Changes to financial reporting

By Marcus Ohm*

Late last year both the Australian Accounting Standards Board (AASB) and the Federal Treasury released proposals for substantial changes in financial reporting in Australia.
If enacted, they will give rise to far-reaching changes in how and what many businesses report. In particular, there is likely to be a significant impact on those businesses that currently prepare special purpose financial statements.
Special purpose statements do not necessarily comply with all the requirements of accounting standards. They are commonly prepared by small and medium sized businesses who have only a limited range of users of their accounts (eg financial data for management, basis for tax return, etc).
Under the proposals, the ???reporting entity??? concept will be removed and all lodged accounts will be considered general purpose. However, there will be a ???reduced disclosure regime??? for those organisations without public accountability.
AASB???s consultation paper contained examples of reduced disclosures and these indicate that the changes will not be as far-reaching as many had hoped for. It is likely that the changes will give rise to a greater compliance burden for those currently preparing special purpose accounts. These changes will therefore need to be planned for appropriately.

Parent entity financial statements
It has also been proposed that the Corporations Act requirement (which requires parent company accounts to be prepared when consolidated accounts are prepared) will be removed. Instead, organisations will need to present summarised financial information for the parent within the notes to the accounts.
At first glance this would appear to be a sound move. However, the benefits are reduced by the fact that summarised financial information still has to be prepared and because this requirement is extended to half-yearly reporting.

Dividends
Another change is that the existing ???profits??? test is likely to be replaced with a ???solvency??? test in determining the ability to pay dividends.
This may give greater flexibility to companies in determining when dividends can be paid, particularly where substantial non-cash items may have adversely affected profit in a particular year.
The proposal allows for early adoption of the reduced disclosure regime from 30 June 2010 but the mandatory adoption date will be for annual reporting periods beginning on or after 1 July 2012. ??

* Marcus Ohm is a partner with accountants and business and financial advisers HLB Mann Judd Perth

Monitor Contributions To Super Carefully

By Andrew Yee*

As the financial year draws to a close, people who usually top up their superannuation contributions at this time of the year must take care not to over-contribute.
The ATO is cracking down on people exceeding their contribution limits and, for those who do, the penalties can be severe.
Excess superannuation contributions that are made (intentionally or unintentionally) above the contributions cap are liable for tax rates that can be as high as 93 percent.
It is easy to fall foul of the new restrictions on contributions that have been introduced for this year.
While members of super funds may believe that they know how much has already been contributed on their behalf during the course of the financial year, there are a number of ways contributions could have been made that they have overlooked.
For example, people who received a Christmas bonus may be unaware that their employer paid the nine percent superannuation contribution levy on it.
Another common mistake that some make is to think that the cap only applies to contributions made above the nine percent superannuation guarantee paid by their employer.
But the age old problem concerning when year end contributions have been made now carries greater significance because if you get the timing wrong, you may be slugged for excess tax.
For example a contribution made this financial year on behalf of the previous year???s earnings, is taken into account for this year???s contribution caps.
With payments made in one year, but not banked until the next, the general rule is that a contribution is considered to have been made when the superannuation fund gains access to the funds, not when the arrangements for payments have been made.
People therefore need to be very careful and review and monitor all superannuation contributions made by them or on their behalf, and to ensure that contributions are correctly reported by their superannuation funds. ??

* Andrew Yee is a director with accountants and business and financial advisers HLB Mann Judd Sydney

PPG Sells Auto Glass Business

PPG Industries Inc has sold a controlling stake in its automotive glass business to a new company formed by investment firm Kohlberg & Co. LLC for A$345 million.

Britain Adopts Scrappage Incentive

Britain approved a 10-month program enticing consumers to scrap older vehicles, becoming the latest European country to adopt a sales incentive that’s stalled in the US Congress.

Farmers To Acquire AIG’s Personal Auto Insurance

The Farmers Insurance Group of Companies will acquire America International Group???s (AIG???s) Personal Auto Group, which includes 21st Century Insurance Co., for A$2.7 billion.

Under the agreement, 21st Century Insurance Group, the wholly owned subsidiaries comprising AIG???s US personal auto insurance business, will be sold to Farmers Group, a Los Angeles-based subsidiary of Zurich Financial Services Group. Farmers Group will sell the underlying insurance entities to the Farmers Exchanges, which Farmers Group manages, but does not own. The acquisition is expected to close by the third quarter of 2009, pending regulatory approvals.

This acquisition by the Farmers Exchanges will position Farmers as the third largest overall, personal lines insurer in the United States, according to industry data. The acquisition also will position the Farmers Exchanges as the largest auto insurer in several states, including California.

Farmers is a leading, top-tier, multi-lines US insurer of autos, homes, businesses, specialty products, life insurance and financial services, providing insurance to 10.5 million households in the United States.

For more information, visit www.farmers.com.
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Audatex Data Shows Hybrids Cost More To Repair

Audatex vehicle and repair data shows that, on average in 2008, the Toyota Prius cost 8.4 per cent more to repair than petrol-powered economy imports, while hybrid vehicles that have petrol counterparts averaged 3.8 per cent more to repair than their counterparts.

Merger Fallout Benefits Key Promina Executives

Following the finalisation of the $7.9 billion merger of Suncorp and Promina, CEO John Mulcahy has appointed three of Promina???s top executives to senior management positions in the new company.
Robert Belleville who, at Promina, was responsible for AAMI, Australian Pensioners Agency (APN) and Just Car insurance, has been appointed to the key job of running the huge personal insurance business.