASA concluded that the company had not complied, in full, with IFRS 6 (the need for impairment testing); IFRS 9 (Disclosure of maturity of receivables); IFRS 7 (liquidity risk maturity tables) and IAS 24 (related party disclosures). Aminex provided IAASA with undertakings to provide additional disclosures in future financial statements.
In respect of Datalex’s half-yearly report to 30 June 2018, IAASA concluded that there had been a misstatement of revenue, adjusted EBITDA and profit. The directors agreed to prepare, publish and refile a restated half-yearly report. A restated half-yearly report was refiled on 4 December 2019.
The findings in respect of the other two issuers provide an insight into some of the issues arising on the accounting and disclosures for deferred taxation, property held as inventory, provisioning, and the fair review of the business and principal risks and uncertainty disclosure requirements. The full report is available on the IAASA’s website.
Public sector standards
International Public Sector Accounting Standards (IPSAS) are IFRS-based standards adopted for the public sector. In its latest e-news, the International Public Sector Accounting Standards Board discusses the use of historical cost and market value as measurement basis.
It also discusses the accounting for infrastructure assets, as well as some issues around accounting for heritage assets and leased assets.
In addition, IPSASB notes its ongoing discussion on value in use and cost of release.
For members in the public sector, a free subscription to the IPSAS newsletter is available on IFAC’s website.
