Review of the Code of Accounting Practice and Financial Reporting - PowerPoint PPT Presentation

Review of the Code of Accounting Practice and Financial Reporting (the Code) Update 28 2019-20

Welcome Introductions and purpose of the web video OLG

Contents of this presentation Financial reporting governance structures and the Code Changes to the Accounting Standards Changes to the Code Financial statements reminders Key Standards issued not yet effective Recap, reminders, where to go for help and next steps OLG

Financial governance structures • Local Government Act 1993 – Chapter 13 – Part 3 – Financial Management http://www.legislation.nsw.gov.au/#/view/act/1993/30/chap13 • Local Government (General) Regulation 2005 – Part 9 - Management and Accountability http://www.legislation.nsw.gov.au/#/view/regulation/2005/487/part9 • Code of Accounting Practice and Financial Reporting – (includes Australian Accounting Standards and Interpretations) http://www.olg.nsw.gov.au/strengthening-local-government/supporting- and-advising-councils/accounting-practice OLG

Code of Accounting Practice and Financial Reporting The Accounting Code comprises of five documents: • 1. General Purpose Financial Statements • 2. Special Purpose Financial Statements • 3. Special Schedules • 4. Appendices • 5. JO Supplement • prescribes the form of the financial statements and the minimum requirements • applies to each NSW council & JO OLG

Code of Accounting Practice and Financial Reporting continued The intent of the Code is to : • facilitate practical and effective financial reporting obligations: • implementation of all Australian Accounting Standards and • Local Government Act, Regulations and associated policies • to drive a culture of commitment to useful, accurate and reliable financial reporting OLG

Overview of the consultation process Create Consult Deploy Sector feedback Web video on Draft Code from Code the draft Code amended Update 27 Updates from the Sector feedback Final Code approved Australia Accounting on the draft Code and Standards Board, Circular issued OLG, Other Final Code Draft Code Results discussed Update 28 Update 28 for with the Technical delivered consultation Advisory Group to the Sector OLG

Drivers of change Changes due to: • Accounting Standards especially AASB 15, 16 & 1058 • Government’s focus on supporting financial sustainability • Feedback from stakeholders • OLG and other Government reporting requirements OLG

Changes to the Accounting Standards – Effective at 30 June 2020 Should be no surprise that the big changes for 30 June 2020 relate to: • Revenue and • Leases This session is not a ‘how to account under AASB 15, AASB 1058 and AASB 16” but more to look at the disclosure changes. Carmen Ridley

Any other changes to accounting standards? • AASB 2017-1 Amendments to Australian Accounting Standards – Transfers of Investment Property, Annual Improvements 2014-2016 Cycle and Other Amendments [AASB 1, AASB 128, AASB 140] • AASB 2017-6 Amendments to Australian Accounting Standards – Prepayment Features with Negative Compensation • AASB 2017-7 Amendments to Australian Accounting Standards – Long-term Interests in Associates and Joint Ventures Carmen Ridley

Any other changes to accounting standards? • AASB 2018-1 Amendments to Australian Accounting Standards – Annual Improvements Cycle 2015 – 2017 Cycle • AASB 2018-2 Amendments to Australian Accounting Standards – Plan Amendment, Curtailment or Settlement [AASB 119] • AASB 2018-3 Amendments to Australian Accounting Standards – Reduced Disclosure Requirements • Interpretation 22 Foreign Currency Transactions and Advance Consideration • Interpretation 23 Uncertainty over Income Tax Treatments Carmen Ridley

Changes to the Code Summary of proposed changes to the Code is published on our website Detailed table of changes will be attached on release of the final Code update 28 Any questions email code@olg.nsw.gov.au OLG Jasmine

Key changes to the Code General Purpose Financial Statements Additional line items added to the primary statements: • Income statement - Rental income • Statement of comprehensive income - FV movements on investment through OCI Carmen Ridley

Key changes to the Code Additional line items added to the primary statements: • Statement of financial position – Contract assets – Contract cost asset – Right of use assets – Contract liabilities – Lease liabilities Carmen Ridley

Key changes to the Code Additional line items added to the primary statements: • Statement of changes in equity – Statement of Changes in Equity – Changes due to AASB 1058 and AASB 15 and AASB 16 • Statement of Cash Flows – Lease liabilities (principal repayments) Carmen Ridley

Key changes - Revenue note Revenue separated depending on which standard is relevant – if neither standard then remove from the revenue note e.g. investment income and rental income Carmen Ridley

Revenue note continued • Amendments to some of the accounting policies to reflect new requirements of AASB 1058 and AASB 15. • Some additional guidance added to the commentary BUT lots of guidance added to the Appendices (Appendix J). Carmen Ridley

Expenses - leases • Don’t forget you need to disclose • Are you capturing this information? Carmen Ridley

Contract assets and liabilities Explain the significant contract asset / liabilities balances Carmen Ridley

Contract assets and liabilities continued Describe the significant changes in contract assets and liabilities Carmen Ridley

Contract cost assets Carmen Ridley

Leases note • Contains all information about leases for lessor and lessee • Description of the leases in place • Reconciliation of right of use assets • Maturity analysis for lease liabilities • Information about possible liabilities e.g. extension options Carmen Ridley

Leases note continued Carmen Ridley

Lessor disclosures • Additional disclosures where Council is a lessor • Operating leases: – Amounts recognised in income statement – Maturity analysis of amounts receivable • Finance leases – Income relating to finance leases – Net investment in the finance lease • Don’t forget when you sub -lease you are a lessor Carmen Ridley

Change in accounting policy note • Modified retrospective approach for both revenue and leases • Illustrative changes in accounting policy – Council needs to ensure that changes discussed are relevant to them • Refer to the practical expedients used Carmen Ridley

AASB 15 and 1058 • Remember need to report on current year numbers under the ‘old’ standards • Also statement of cash flows if any changes Carmen Ridley

Leases • Reconciliation of operating lease commitment note to lease liabilities at 1 July 2019 Carmen Ridley

Where the Crown reserves are under a lease arrangement they are accounted for under AASB 16 Leases , refer to Note 15. Other changes • Interest and investment income now Note 5 rather than being part of the revenue note • Commentary - where the Crown reserves are under a lease arrangement they are accounted for under AASB 16 Leases • Differentiation of investment property between ‘owned investment property’ and ‘Right to Use’ – body of the Code assumes owned only • Changes made to results by fund to reflect new balances Carmen Ridley

5. Key Standards issued not yet effective

Key Standards issued not yet effective • No big changes coming next year except for Service Concession Arrangements. – Do you know what they are? – Do you have any? – Talk to OLG if you suspect any Carmen Ridley

Key Standards issued not yet effective • AASB 1059 “Applies to arrangements that involve an operator providing public services related to a service concession asset on behalf of a public sector grantor for a specified period of time and managing at least some of those services” Carmen Ridley

Common features of service concession arrangements operator is responsible for arrangement sets or limits the some of the management of initial prices to be levied by the the grantor is a public the SC asset and related operator and regulates price sector entity services and does not merely revisions over the period of the SCA act as an agent of the grantor operator is obliged to hand over arrangement is governed by a the SC asset to the grantor in a contract that sets out specified condition at the end of performance standards, the arrangement, for little or no mechanisms for adjusting incremental consideration, prices, and arrangements for irrespective of which party initially arbitrating disputes financed it Think about social housing, , rubbish collection, leisure centre, other services you ‘outsource’ to the private sector Carmen Ridley

Financial statements reminders Financial statements have been prepared in accordance with : • Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB); • the Local Government Act 1993 and Regulation; and • the Local Government Code of Accounting Practice and Financial Reporting (the Code). OLG Jasmne