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The Institute of Chartered Accountants in Australia, Incorporated In Australia Members’ Liability Limited.
ABN 50 084 642 571. Job Number 0708-11
Published by: The Institute of Chartered Accountants in Australia
Address: 33 Erskine Street, Sydney NSW Australia 2000
2008 Report to members: including full financial statements
ISSN 1834-0423
Contents
President’s message .............................. 5
CEO’s review .......................................... 6
Highlights . .............................................. 8
Strategic initiatives ................................. 9
Corporate governance
The Board ............................................. 35
Board and advisory committees........... 37
Corporate Governance Statement........ 39
Risk management and audit................. 40
Financial statements
Financial statements contents.............. 44
Financial statements.............................. 46
Contact details....................................... 77
Vision
President’s message
Business leaders are under more scrutiny proposed system. We are also identifying
and are more accountable than ever potential opportunities to use tax policy
before. An integral part of our vision of to drive behavioural change that reduces
leading the profession is to lobby on behalf emissions usage.
of our members to reduce over-regulation
The Institute’s strategic plan details our
and help businesses interpret the latest
response to the current and long-term
international reporting standards.
issues facing the Institute and sets out
Over the last year, the Institute has the initiatives that will help us achieve
published 10 leadership reports and hosted our vision of leading the profession.
a range of workshops, forums and debates
These will ensure the Institute becomes
on issues such as ethics, differential auditing
even more relevant to members, maintains
and extended performance reporting.
its influence with governments and
A welcome success for the Institute this regulators, is more competitive both here
year was the introduction of a national and globally, has a sustainable and growing
framework of schemes that limit the liability membership and is able to attract and
of our members. After 20 years of recruit the best staff.
negotiation with state, territory and federal
To ensure the Institute is on the right track,
governments, we have secured a first for
the Board undertook a substantial strategic
any Australian profession and a first among
review during the year. This review
the accounting profession globally. This
confirmed our overall strategic plan and and eliminates the need for a bridging
was a significant outcome for us, and for
made necessary amendments to take us course. Globalisation is a key part of
you, our members.
through to 2010. business today and the GAA ensures our
Thanks to the approval we secured in all members’ transition to GAA countries
These amendments reflect the changing
states except Tasmania, the schemes are knows no boundaries.
environment, a greater focus on leadership
operative under state law. Commonwealth
positioning nationally and globally and the In 2008 the Institute celebrates its 80th
approval means that members are covered
need for improved processes and year and we reflect on all that has been
against claims made under the Trade
infrastructure to better respond to achieved since 1928 when His Majesty
Practices Act as well.
members’ needs. King George V constituted the Institute
Another area of major international of Chartered Accountants in Australia by
Assessing progress against delivery of the
regulatory significance is sustainability and Royal Charter. We are justifiably proud of
six objectives in our strategic plan is the
the need for businesses to be accountable our heritage, our currency and our vision.
best way to measure the Institute’s success
for their environmental footprint.
in 2008, and we have structured the report
Australia is playing an important role in to give members an understanding of
international activities that are leading to how we have performed against our
emissions trading, the permanent storage strategic goals.
of emissions through sequestration,
As a founding member of the Global Andrew Arkell
and development of carbon credit
Accounting Alliance (GAA), we continue to President
offset activities.
work closely with our international peers in
With the focus on an Australian Emissions professional accounting bodies in shaping
Trading System for 2010, the Institute is the profession on a global scale.
developing a number of projects in this
The Institute has recently completed work
area. For example, we worked with a
to confirm our full mutual recognition of
member firm to prepare a report that
eight GAA institutes’ qualifying programs
will help the government identify the tax
with our Chartered Accountants Program.
implications and develop tax incentives
This ensures the process of going overseas
by assessing whether the existing tax
with an Australian qualification is seamless
framework will cope effectively with the
CEO’s review
After an eventful year, I can report with Serving the national interest
pleasure that the Institute is well placed While we remain responsive to the
to continue fulfilling its charter to serve concerns of members, we understand that
members, engage meaningfully with as a peak body in a vital services sector
regulators and the community and we have a responsibility to put forward
contribute to excellence in standards proposals that are in the national interest
of accounting. as well as our own. To that end the areas
As our many successful initiatives on which we maintain special focus are
demonstrate, our voice is being heard. taxation, superannuation, corporate
This is particularly true in areas in which governance and ethics, regulatory and
we have actively sought to influence the workplace reform.
regulatory environment to maximise the In our pre-budget submission to the federal
contribution the accountancy profession government, for instance, we placed
can make to building robust Australian business tax reform high on the agenda.
businesses and by contributing to the As an initial step we have asked that
efficiency and integrity of the public sector. certain tax measures already in train by
We will maintain this momentum by the previous government be dealt with
allocating additional resources to these as a priority, to underpin a competitive
efforts in the year ahead – a year in which tax system which is vital to attract venture
conditions are likely to remain volatile. capital and long-term investment.
Why do we find ourselves in such a strong We continue to develop the Chartered
Spreading the word
position? A prime reason has been our Accountants Program to ensure its Meanwhile other programs like our
continued focus on maintaining standards relevance to today’s business needs. This ‘Achiever Work Experience’ and ‘Meet
and building on good existing relationships postgraduate diploma continues to attract the Business Leader’ are helping broaden
with government. The Institute has the highest quality students and helps young people’s knowledge of our
contributed in a constructive way to public prepare them to be tomorrow’s business profession and further boosting its image.
policy development in the year under advisors and leaders. Enrolments in the The coming year will see us maintaining
review by engaging actively with policy Chartered Accountants Program go some the momentum of these endeavours,
makers through, inter alia, written way to alleviating the accounting skills which are more appropriate than ever in
submissions and appearances before shortage which continues to challenge an era of unprecedented skills shortages.
parliamentary committees. Australian business. A key issue for our profession at
I am delighted that the excellent work After years of considering the best means universities and high schools remains
of our representatives in lobbying and of broadening the entry pathway to the a general lack of understanding about
providing thought leadership on tax, audit, Chartered Accountants Program, the accountancy. In some areas it is still
accounting and financial planning has Institute has recently introduced pathways perceived to be a ‘brown cardigan and
delivered real benefits for members and for non-accounting graduates to be eligible calculator’ profession rather than a
is helping to ensure a prosperous future for the Chartered Accountants Program. dynamic one with exciting possibilities.
for our profession. The Graduate Certificate of Chartered Indeed we are determined to change those
Accounting Foundations (GCCAF) is perceptions and are working hard to do so.
Our thought leadership initiatives have
been supported by a broad variety of a one-year online Graduate Certificate, For example, an online campaign on the
papers for commercial and professional presently offered by Deakin University. social networking site Facebook was
disciplines on areas of particular interest. We also offer an entrance exam for introduced to engage students in a deeper
A good example was the recent paper, non-accounting graduates with industry conversation on their career opportunities
The Benefits of Assuring Carbon experience to enter the Program. This and the value of the Chartered Accountant
Emissions Disclosures, which outlined signifies a new era of accounting, where designation. Similarly, the online Student
the case for a global assurance standard diversity in the profession, both in the role Challenge, which attracted more than
on this issue and the benefits of having and the people it attracts, is being 11,000 visitors, was designed to introduce
these disclosures assured by an encouraged and nurtured. students to practical accounting at a critical
independent expert. time in their career decision process.
Community links
Finally, I would like to thank wholeheartedly
everyone who has worked so willingly in
our business and community involvement
programs and who have cheerfully given Graham Meyer
their time to help make a difference. Our Chief Executive Officer
Business Leader Awards, which recognise
excellence in the business community, our
sponsorship of the Transparency Awards,
and our workplace giving program
‘Everybody Counts’ have been unqualified
successes. I commend these efforts once
again and seek ongoing support for them.
Highlights
> Delivered some 700 workshops, > Completed 480 reviews of different
forums, debates and events on issues sized practices under the Institute’s
such as ethics, differential auditing, Quality Review Program and undertook
extended performance reporting, 259 investigations into formal
legally enforceable auditing standards, complaints or other issues concerning
standard legislative framework for tax the conduct of members
agents and anti-money laundering > Redesigned the practical experience
> Introduced two new conferences: an component of the Chartered
accounting conference focusing on Accountants Program in consultation
financial reporting and management with candidates, mentors and employers
accounting and a self managed > Broadened the entry pathway for non-
superannuation funds (SMSFs) accounting graduates with the Graduate
conference, both of which exceeded Certificate of Chartered Accounting
registration and revenue targets Foundations offered by Deakin
> Launched an audit manual to help University and the entrance exam for
auditors, particularly those dealing graduates with extensive on-the-job
with small to medium sized entities; experience working for an Institute-
a Business Software Guide that approved employer
provides information on 45 tailored > Recorded an all-time high candidate
business software solutions; and a and employer satisfaction rate, with
refreshed library service called the candidates at 75 per cent in December
Knowledge Centre 2007 and employers at 87 per cent in
> Expanded the Institute’s in-house June 2008
training and grew client engagement by > Engaged with 19,423 students
an average of 89 per cent compared with 9828 at the same time
> Piloted a practical Graduate last year through careers marketing
Development Program in response to events and initiatives
demand from members > Secured places for 210 first-year
> Further strengthened the Institute’s students in more than 100 accounting
lobbying, advocacy and thought organisations during the 2007/2008
leadership role with involvement in: summer break as part of the Institute’s
– the Henry Review of Australia’s Achiever Work Experience program
taxation system > Gained recognition for the Chartered
– the introduction of a carbon emissions Accountants Program and reciprocal
trading scheme membership with seven institutes in
– liability capping schemes Canada, Hong Kong, South Africa,
England and Wales, Ireland, Scotland
– the Government’s review of
and South Africa
governance of self managed
superannuation funds > Successfully completed the sale of
the York Street premises, relocated to
– the disclosure regime for not-for-profit
Erskine Street in Sydney and negotiated
organisations
new leases of premises in Brisbane
– anti-money laundering legislation
and Canberra.
– a non-product based fee-for-service
model for the financial planning
industry.
Strategic initiatives
1920s
stakeholder groups. > A sound financial base to enable
investment in key strategic issues
Leadership and
> Appropriate infrastructure and
competitive positioning
processes to be responsive to
> A focused leadership strategy which The early days of regulation
member needs
ensures influence nationally, regionally
> A nimble governance structure It’s 1925 and the Sydney Stock
and internationally
> Targeted and relevant committees Exchange calls on companies to
> Effective, visionary and well-publicised publish balance sheets and profit
providing quality input
thought leadership initiatives which and loss accounts. A few years
profoundly and positively impact > Strategic thinking which identifies later the granting of a Royal Charter
business and the accounting profession and responds to emerging trends sees the Institute of Chartered
and markets. Accountants begin operations
> A well-recognised and differentiated
at Currie Street, Adelaide.
Chartered Accountants brand People and culture
> Continuing regard for the importance > A culture which is proactive, responsive
of discipline, ethics and conduct for and innovative with strong leadership
the profession.
> Best practice in recruitment, retention
Growth to ensure a sustainable and rewards
future for the Institute and > Rigorous succession planning with high
Chartered Accountants achievers identified and mentored for
> Ongoing review of the Chartered staff and committees
Accountants Program to ensure > Key people recognised as experts
relevance and pre-eminence in their fields.
> Innovative and influential careers
marketing to ensure the attractiveness
of a professional career in
chartered accounting
> Ongoing brand promotion to attract Ensuring the Institute is fit for the
new members
> Addressing the skills shortage and
future via strategic thinking which
ensuring ongoing recruitment and
retention of members.
identifies and responds to
emerging trends and markets.
Interacting effectively with Also successful were our Public Practice Publications
our members conferences, attendance at which nearly Charter magazine, e-Bulletins and other
The Institute interacts with members doubled this year. corporate communication channels
through events, conferences, roadshows, provide useful tools to inform and update
Tools
website, print and broadcast media, members, with 87 per cent of our
The Institute recently launched an audit
e-Bulletins and technical newsletters, membership claiming to be satisfied
manual to help auditors, particularly those
manuals, toolkits, guides, Charter magazine, with the communications received.
dealing with small to medium sized entities
Institute updates and training sessions.
(SMEs), apply the current Australian The fortnightly e-Bulletins provide relevant
During 2008 the Institute delivered some Auditing Standards (ASAs). information and news to members who
700 workshops, forums, debates and work in the Big 4, public practice, business
The manual is based on the International
events on issues such as ethics, differential and government. Many topical issues were
Federation of Accountants (IFAC) Guide to
auditing, extended performance reporting, covered during the year including the
using international standards. It is freely
legally enforceable auditing standards, implications of carbon emissions trading,
available on the Institute website and is
standard legislative framework for tax the liability capping scheme, the launch
supplemented by a toolkit, complete with
agents and anti-money laundering. of the new CPP tool, and regular lobbying
forms, checklists and programs necessary
updates. In addition, Chartered Accountants
More than 4700 accounting and business for conducting an audit, and training
Local News, an essential tool used by
professionals across all major capital cities sessions in several states. This has been
members in all regions for local information
attended our popular Business Forums, widely accepted as a significant step in
and updates, was successfully relaunched.
while our Force of Law national roadshow assisting practitioners to maintain
events attracted more than 300 delegates. consistently high auditing standards The three technical e-newsletters, CA Tax
and practices. Bulletin, Accounting and Assurance Today,
The Institute’s Public Sector Forum,
and the relaunched Chartered Accountants
designed to present contemporary To help Chartered Accountants find
Superannuation Bulletin, continue to
management issues to members who their way through the myriad of software
provide relevant information to subscribers,
work in, or closely with, government was choices available, the Institute introduced
and member satisfaction levels are
again well received. Initially targeted at a Business Software Guide that provides
high (88 per cent, 86 per cent and 85
middle management, the forum now information on 45 tailored business
per cent respectively).
attracts a broader audience from the public software solutions. This comprehensive
sector, with attendance averaging between tool, which allows members to Charter, the Institute’s flagship publication,
80 and 100 for the five-program event. cross-reference by industry and continues to attract new readers with
function, was distributed to all circulation now totalling more than 48,000.
A combination of quality content and
members with Charter magazine. The magazine’s quality, credibility and
speakers, together with a robust marketing
targeted reach also make it attractive
strategy and excellent teamwork
to advertisers.
contributed to the success of the
1 Charter
Institute’s conferences this year. 2 CA Tax Bulletin
3 Accounting & Assurance Today
A new Accounting Conference was
4 Chartered Accountants Superannuation Bulletin
introduced and held in Sydney, Melbourne,
Brisbane and Perth, focusing on financial
reporting and management accounting.
It attracted 572 delegates, exceeding
registration targets by 43 per cent and
revenue targets by 30 per cent. The
inaugural SMSFs Conference held in
Sydney attracted 223 delegates, 50 per
2 3 4
cent over registration targets and 30 per
cent ahead of revenue targets.
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Business Leader
Awards 2008
collatoral
1930s
A new era of taxes
The Income Tax Assessment Act 1936,
weighing in at just 120 pages, heralds
a new era of federal tax collections.
The need to prepare statements
spurs greater demand for accounting
professionals. In response, the
Institute issues its first Code of Ethics
to all members and its first statement
on accounting practice.
The field tests were conducted in addition The Institute also hosted the first of two We believe the adoption of a genuine,
to the separate submissions made earlier round table forums on the topic of non-product-based fee-for-service model
this year by each of the professional bodies ‘Assurance on Disclosures of Carbon would improve the professionalism of the
to the IASB and the Australian Accounting Emissions Information’, which were financial planning industry and the trust
Standards Board (AASB) with regard to the conducted under the auspices of the between financial advisers and their clients.
proposed standard, demonstrating the International Auditing and Assurance This in turn would lead to less prescriptive
commitment of the Australian accounting Standards Board to hear from users, legislation, lower costs for advice, and wider
profession to have a voice in the preparers and assurance providers. access to affordable, independent advice.
international and Australian debates. The intention is to inform the planned
Sub-prime mortgage market and
development of an International Standard
These submissions, as well as the report international reporting standards
or Practice Statement on assuring carbon
based on the field tests, and our In April, the Institute released a report
emissions information.
submission on the Australian differential on the Collapse of the United States
reporting proposals, argue that the burden We responded to the Garnaut Report sub-prime mortgage market and the
on SMEs will only be reduced if the with a submission in April and in the same impacts under International Financial
proposed reporting standards significantly month released a leadership paper, Reporting Standards (IFRS).
reduce the disclosure requirements. produced jointly with Ernst & Young, on the
The report detailed how the collapse
tax treatment of carbon emissions trading.
Further activity on reducing the burden occurred and affected the financial
on small business has seen the Institute This paper argued that the existing regime statements of banks, other financial
become involved in the government’s would not properly deal with an emissions institutions and investors in mortgage-
Standard Business Reporting (SBR) trading scheme. Consideration should be backed securities around the world.
initiative; and in fact become a key member given to amending legislation relating to A number of lessons can be learned from
of the Business Advisory Forum. The income tax, the GST, Petroleum Resources the experience in areas of regulation and
Business Advisory Forum acts as a reality Rent Tax, state stamp duties and other legislation, financial reporting, bank lending
check on the activities of the SBR team, taxes and charges. It also identified practices, indebtedness of individuals and
ensuring effective communication with potential tax incentives to reduce the in the area of investment decision making.
the business community and ensuring it burden on business of the significant Discussions are already in progress at both
remains on track to meet its objective of capital expenditures and adjustments that the International Accounting Standards
reducing the reporting burden on business. will be required following the introduction Board (IASB) and the Financial Accounting
of mandatory targets and an emissions Standards Board (FASB) to improve
Carbon emissions trading
trading scheme. financial reporting and disclosures in the
The release of an Institute leadership report
areas impacted by the credit crisis.
shortly after year end calling for the Financial planning industry
inclusion of a global assurance framework In July, the Institute released a white paper Anti-money laundering
for carbon emissions disclosures was the following a financial planning industry The latest in a number of meetings
latest in a suite of leadership and lobbying forum we facilitated to discuss Reinventing between the Institute and government took
initiatives we undertook in 2008 in the area financial planning, a paper we had place in May this year. These discussions
of carbon emissions trading. The report, commissioned. The forum brought together are helping to shape the second tranche
entitled The Benefits of Assuring Carbon industry associations, consumer advocates, of anti-money laundering legislation, which
Emission Disclosures, was produced in regulators, product manufacturers, ‘dealer’ should be released later this year.
association with Professor Roger Simnett, groups and practitioners.
Head of Accounting at the Australian
School of Business, and argued for
generally accepted international reporting
criteria to ensure consistency between
jurisdictions and facilitate understanding
of the depth of the issues.
Government procurement In February this year, the Institute, Threshold for unlisted
The Institute instigated and drove the in association with CPA Australia Limited public companies
development of a submission to address and the National Institute of Accountants, We continue to hold talks with Treasury
ongoing procurement issues within developed and released a set of on the subject of introducing a threshold
government. We hosted several roundtable competency requirements that clarify for financial reporting and auditing
events attended by senior government the skills auditors need to ensure trustees requirements for unlisted public
officials, key stakeholders and members are fulfilling their legal obligations. companies, including companies limited
in the Big 4. The submission was by guarantee, similar to that used for
These requirements prescribe the
presented to the Department of Finance proprietary companies. Last year, the
competencies for members of the three
and Administration in November 2007. Institute, with the other professional
professional accounting bodies who audit
The Department has acknowledged accounting bodies, made a submission to
SMSFs. They provide clarification,
receipt of the submission and negotiations Treasury supporting a reduction in red tape
guidance and assistance to auditors of
are continuing. in this area.
SMSFs, and are expected to contribute
Governance of superannuation funds greatly to the assurance that trustees, The submission supported the introduction
A survey undertaken by the Institute and beneficiaries and the regulator gain. of differential lodgment which would
Deloitte between October and December eliminate the need for entities under a
This was followed in April by a forum
2007 to understand the governance of prescribed threshold to prepare general
which discussed the key recommendations
super funds and recommend further purpose financial reports. However, it also
made in a discussion paper entitled Review
improvements, found most industry encouraged Treasury to set up a
of the existing regulatory and governance
experts believe governance practices governance structure for these smaller
framework. We used the issues raised at
and standards had improved. unlisted public companies to maintain
the forum, and in the discussion paper,
public accountability.
The drive for continuous improvement in to develop policy positions in a submission
governance practices is important given to Senator the Hon Nick Sherry in the Auditing standards and registration
that funds under management have same month. The submission also The IAASB is on track with its upcoming
almost doubled in three years, growing included data collected from a recent ‘Clarity Project’, which entails revising and
from $631bn in July 2004 to $1,187bn member questionnaire. reissuing all of the International Auditing
towards the end of 2007 when the survey Standards using the new clarified drafting
Legislative Instruments Act
was initiated. style by December 2008. We maintain
In May this year, the Institute, with the
regular communication with the AUASB
Moreover, the forecast is for this figure other professional accounting bodies,
regarding changes to Australian Standards,
to more than triple by 2021, reaching in lodged a joint submission on the review
which are planned to be effective for
excess of $4,000bn. An Institute report of the Legislative Instruments Act 2003.
financial reporting periods from 1 January
based on the survey, The Governance of Since the Australian Auditing Standards
2010. We are also engaged in discussions
Superannuation Funds – three years on Board (AASB) and the Auditing and
on auditor registration with relevant
from trustee licensing, identified three Assurance Standards Board (AUASB)
government stakeholders and will keep
areas where training was required: the standards are legislative instruments, this
members informed as meetings progress.
need to understand the difference review affects those involved in financial
between directing and managing; reporting and assurance.
alternative investments; and the value
The submission suggested ways of
of risk management.
streamlining the process of reviewing
Self-managed superannuation legislative instruments to provide certainty
funds (SMSFs) for those wishing to adopt standards based
The self-managed funds industry has on international equivalents earlier than
enjoyed significant growth over the past their mandatory applicable date. The
year. There are now 372,000 SMSFs in review is still in progress.
Australia representing the interests of
718,000 individuals. Assets grew to
$300.2bn in the last year alone.
Highlighting the importance of Results have been analysed and are available in the 2008 Annual Report on the Quality
discipline, ethics and conduct Review Program.
The Institute educates and continually
Number of reviews completed 2008 2007 2006 2005 2004
updates members about their ethical and
480 478 482 480 472
professional obligations.
1940s
War and taxes
New war and payroll taxes roll
out during the 1940s while the
Commonwealth begins collecting
all income tax on a uniform basis.
Pay-As-You-Earn and provisional
tax systems come into effect and
the Institute begins issuing formal
accounting guidance to its members.
Uniquely among professional accounting Broadening the pathway to enter the Skilled Migration Internship
bodies, the Institute is an accredited higher Program retains the quality and standing Program – Accounting
education provider. This means that the of Chartered Accountants, while extending In a further move designed to ease the
Chartered Accountants Program earns the pool of talent available to employers current skills shortage in accounting, the
candidates a Graduate Diploma of Chartered who have found it challenging in recent Institute, with other accounting bodies,
Accounting – a qualification that can be years to fill accounting roles. responded to a request from the
used to gain exemptions to Masters degrees Department of Immigration and Citizenship
More importantly, this also realises the
offered by universities around Australia. (DIAC) to develop a Skilled Migration
Institute’s long-held view that a Chartered
Internship Program.
Ensuring the relevance of the Accountant qualification should be
Chartered Accountants Program available to all high achieving graduates The objective of the Program is to help
who wish to qualify as accountants, rather international accounting graduates gain
In 2008 the Institute successfully gained
than being available only to high achieving the business communication skills required
re-accreditation of the Graduate Diploma
accounting graduates who wish to qualify for the Australian workplace. It will be
of Chartered Accounting in all
as accountants. This represents a delivered by existing educational
Australian states.
significant step forward for the profession institutions with the professional bodies
A new approach to in Australia and is in alignment with taking responsibility for approving suitable
practical experience global practice. providers and overseeing the provision
In consultation with candidates, mentors of the Program.
From 2007, prospective candidates from
and employers, the Institute redesigned
non-accounting degrees are offered two Enrolments
the practical experience component of the
additional pathways. A relatively modest increase (2.9 per cent)
Chartered Accountants pathway. This
meets international standards set by the Graduate Certificate of Chartered in new enrolments this year partly reflects
International Federation of Accountants Accounting Foundations (GCCAF) static growth in domestic students
requiring a competency-based, structured The Graduate Certificate of Chartered graduating from accounting degrees. To
approach to developing professional Accounting Foundations offered by Deakin address this and increase the available pool
knowledge and skills in the workplace. University meets all the academic entry of talent, we expect the broadened entry
requirements of the Institute. Strong pathway to the Chartered Accountants
Another reason for the redesign was Program to make an impact from next year.
support for the GCCAF has come from all
to fulfil candidate and mentor requests for
segments of the membership. More than Candidate and employer satisfaction
more information and guidance on their
416 students enrolled in the eight unit
roles and responsibilities during the Candidate and employer satisfaction with
online course this year. The Graduate
three-year practical experience period. the Chartered Accountants Program is at
Certificate enables students to acquire a
an all-time high, with candidates at 75 per
The new Practical Experience Program basic grounding in financial accounting,
cent in December 2007 and employers at
came into effect for all candidates who management accounting, finance, taxation,
87 per cent in June 2008. Advocacy,
commenced their first module from the audits and corporations law, so that they
defined as ‘likely to’ or ‘proactively to’
third term of 2007. are eligible to enrol in the Chartered
recommend the Chartered Accountants
Accountants Program.
Addressing the skills shortage Program, is also at a very high level:
The Institute is a leader in enabling Entrance exam employers at 94 per cent and candidates
non-accounting graduates to enter the at 86 per cent.
The entrance exam is targeted at
profession. The broadening of the entry non-accounting graduates currently
pathway is providing solutions for employed by an Institute-approved
addressing the skills shortage. employer who have extensive on-the-job
experience. The entrance exam assesses a
candidate’s readiness for the Program and
identifies any further study they may need.
A total of 60 applicants sat the entrance
exam in the first 12 months, a number of
whom immediately enrolled in the Program.
Candidate program satisfaction The online campaign commenced with a Events included the Chartered Accountants
ratings 2006 – 2008 (latest measure social networking site on Facebook, and Employment Evening and Achiever Work
as at December 2007) was designed to engage students in a Experience programs, as well as the
Overall Would deeper conversation around their career Chartered Accountants Cadetship evening
satisfaction recommend Advocacy choice and the brand. It emphasised how and Chartered Accountants Vacation
Year % % %
a quality qualification can help them Evening in New South Wales, Victoria,
2006/2007 65 88 71
achieve success in their careers. Phase two Western Australia and Queensland. Overall,
2007/2008 75 86 70
involved the launch of an online application as at July 2008 student engagement stood
(calendar) for students and phase three at an impressive 19,423 compared with
Employer program satisfaction
saw the launch of a student challenge. 9828 at the same time last year.
ratings 2006 – 2008 (latest measure
as at June 2008) In a series of three challenges, the Chartered Accountants
competition allowed students to develop Employment Evening
Overall
satisfaction Advocacy real-life business solutions for three global Employment evenings are aimed at
Year % % not-for-profit organisations, introducing third-year university students. The event
2006/2007 79 88 them to practical Chartered Accounting was held for the first time in the Australian
2007/2008 87 94 at a critical time in their career Capital Territory. This year, in Western
decision process. Australia attendance numbers were up, but
Attracting new members and in all other states there was a decrease,
The online challenges were exceptionally
recruits to the profession reflecting changing recruitment practices
well received with over 11,106 visitors
The skills shortage in the accounting by employers.
to the site.
profession is an ongoing issue that
Achiever Work Experience
continues to be felt by practices and Recent research has shown that we have
This year 210 first-year students secured
commerce nationwide. The Institute has positioned the Chartered Accountants
places in more than 100 accounting
been working to ensure students recognise brand as the ‘preferred postgraduate
organisations during the 2007/2008
the Chartered Accountant brand as accounting qualification’ and ‘the
summer break as part of our Achiever Work
the pre-eminent accounting designation qualification best for your career’ with
Experience, the Institute’s annual initiative
in Australia. the target student community.
that recognises outstanding up and coming
Brand campaign Careers marketing accounting talent across Australia.
One of the more high profile initiatives was Careers marketing events and initiatives
The program helps marry students chasing
a brand campaign, developed out of were used to great effect during the year
work experience opportunities and
student focus groups, which used multiple to promote accounting as a career and
employers attempting to secure new
channels including television and a ‘Chartered Accountant’ as the premier
accounting talent early on in their
dedicated online program to reach our designation of choice to university and
development so they are less reliant on
target audience. school students and such key influencers
competitive graduate recruitment periods.
as academics, employers, career advisors
The television campaign targeted key The placements are from two to 12 weeks
and teachers.
programs viewed by our youth with Institute-accredited firms ranging
demographic and showcased the career Initiatives included the recruitment of 11 from the Big 4, small to mid tier public
opportunities that can be achieved through student brand champs who worked on practice firms, government and
a career as a Chartered Accountant. This campus to help secure registrations, and commerce organisations.
annual television campaign was coupled the launch of the Day in the Life interactive
with a three-phase online campaign. DVD targeted at high school students,
teachers and careers advisors, and which
profiles five Chartered Accountants
working in diverse industries.
1950s
second and third year university students
from stockbroking or forensic accounting
the opportunity to find paid work
to working as the chief financial officer of a
experience during the summer holidays,
listed corporation.
which can lead to an opportunity to secure Post-war boom
graduate employment. The Vacation
Employment is a simple, cost-efficient The Menzies Government abolishes
way for employers from public practice, land tax, and taxes decline generally in
the middle of the century. The Institute
government and commerce to meet
issues its first auditing statements and
large numbers of potential recruits in establishes the Australian Chartered
a targeted manner. Accountants Research and Service
Foundation (later, the AARF).
Global positioning
How we delivered in 2008
As a founding member of the Global The latest survey polled 680 of the 12,400
Accounting Alliance (GAA), we continue young accountants presently studying
to work closely with other pre-eminent the Chartered Accountants Program.
international professional accounting
The most popular destination at 66 per
bodies to shape the profession on a
cent remained the UK, again the same as
global scale.
the 2006 survey. However, the second
Of the Institute’s 48,000 Chartered most popular destination was found to be
Accountants, 14 per cent are presently Asia, pushing last year’s second choice,
living overseas, spanning 119 countries USA, to third place.
from Canada to Kazakhstan.
For GAA members living in Australia, we
As working overseas and connecting aim to provide home-away-from-home
globally becomes an increasingly important benefits that make the transition to working
part of everyday business, our GAA here seamless. To date, the Institute has
membership is delivering more and more received more than 2500 registrations from
opportunities for our members. other GAA institute members to receive
services from us.
1960s
This year, for example, we gained
recognition for our Chartered Accountants The GAA’s focus for 2008 was on
Program and reciprocal membership with leadership and issues of convergence,
eight institutes in Canada, Hong Kong, in particular in the capital markets. We
South Africa, England and Wales, Ireland, shared information, research and strategies
A period of consolidation
Scotland and South Africa. This means on issues of relevance to the profession The government introduces the
members do not have to undertake and collaborated on solutions for first uniform national companies
bridging courses such as tax and company common challenges. legislation in 1961. The Institute
law to have their qualification recognised, professionalises with the codification
Individually and through the GAA we also of Professional Conduct rules and
or become reciprocal members of
continue to contribute to the International the publication of the first Members’
these institutes, when they move to
Federation of Accountants. Handbook. The first AARF research
a GAA country. paper is published in A Statement
An Institute survey conducted during the of Australian Accounting Principles.
year showed that 43 per cent of young
accountants intended to travel overseas
in the next two years. Of those, just less
than half were younger than 25 years old.
The results were similar to those of the
2006 survey.
A global presence
Key
Global Accounting Alliance
Institute members
24
Fiscal year 2008 was a busy and active year 2008 2007 2006 2005
for the Institute. We established a new $‘000 $‘000 $‘000 $‘000
customer service division, which included Revenue from
the creation of a national service centre operating activities 73,985 68,070 59,508 55,516
with improved service standards. We Revenue from
merged teams, implemented new non-operating activities 1,612 1,519 2,371 2,214
practices and procedures, improved Total revenue 75,597 69,589 61,879 57,730
turnaround times for migration assessments
and organised more than 700 events
Service expenses 17,859 20,175 14,820 13,445
during a period of significant change.
Marketing, promotion and
2,998 3,599 4,289 4,213
We successfully completed the sale of our publications expenses
York Street premises, relocated to Erskine Occupancy expenses 4,657 4,157 3,795 2,559
Street in Sydney and negotiated new Administration expenses 38,858 31,970 29,642 25,879
leases of our premises in Brisbane and
Other expenses 9,401 7,699 8,883 7,611
Canberra. We implemented service level
Total expenses 73,773 67,600 61,429 53,707
agreements to ensure a quality customer
experience, increased the use of
multimedia in our Chartered Accountants Surplus from
Program to enhance the learning ordinary activities 1,824 1,989 450 4,023
environment and improved our risk
management systems. For further details see the financial commentary on page 45.
Technology
A review by Deloitte of the Institute’s
technology has prioritised current needs,
evaluated future needs and recommended
programs and activities. The review has
given the Institute a starting point to
standardise equipment and processes and
create a solid foundation for the future.
An upgrade of our systems this year has
provided faster internet access, the
opportunity to evaluate traffic usage
and costs and the capacity to undertake
more detailed research and analysis of
members’ needs.
Sustainability review
1980s
policy is under development and we are
in the process of establishing a range of
environmental indicators and targets to
formalise the Institute’s sustainability
The rise and rise of regulation
commitment in this area.
The 1980s sees the increasing role
Since we are only at the beginning of this
of regulatory bodies including the
journey, we have not sought to have this newly formed NCSC (regulating the
information assured. However, best practice states’ application of Commonwealth
demands we report this information in as laws), the AAS, ASRB and the
rigorous a way as possible. To this end, we Australian Securities Commission.
have used the Global Reporting Initiative Capital gains and fringe benefits
taxes are introduced and the
(GRI) G3 guidelines as a reference to frame
Corporations Act 1989 commences
its contents. operation. The Institute rules CPE
is a mandatory requirement for
membership as well as a raft of
standards including work addressing
the so called ‘bottom of the harbour’
tax avoidance schemes.
Environment
Social
Stakeholder engagement
Stakeholder engagement is an important part of our sustainability agenda. To enhance and
promote the role and reputation of Chartered Accountants we actively engage with a wide
range of stakeholders.
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Social (continued)
Stakeholder dialogue takes many forms. The Chartered Accountants Advisory Young Chartered Accountants
Some examples are: Group provides confidential free Our Young Members Committees help
counselling for members experiencing young Chartered Accountants establish
Members difficult ethical or professional situations. themselves in the accounting profession
We provide members with timely access This year it assisted more than 80 members by enhancing professional skills and
to information about the activities of the across the country. mentoring them. The committee aims
business, management and governance, through its programs to also help members
as well as changes in legislation that may Membership distribution 2008
by branch % network across the legal, engineering and
affect the profession. Key communication finance professions, as well as with local
ACT 2
channels include 11 issues of Charter politicians. During the year the Institute
NSW 36
magazine; regular technical e-newsletters commissioned research to better
for tax, accounting and audit, financial NT 1
understand factors affecting recruitment,
planning and superannuation; fortnightly Overseas 14
performance, retention and attrition rates
segmented e-Bulletins; monthly local Qld 12
among young members.
e-newsletters; face-to-face visits from a SA 5
dedicated member relations team; training 2008
Tas 1
Membership by age band %
and development seminars; conferences; Vic 22
40 and under 52
and our website. WA 8
41–65 42
The annual general meeting is held in Over 65 6
Sydney, New South Wales, with an open 2008
invitation for members to attend and Membership by business segment %
Social (continued)
To date the proportion of Chartered To offer guidance on the practical The not-for-profit sector
Accountants who are women stands at 32 implications of regulation and legislation, We have long been active in helping
per cent, while in 1998 it stood at only 19.7 we also meet regularly with stakeholders not-for-profits (NFPs) improve their
per cent. across government, Treasury, the Financial financial reporting. There are 700,000 NFP
Reporting Council, the Australian Auditing organisations in Australia that require
2008
Membership by gender %
Standards Board, the Australian guidance on the latest reporting standards.
Accounting Standards Board, the
Female 32
Australian Securities and Investments Our first report in this area, Not-for-profit
Male 68
Commission, and the Australian Prudential sector reporting: a research project, in 2006
Regulation Authority. reviewed NFP annual and financial reports.
Government, industry bodies
Our second report, Enhancing not-for-profit
and regulators The Institute is also represented on the annual and financial reporting, published in
We maintain strong relationships with Chairs Committee, which comprises ASIC, February 2007, provided deeper practical
leading industry bodies and stakeholder CEOs of the Big 4, representatives of the guidance to help NFPs prepare and present
groups. We have a seat at the table of the: G100 and professional accounting bodies. annual and financial reports.
> Regulatory Discussion Group, dealing The Committee aims to achieve better
liaison between the profession and ASIC, The report outlined how enhancements
with matters affecting financial
reporting and auditing with the Institute representing the interests for annual and financial reporting detailed
of members outside the Big 4. in the first NFP report may be implemented
> Australian Securities Exchange
and provided an overview of legislation
Corporate Governance Council
Global engagement and resources and how to meet
> Australian Institute of Company The Institute connects with global research reporting obligations.
Directors Financial Reporting Committee
and advocacy through our role as founding
> Business Coalition for Tax Reform member of the GAA. Through the Joint Transparency Awards
> All major ATO, the Inspector General of Accounting Body (JAB) we ensure This year we extended our work in this area
Taxation and Treasury taxation forums Australia is well represented on the by partnering with PricewaterhouseCoopers
> Trans-Tasman Accounting Standards International Federation of Accountants to launch the inaugural Australian PwC
Advisory Group. Board and its key committees and boards. Transparency Awards to recognise and
We contribute to public policy development The JAB also ensures representation on the encourage ongoing improvement in the
by engaging actively with policy makers Confederation of Asian and Pacific quality and transparency of reporting in the
through written submissions, appearances Accountants and the ASEAN Federation not-for-profit (NFP) sector.
before parliamentary committees, of Accountants. The winner of the inaugural award was the
face-to-face meetings, involvement in Juvenile Diabetes Research Foundation
media debates and in legislation and and runner up was the Australian
regulation development. Community Support Organisation.
Social (continued)
(("/.'
and Alzheimer’s Australia, Cancer
Council, Camp Quality, Inspire ''!%%%
(("'))
Foundation and RSPCA were selected
as our charity partners.
'&!%%%
1990s
Staff participation in the program has
grown from 19 per cent in 2006 to 31 per
cent, with staff donations totalling $45,114, '%!%%%
as at June 2008. ?jan%+$ ?jan%,$
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Funding retirement
The Australian Charities Fund benchmarked
Everybody Counts this year. Participation Community investment by time The Keating Government’s
by 31 per cent of staff (and an average superannuation guarantee of
2006 – 2007 Percentage of employees 1992 sets in motion Australia’s
monthly donation of $35) placed the
volunteering hours equals key retirement income policy. The
Institute ‘above average’ compared to 62 per cent based on 250 Corporate Law Report Act begins
similar sized organisations. employees nationally operation in 1993 introducing
directors’ duties. The Ralph Report,
The program model has now evolved to 2007 – 2008 Percentage of employees
volunteering hours equals a review of business taxation, is
cover three strands: workplace giving, completed. The Financial Reporting
54 per cent based on 280
volunteer opportunities and pro bono skills employees nationally Council (FRC) is set up to oversee
transfer at a national and local level. the activities of the AASB. The
Professional Standards Act of
1994 is passed in the New South
Wales Parliament followed by a
submission from the Institute to
impose a limitation on liability. The
Institute calls for Australia to adopt
Everybody Counts was launched in 2006, international accounting and
auditing standards.
and Alzheimer’s Australia, Cancer Council,
Camp Quality, Inspire Foundation and RSPCA
were selected as our charity partners.
Social (continued)
21 st
century
Internationalisation of
reporting standards
Major changes to Australia’s tax system
in 2000 saw the introduction of a 10 per
cent goods and services tax (GST) on the
majority of goods. Following some high
profile corporate failures in Australia and
overseas, a reform to the Corporations
Act known as CLERP 9 becomes law
on 1 July 2004. The reforms aim at
strengthening the financial reporting
framework and enhancing disclosure.
The Institute continues to work strongly
to support CLERP 9 and other initiatives.
More recently the Institute has been
working with government on proposals
intended to reduce the regulatory burden
including company reporting obligations
and corporate governance issues.
Organisational chart
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Andrew Arkell FCA BCom Richard Deutsch FCA BEc Rachel Grimes FCA BBus (Acc)
GDipAppFin FAICD FCIS F FIN Deputy President Rachel is a director in the Mergers and
President Richard is a member of the leadership team Acquisition Team at Westpac.
Andrew is the company secretary and head of PricewaterhouseCoopers Australia and is Rachel has 19 years experience across
of corporate and advisory services at the firm’s National Assurance Leader. the financial services sector, working in
Queensland Investment Corporation (QIC),
An APRA-approved auditor, he has more commerce with Westpac/BT Financial
with services covering accounting policy,
tax, legal, investment compliance, risk than 15 years experience specialising in Group for 10 years as well as in the
management and company secretariat. insurance and investment management. Big 4 with Price Waterhouse.
He is also the lead engagement partner on
He has worked across a number of Rachel was the state chair of the New
segments, including the Big 4, small practice, external audits for a number of major listed South Wales regional council in 2004 and
government and more than 14 years in Australian companies, and provides due became a director in 2006. She is chair of
commerce with QIC. Andrew currently diligence support to clients looking at the Audit Committee.
serves on the Queensland regional council. potential acquisitions in the insurance and
investment management industry.
Andrew became a director in 2004. He is
chair of the Executive Review Committee, Richard became a director in 2004. He is a
joint chair of the Joint Standing Committee member of the Nominations, Joint Standing
and a member of the Nominations and Executive Review Committees.
Committee. Andrew is the Board’s
representative on the Corporate
Advisory Committee.
Fiona is a business consultant and a director Margaret is a partner at Hayes Knight He is Non-Executive Chairman of M2
of a number of boards including Bayside Melbourne, specialising in tax and business Telecommunications Group and Tonkin
Health, WPC Group Limited and the Legal services for medium-sized enterprises and Consulting Engineers.
Services Board (Victoria). high net worth individuals for the past 11 years. Craig is a Fellow of the Governor’s
She has over 25 years experience in Leadership Foundation and was awarded
She has extensive experience in people
commercial and financial management, the Institute of Chartered Accountants 1999
management, business and finance, and
governance, risk management and audit. National President’s Award for services to
serves as a director for Chunky Move the Institute and the Profession, and the
She has held senior executive positions at
Contemporary Dance Company, Jean 2006 South Australian Outstanding Service
BHP Billiton Limited and Coles Group
Hailes Foundation and Storage & to the Profession Award.
Limited, and has previously been the Chief
Warehousing Services.
Financial Officer of several organisations Craig was chair of the Institute’s National
in the health sector. Margaret is a past Victorian state chair Public Practice Committee for four years
Fiona became a director in 2007. Fiona is and became a director in 2005. She is to the end of 2007. He became a director
the Board’s representative on the Corporate the Board’s representative on the Public in 2008 and is a member of the
Advisory Committee and is a member of the Practice Advisory Committee. Governance Committee.
Audit Committee.
36
Derek Parkin FCA BCom CTA FAICD Michael Watson FCA Board 2007
Derek is a professor of accounting at the Michael is an executive board member Jenny Morison FCA BEc
University of Notre Dame Australia, in the Australian National Audit Office. Jenny is currently a director of Morison
Fremantle. His professional career has He jointly heads the audit and assurance Consulting and is also an independent
spanned four continents during the past area in the ANAO. member of a number of ACT and
three decades, beginning with Price Commonwealth audit committees, deputy
Michael has more than 35 years experience
Waterhouse in South Africa and moving chairperson of the ACT Land Development
specialising in public sector auditing. He
to roles as partner at both Arthur Andersen Agency and board member of the Growth
has direct audit responsibilities in respect
and Ernst & Young in Australia. Centres Commission (Sydney).
of government business entities and major
Derek’s current corporate roles involve public sector entities. She has some 26 years’ experience in the
both Board and audit committee positions areas of audit, tax, management consulting
Michael was an ACT regional councillor
in the resources, shipbuilding and building and accounting for government. Jenny
for six years and was chair for part
products sectors. is a leading specialist in the area of public
of 2007. Michael is a member of the Audit
A past state chair for the Western Australian Committee. He became a director in 2008. sector financial management reform,
council, Derek served on council for 12 years, having led teams for both the ACT and
and became a director in 2003. Derek is the Commonwealth governments in
Board’s representative on the Education implementing accrual output based
Board and Audit Advisory Committee. budgeting reforms.
Jenny has served as an ACT state chair and
became a director in 2003.
Governance (continued)
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Governance (continued)
A H A H A H
Fiona Bennett 1 1
Michael Watson 1 1
Governance (continued)
Indemnification and insurance This Board structure comprises both External auditors
for directors and officers member-elected and Board-elected The Institute engages the services of
The Institute’s by-laws provide for an directors. This balance ensures the Board Ernst & Young as the external auditor.
indemnity to each person who is or has comprises directors with appropriate skills, The external auditor’s performance is
been a director, councillor or committee experience and attributes for the reviewed annually.
member or officer against any liability organisation and its business. The
An analysis of fees paid to the external
which results from any act or deed done directors’ skills and expertise relevant to
auditors, including a breakdown of any
in the discharge of the individual’s duties. their position and their terms of office are
non-audit fees, is provided in Note 17 of
described on pages 35–36.
The Institute’s insurance policy serves the financial report. It is the policy of the
to indemnify the directors, councillors, Nominations committee external auditors to provide an annual
committee members and officers against The Institute has a separate nominations declaration of independence to the audit
liabilities for costs and expenses incurred committee with representation from the committee (see page 41). All proposed
by them in defending legal proceedings Board and membership. The committee non-audit work by the external auditor
arising out of the performance of their assists the Board to identify potential is required to be approved by the audit
normal duties for the Institute. candidates for appointment and removal committee prior to it being undertaken.
as members of committees and other The audit committee undertakes a full
Adding value through board review of the audit engagement before
appointments, as deemed relevant by the
structure and ethical and
Board. While the nominations committee deciding to reappoint the existing audit
responsible decision making
is not able to formally make appointments firm or seek tenders on the open market.
The Board and its committees provide
to the Board, it can identify skills gaps and
visionary leadership to the organisation Auditor independence and
work with the Board to address these.
and its global operations to ensure that non-audit services
the Institute sets and achieves strategic Ethical and responsible The directors received a declaration from
objectives and operates effectively and decision making the auditor of the Institute, as printed on
efficiently. Under the Institute’s by-laws, Members and staff are required to meet page 41.
the Board is given power over: high standards of honesty and integrity, as
Non-audit services
outlined in the Institute’s code of conduct.
> Maintaining and controlling the The non-audit services provided by the
Institute’s affairs New employees to the organisation are auditor, Sean Van Gorp, or his firm, Ernst
> The appointment, removal and provided with a comprehensive information & Young, are set out in Note 17, Auditors’
remuneration of the CEO kit and face-to-face induction, which remuneration. The directors are satisfied
> The promotion of improvements in laws outline standards of behaviour expected that the provision of services is compatible
affecting the accounting profession of all employees. All staff also participate with the general standard of independence
> The promulgation of regulations, in the Institute’s two-day cultural program for auditors imposed by the Corporations
including regulations prescribing rulings PRIDE and staff performance reviews, Act 2001. The nature and scope of each
> Providing guidance on standards of and the development process includes type of non-audit service provided
practice and professional conduct, behavioural expectations in alignment means that auditor independence was
including technical standards. with these PRIDE values (see page 26). not compromised.
The Board governs the Institute by:
Risk management and audit
> Setting strategic direction Audit committee
> Approving and monitoring delivery The audit committee comprises three
of the strategic plan
Board members. In accordance with its
> Liaising with stakeholders Charter, the committee assists the Board
> Ensuring compliance with to discharge its responsibility for financial
statutory obligations reports, application of accounting policies,
> Managing risk internal control systems and the operation
> Monitoring organisational performance of enterprise risk management processes.
> Monitoring the financial position.
Governance (continued)
Risk management Respecting the rights of members, Note 22, Director and executive disclosures
The Institute’s executive business risk and timely and balanced disclosure in the Notes to the Financial Statements)
management committee is charged with Enhanced performance by reason of a contract made by the
identifying, assessing, monitoring and The Board completes a formal evaluation Institute with a director or with a firm of
managing risk and compliance across the process annually. The results are provided which the director is a member, or with any
organisation. The committee reports to the to the governance and nominations entity in which the director has a
audit committee on an ongoing basis. committees for review and consideration, substantial financial interest except as set
with a recommendation being provided out in Note 21, Related parties in the Notes
This year, the Institute developed its
to the Board. to the Financial Statements.
business continuity and disaster recovery
framework and detailed plans. A further Fair and responsible remuneration Recognise the legitimate interest
review of the Institute’s risk management of stakeholders
The Board has an executive remuneration
was conducted by an external consultant, Directors are considered to be independent
review committee that monitors the terms
and management is currently implementing insofar as membership does not imply
and conditions of employment of staff and
recommendations. In the next financial or constitute a relationship that would lead
staff remuneration. The committee
year, the focus will be on business to material interference with their ability
considers the remuneration of the chief
continuity and disaster testing and to act objectively and in the best interests
executive officer and senior management,
the IT recovery plan. of the Institute.
agrees the remuneration strategy and
structure and approves the annual Directors whose firms undertake work for
Financial reporting
remuneration budget. The five highest paid the Institute do not participate in
The Board presents to members a report,
executives (non-directors) are paid within negotiations or discussions around such
signed by the president and deputy
the salary range of A$179,900 – A$465,000. work at Institute Board meetings, and
president, that the financial statements of
abstain from any decisions that relate to
the Institute for the full financial year give No director of the Institute has, since the
their organisation. No director or their
a true and fair view of the organisation’s end of the previous financial year, received
organisation is a material supplier to the
financial position and operational results, or become entitled to receive a benefit
Institute, although their organisations may
and comply with accounting standards (other than a benefit included in the total
be substantial customers.
in Australia. amount of emoluments disclosed in
19 August 2008 Liability Limited by a scheme approved under Professional Standards Legislation.
Governance (continued)
Joint accounting bodies committee Corporate advisory committee New South Wales council 2008
Institute members: Peter King FCA (Chair) Chris George FCA (Chair 2008)
Andrew Arkell FCA (Joint Chair 2008) Alison Harrop FCA Jason Phillips CA (Vice Chair 2008)
Richard Deutsch FCA Michael Cottier FCA Andrew Archer CA
Michael Spinks FCA Yvonne Sneddon FCA Georgina Gaussen CA
Robert DiMonte FCA (Joint Chair 2007) Thomas Gribble FCA Bruce Gleeson CA
There are also three committee Jo-Ann Long FCA Peter King FCA
members from the other professional Paul Urquhart FCA Ian Rodrigues FCA
accounting bodies. Matt Harrington FCA Jonathan Tyler CA
Andrew Arkell FCA (Board representative) Lee White FCA
Fiona Bennett FCA (Board representative) Anna Carrabs FCA (Chair 2007)
Audit committee
Rachel Grimes FCA (Chair 2008)
Fiona Bennett FCA Public practice advisory committee ACT council 2008
Michael Watson FCA Darryl Jess CA (Chair) Steven McDonnell FCA (Chair)
Jenny Morison FCA Rob Atkinson FCA Kelly Fenner FCA (Vice Chair)
Richard Deutsch FCA (Chair 2007) Dianne Azoor Hughes CA David Black FCA
Peter Beames CA Richard Stewart FCA
Craig Farrow FCA (Retired) Josephine Stevens FCA
Governance committee
Peter Hansen FCA Jodi George CA
Michael Spinks FCA (Chair 2008)
Brad Hellen FCA Lisa Stone FCA
Craig Farrow FCA
Gail Kinsella FCA (Retired) Chris Ikin FCA
Jenny Morison FCA
Arthur Kirk CA Stephen Holmes CA
Jenni Lewis FCA (Retired)
Executive review committee
Robert Mayberry FCA Tasmania council 2008
Andrew Arkell FCA (Chair 2008)
James Orchard CA Mike Blake FCA (Chair)
Richard Deutsch FCA
Joe Pierluigi FCA (Retired) Yvonne Rundle FCA (Vice Chair)
Michael Spinks FCA
Salvatore Russo CA (Retired) Nicholas Lunson CA (Retired)
Robert DiMonte FCA (Chair 2007)
Caroline Wilcher CA (Retired) Tim Maddock FCA
Margaret Parker FCA (Board Tracy Matthews FCA
Nominations committee representative) Sarah Merridew FCA
Robert DiMonte FCA (Chair 2008)
Andrew Arkell FCA Audit advisory committee
Richard Deutsch FCA Victoria council 2008
Tony Whitfield FCA (chair) Penny Hutchinson FCA (Chair)
Garry Waldron FCA
Robert Forbes FCA Annette Kimmitt FCA (Vice Chair)
Stuart Black FCA
Barry Jameson FCA Paul Allen FCA (retired end 2007)
Neil Faulkner FCA (Chair 2007)
Tiernan O’Rourke CA Garth Campbell-Cowen FCA (Retired
Dennis Robertson FCA end 2007)
Education board Graeme Rodda FCA Mark Davies FCA
Prof Stewart Leech FCA (Chair) Rod Smith FCA/(alternate Caithlin Timothy Holden FCA
Dr Anne Wyatt CA McCabe CA) Bruce Mulvaney FCA (Retired)
Dr Jacqueline McManus CA Prof Derek Parkin FCA (Board Kevin Neville FCA (Retired 2008)
Prof Allen Craswell CA representative) Martin Sammut FCA
Prof Anne Lillis CA Dr Nonna Martinov-Bennie FCA Malcolm Simister FCA
Les Jones CA Julian Bishop CA (joined May 2008)
Jenny Parker FCA
Jeffrey Bye CA
Frank Newman CA
Prof Derek Parkin FCA (Board
representative)
Governance (continued)
Contents
Financial statements
Financial commentary........................... 45
Income Statement................................. 46
Balance Sheet........................................ 47
Statement of Recognised
Income and Expense............................. 48
Cash Flow Statement............................ 49
Notes to the Financial Statements........ 50
Directors’ declaration............................ 75
Independent auditor’s report................. 76
2008 2007
Notes $’000 $’000
Revenue from operating activities 73,985 68,070
Revenue from non-operating activities 1,612 1,519
Total revenue from ordinary activities 4 75,597 69,589
The above income statement should be read in conjunction with the accompanying notes.
2008 2007
Notes $’000 $’000
Current assets
Cash and cash equivalents 6 4,475 22
Trade and other receivables 7 5,742 18,183
Total current assets 10,217 18,205
Non-current assets
Receivables 7 350 –
Property, plant and equipment 8 60,682 54,779
Intangible assets 9 153 69
Total non-current assets 61,185 54,848
Total assets 71,402 73,053
Current liabilities
Receipts in advance 10 26,515 22,677
Trade and other payables 11 9,309 9,296
Interest-bearing loans and borrowings 12 – 49
Provisions 13 1,749 1,569
Total current liabilities 37,573 33,591
Non-current liabilities
Trade and other payables 11 341 238
Interest-bearing loans and borrowings 12 – 10,000
Provisions 13 320 584
Total non-current liabilities 661 10,822
Total liabilities 38,234 44,413
Members’ funds
Reserves 14 2,704 –
Retained earnings 14 30,464 28,640
Total members’ funds 33,168 28,640
The above balance sheet should be read in conjunction with the accompanying notes.
2008 2007
$’000 $’000
Fair value reversal of freehold property sold – recognised
– 7,367
directly in members’ funds
The above statement of recognised income and expense should be read in conjunction with the accompanying notes.
2008 2007
Notes $’000 $’000
Cash flows from operating activities
Receipts from members’ subscriptions 40,579 36,023
Receipts from Institute activities 39,512 39,667
Payments to suppliers and employees (72,104) (65,881)
Net payments for GST (1,100) (927)
Net cash flows from operating activities 6 6,887 8,882
The above cash flow statement should be read in conjunction with the accompanying notes.
1. Corporate information The financial report is presented in recognition of amounts disclosed in the
The Institute of Chartered Accountants in Australian dollars and all values are financial report. This standard is for annual
Australia (‘the Institute’) is a body corporate rounded to the nearest thousand dollars reporting periods beginning on or after
that is governed by its Supplemental Royal ($’000) unless otherwise stated. 1 January 2009. The Institute has not
Charter and is domiciled in Australia. The determined at this stage whether to
(b) Statement of compliance present a single statement of
liability of its members is limited.
The financial report complies with comprehensive income or two separate
The registered office of the Institute is: Australian Accounting Standards. statements.
33 Erskine Street The Institute has early adopted AASB 8
Sydney NSW 2000 (c) Cash and cash equivalents
Operating Segments. As the Institute is not
Cash and cash equivalents in the Balance
The principal activities of the Institute a listed entity, the Institute has not included
Sheet, which comprise cash at bank and
during the year were: a note on an operating segment.
in hand and short-term deposits, are stated
> The delivery of pre and post admission Adoption of new accounting standards at their nominal amount. Short-term money
education and services The Institute has adopted AASB 7 Financial market securities are valued at cost plus
> The setting and maintaining of high Instruments: Disclosures and all accrued interest to balance date.
standards as they apply to members to consequential amendments which became
For the purposes of the Cash Flow
enhance their standing with the public applicable to annual reporting periods
and the business community Statement, cash and cash equivalents
beginning on or after 1 January 2007. The
consist of cash and cash equivalents as
> The continuing development of adoption of this standard has only affected
defined above and include short-term
government relations and advocacy the dislosures in these financial statements.
programs in pursuit of legislative and money securities and deposits at call which
There has been no effect on profit or loss,
regulatory objectives are readily convertible to cash in hand and
or the financial position of the Institute.
> The continuing development of a subject to an insignificant risk of changes
program to enhance the market Certain Australian Accounting Standards in value, net of outstanding bank
and personal value of the Chartered and AASB Interpretations have recently overdrafts. Bank overdrafts are included
Accountant designation. been issued or amended but are not yet within interest-bearing loans and
effective and have not been adopted by borrowings in current liabilities on
The Institute had 282 full-time equivalent
the Institute for the annual reporting period the Balance Sheet.
employees and in-house contractors at
ended 30 June 2008. The interpretations
30 June 2008 (2007: 246 full-time (d) Trade and other receivables
as relevant to the Institute are as follows:
equivalent employees).
Trade receivables are recognised and
AASB 101 (Revised) and AASB 2007-8
2. Summary of significant carried at original invoice amount less
Presentation of Financial Statements and
accounting policies an allowance for impairment.
consequential amendments to other
(a) Basis of preparation Australian Accounting Standards – this Collectability of trade receivables is
This general purpose financial report introduces a statement of comprehensive reviewed on an ongoing basis.
has been prepared in accordance with income and other revisions on the An impairment provision is recognised
Australian Accounting Standards, other presentation of items in the statement when there is objective evidence that the
authoritative pronouncements of the of changes in equity, new presentation Institute will not be able to collect the
Australian Accounting Standards requirements for restatements or receivable. Individual debts which are
Board and Urgent Issues Group reclassifications of items in the financial known to be uncollectible are written off
Consensus Views. statements, changes in the presentation when identified.
requirements for dividends and changes
This financial report has been prepared (e) Property, plant and equipment
to the titles of the financial statements.
on the basis of historical cost, except for Freehold property is measured at fair value
freehold property which has been These amendments are only expected to less accumulated depreciation on buildings
measured at fair value (refer Note 2(e)). affect the presentation of the Institute’s and building plant less any impairment
financial report and will not have a direct losses recognised after the date of
impact on the measurement and revaluation.
All plant and equipment is stated (ii) Revaluations amortised over the useful life and assessed
at historical cost less accumulated Following initial recognition at cost, for impairment whenever there is an
depreciation or amortisation and any freehold property is carried at a revalued indication that the intangible asset may be
accumulated impairment losses. amount which is the fair value at the date impaired. The amortisation period and the
of revaluation less any subsequent amortisation method for an intangible asset
Depreciation of property, plant and
accumulated depreciation on buildings with a finite useful life is reviewed at least
equipment, other than freehold land, is
and any subsequent accumulated at each financial year end. Changes in the
calculated on a straight-line basis at rates
impairment losses. expected useful life or the expected pattern
which take account of the remaining useful
of consumption of future economic
life of the relevant assets and their Any revaluation increment is credited to
benefits embodied in the asset are
estimated residual values. the property revaluation reserve included in
accounted for by changing the
The cost of fixtures and fittings on the members’ funds section of the Balance
amortisation period or method, as
leasehold premises is amortised over their Sheet, except to the extent that it reverses
appropriate, which is a change in
estimated useful lives or the remainder of a revaluation decrement for the same asset
accounting estimate. The amortisation
the lease period, dependent on whichever previously recognised in profit or loss, in
expense on intangible assets with finite
period is shorter. which case the increase is recognised in
lives is recognised in profit or loss in the
profit or loss.
Major depreciation periods are: expense category consistent with the
Any revaluation decrement is recognised function of the intangible asset.
Freehold property: in profit or loss, except to the extent that
Intangibles are amortised as follows:
– Building 50 years it offsets a previous revaluation increment
– Building plant 25 years for the same asset, in which case the Computer software 3 years
Furniture 10 years decrement is debited directly to the Gains or losses arising from derecognition
Office equipment 5 years property revaluation reserve to the extent of an intangible asset are measured as the
Computer equipment 3 years of the credit balance existing in the difference between the net disposal
Fixtures and fittings revaluation reserve for that asset. proceeds and the carrying amount of the
on freehold premises 10 years (iii) Derecognition and disposal asset and are recognised in profit or loss
Fixtures and fittings on An item of property, plant and equipment when the asset is derecognised.
leasehold premises Lease term is derecognised upon disposal or when
(g) Receipts in advance
Motor vehicles 3 years no further future economic benefits are
Receipts in advance are carried at original
expected from its use or disposal.
The assets’ residual values, useful lives and invoice amount in respect of goods and
amortisation methods are reviewed, and Any gain or loss arising on derecognition services to be provided subsequent to
adjusted if appropriate, at each financial of the asset (calculated as the difference balance date. Receipts in advance includes
year end. between the net disposal proceeds and the membership fees, Chartered Accountants
carrying amount of the asset) is included in Program enrolment fees and Training
(i) Impairment
the Income Statement in the year the asset & Development course fees.
The carrying values of plant and equipment
is derecognised.
are reviewed for impairment when events (h) Trade and other payables
or changes in circumstances indicate the (f) Intangibles Trade and other payables are carried at
carrying value may not be recoverable. Intangible assets acquired are initially amortised cost. They represent liabilities
Impairment losses are recognised as measured at cost. Following initial for goods and services provided to the
expenditure in the Income Statement. recognition, intangible assets are carried Institute prior to the end of the financial
Freehold property is measured at revalued at cost less any accumulated amortisation year that are unpaid and arise when the
amounts, and therefore impairment losses and any accumulated impairment losses. Institute becomes obliged to make future
on freehold property are treated as a
The useful lives of intangible assets are payments in respect of the purchase of
revaluation decrement.
assessed to be either finite or indefinite. these goods and services. Trade payables
Intangible assets with finite lives are are non-interest bearing and are normally
settled on a 30-day term.
(i) Employee leave benefits (i) Member fees Revenue in regard to certain activities is
(i) Wages, salaries and annual leave The Institute’s membership subscription deferred in cases where it is anticipated
Liabilities for wages and salaries, including year is 1 July to 30 June. Fees are payable that refunds will be made in regard to
non-monetary benefits, and annual leave annually in advance. Only those member discontinuation by attendees. The deferred
expected to be settled within 12 months fee receipts which are attributable to the amount is carried forward in the Balance
of the reporting date, are recognised in current financial year are recognised as Sheet within Receipts in advance.
other payables in respect of employees’ revenue. For activities which span the balance date,
services up to the reporting date. They are Fee receipts relating to periods beyond the the methods adopted to determine the
measured at the amounts expected to current financial year are shown, excluding percentage of completion basis are as
be paid when the liabilities are settled. any applicable taxes, in the Balance Sheet follows:
(ii) Long service leave as Receipts in advance under the heading > For Chartered Accountants Program
The liability for long service leave is of current liabilities. modules, the percentage of completion
recognised in the provision for employee (ii) Other revenue-generating activities is apportioned according to the time
benefits and measured as the present The Institute undertakes certain activities span between the commencement
value of expected future payments to be which are accounted for on a work-in- of the module and the completion of
made in respect of services provided by progress basis including Chartered the examination
employees up to the reporting date Accountants Program modules, Training > For other courses and activities that are
using the projected unit credit method. & Development courses, Quality Reviews, delivered in a series of events, the
Consideration is given to expected future Charter Journals, Congresses and student percentage of completion is apportioned
wage and salary levels, experience of activities. The Institute’s policy of accrual according to the number of events
employee departures, and periods of accounting with respect to the recognition delivered at balance date compared to
service. Expected future payments are of revenue and expenses on such activities the total number of events in the series.
discounted using market yields at the is as follows:
reporting date on national government (iii) Sale of goods
bonds with terms to maturity and > For activities which are completed The Institute recognises revenue from the
currencies that match, as closely as on or before balance date, any surplus or sale of goods when physical control of the
possible, the estimated future cash deficit is incorporated into the goods passes to the purchaser pursuant to
outflows. year’s results an enforceable sales contract and the costs
> For activities which take place wholly incurred or to be incurred in respect of the
(j) Revenue and expense recognition after the end of the financial year, any transaction can be measured reliably. Risks
Revenue and expenses are recognised revenue received and expense incurred and rewards of ownership are considered
to the extent that it is probable that their on such activities prior to balance date is passed to the buyer at the time of delivery
respective economic benefits will flow to deferred and carried forward in of the goods to the customer.
or be lost or consumed by the Institute, the Balance Sheet within receipts (iv) Interest income and expense
and the revenue and expenses can be in advance and prepayments respectively
Interest income on bank bills and deposits
reliably measured. The following specific
> For activities which span the balance is recognised on an accrual basis (using the
recognition criteria must also be met
date, a proportion of the final projected effective interest method, which is the rate
before revenue or expenses are
net surplus is recognised in the financial that exactly discounts the estimated future
recognised:
year on the percentage cash receipts through the expected life of
of completion basis. the investment) where the Institute attains
control of a right to receive consideration
for an investment.
(v) Member groups and reduced to the extent that it is no Cash flows are included in the Cash Flow
The Institute grants funds to certain longer probable that sufficient taxable Statement on a gross basis, and the GST
intrastate and overseas member groups. profit will be available to allow all or component of cash flows arising from
These funds are paid to support and part of the deferred income tax asset investing and financing activities, which
supplement membership activities to be utilised. is recoverable from, or payable to, the
controlled by members in those locations taxation authority is classified as part
Unrecognised deferred income tax assets
and are expensed by the Institute at the of operating cash flows.
are reassessed at each balance date and
time of the payment to the groups. are recognised to the extent that it has Commitments and contingencies are
become probable that future taxable disclosed net of the amount of GST
(k) Income tax and other taxes
profit will allow the deferred tax asset recoverable from, or payable to, the
(i) Income tax
to be recovered. taxation authority.
The Institute prepares its income tax
returns by reference to the application of Deferred income tax assets are measured (l) Operating leases
the principle of mutuality to the revenue at the tax rates that are expected to apply
Operating lease payments are recognised
and expenses of the Institute. The principle to the year when the asset is realised,
as an expense in the Income Statement
of mutuality is a common law principle based on tax rates (and tax laws) that have
on a straight-line basis over the lease term.
arising from the premise that individuals been enacted or substantively enacted
Lease incentives are recognised in the
cannot profit from themselves. at balance date.
Income Statement as an integral part of
Accordingly, receipts from members are Where assets are revalued, no provision the total lease expense.
deemed to be mutual income and not for potential capital gains tax has been
subject to income tax, and expenses in (m) Government grants
made because of the long-term nature of
connection with mutual activities are the asset and the existence of accumulated Government grants are recognised at fair
therefore not deductible for taxation tax losses. value where there is reasonable assurance
purposes. All other receipts and payments that the grant will be received and all
are classified in accordance with taxation (ii) Goods and services tax (GST) attaching conditions will be complied with.
legislation. Revenues, expenses and assets are
When the grant relates to an expense item,
recognised net of the amount of
The Institute is liable for other taxes it is recognised as income over the periods
GST except:
including fringe benefits tax. necessary to match the grant on a
> Where the GST incurred on a purchase systematic basis to the costs that it is
Deferred income tax assets are recognised of goods or services is not recoverable intended to compensate.
for all deductible temporary differences, from the taxation authority, in which
carry forward of unused tax assets and case the GST is recognised as part of (n) Provisions
unused tax losses, to the extent that it is the cost of acquisition of the asset or as
Provisions are recognised when there is
probable that taxable profit will be available part of the expense item as applicable
a present obligation (legal or constructive)
against which the deductible temporary > Receivables and payables, which are as a result of a past event, it is probable
differences and the carry forward of stated with the amount of GST included.
that an outflow of resources embodying
unused tax credits and unused tax losses The net amount of GST recoverable from, economic benefits will be required to settle
can be utilised, except when the deferred or payable to, the taxation authority is the obligation, and a reliable estimate can
income tax asset relating to the deductible included as part of receivables or payables be made of the amount of the obligation.
temporary difference arises from the initial in the Balance Sheet.
recognition of an asset or liability in a If the effect of the time value of money is
transaction that is not a business In respect of all receipts in advance that are material, provisions are discounted using
combination and, at the time of the subject to GST, a liability for GST payable is a current pre-tax rate that reflects the risks
transaction, affects neither the accounting raised except for receipts in advance that specific to the liability. When discounting
profit nor the taxable profit or loss. have a settlement date in respect of the is used, the increase in the provision due
GST liability that occurs prior to balance to the passage of time is recognised as
The carrying amount of deferred income date at which stage the liability will have a borrowing cost.
tax assets is reviewed at each balance date already been settled.
(o) Borrowing costs recoverable amount, but only to the extent trigger exists, the recoverable amount of
Borrowing costs are recognised as an that the increased carrying amount does the asset is determined. This involves
expense when incurred. not exceed the carrying amount that would value-in-use calculations, which
have been determined had no impairment incorporate a number of key estimates
(p) Interest-bearing loans and loss been recognised for the asset in and assumptions.
borrowings prior years.
(ii) Significant accounting estimates
All loans and borrowings are initially
An impairment loss and/or reversal is and assumptions
recognised at the fair value of the
recognised in the Income Statement Long service leave provision
consideration received less directly
immediately. As disclosed in Note 2(i)(ii), the liability
attributable transaction costs.
for long service leave is recognised and
After initial recognition, interest-bearing (r) Significant accounting judgments,
measured at the present value of the
loans and borrowings are subsequently estimates and assumptions
estimated future cash flows to be made
measured at amortised cost using the In applying the Institute’s accounting
in respect of all employees at balance date.
effective interest method. Fees paid on the policies, management continually evaluates
In determining the present value of the
establishment of loan facilities that are yield judgments, estimates and assumptions
liability, attrition rates, pay increases
related are included as part of the carrying based on experience and other factors,
through promotion, and inflation have
amount of the loans and borrowings. including expectations of future events that
been taken into account.
may have an impact on the Institute. All
Borrowings are classified as current
judgments, estimates and assumptions Allowance for impairment loss on
liabilities unless the Institute has an
made are believed to be reasonable based trade receivables
unconditional right to defer settlement
on the most current set of circumstances Where receivables are outstanding beyond
of the liability for at least 12 months after
available to management. Actual results the normal trading terms, the likelihood
balance date.
may differ under different conditions from of the recovery of these receivables is
(q) Impairment of assets other the judgments, estimates and assessed by management on an individual
than goodwill assumptions. Significant judgments, account basis. The impairment loss is
The carrying values of the Institute’s assets estimates and assumptions made by outlined in Note 7.
are reviewed for impairment whenever management in the preparation of these
Estimation of useful lives of assets
events or changes in circumstances financial statements are outlined below.
The estimation of the useful lives of assets
indicate the carrying value may not (i) Significant accounting judgments has been based on historical experience as
be recoverable. Non-recovery of deferred tax assets well as future expectations on use, lease
For an asset that does not generate largely Deferred tax assets are not recognised terms (for leased equipment), and turnover
independent cash inflow, the recoverable for deductible temporary differences policies (for motor vehicles). In addition,
amount is determined for the cash as management considers that it is not the condition of the assets is assessed at
generating unit to which the asset belongs. probable that future taxable profits will least annually and considered against their
be available to utilise those temporary remaining useful life. Adjustments to useful
If any such indication exists and where
differences. lives are made when considered necessary.
the carrying values exceed the estimated
Depreciation and/or amortisation charges
recoverable amount, the assets or cash- Impairment of non-financial assets
are included in Note 8.
generating units are written down to their The Institute assesses impairment of
recoverable amount. all assets at each reporting date by
evaluating conditions specific to the
The recoverable amount of the asset is the
Institute and to the particular asset that
greater of fair value less costs to sell and
may lead to impairment. These include
value in use.
the asset’s use and performance, future
Where an impairment loss subsequently expectations, economic and political
reverses, the carrying amount of the asset environments and the assessment of the
is increased to the revised estimate of its asset’s carrying value. If an impairment
3. Financial risk management The Board reviews and agrees on policies The Institute collects subscription income
objectives and policies for managing each of these risks. The at the beginning of the financial year. It is
The Institute’s principal financial policies are summarised below. anticipated that the overdraft facility would
instruments are comprised of receivables, be utilised from December 2008 to May
bank loans and cash. Market risk 2009. Borrowings are expected to peak at
Market risk is the risk that the fair value or approximately $18,000,000 in May 2009.
The Institute manages its exposure to key future cash flows of a financial instrument In order to minimise interest costs during
financial risks in accordance with the will fluctuate because of changes in market the period that the Institute has surplus
Institute’s financial risk management policy. prices. The main component of market risk cash, the Institute has chosen not to fix
The objective of the policy is to support the to the Institute is interest rate risk. any component of its borrowings. This is
delivery of the Institute’s financial targets
Interest rate risk refers to the risk that consistent with previous years, and enables
while protecting future financial security.
movements in variable interest rates the Institute to minimise borrowing costs
The main risks arising from the Institute’s will affect financial performance by and maximise the impact of positive cash
financial instruments are: increasing interest expenses or reducing flows in the first half of the financial year.
> Interest rate risk interest income. All of the Institute’s revenues are
> Credit risk Interest rate risk arises from financial assets denominated in its functional currency,
> Liquidity risk. and liabilities that are subject to floating namely expressed in Australian dollars.
The Institute uses different methods to interest rates. The Institute’s exposure to In addition, the Institute has an insignificant
measure and manage the risks to which market interest rates relates primarily to: exposure to foreign currency purchases.
it is exposed. These include: > Cash and cash equivalents These are mainly comprised of overseas
> Bank overdraft travel and accommodation charges which
> Monitoring levels of exposure to
are generally settled through credit card
interest rates > Borrowings.
transactions at the time of incurrence.
> Monitoring assessments of market
Currently the Institute has an approved
forecasts for interest rates Consequently, the Institute is not exposed
overdraft facility with a financial institution
> Ageing analysis and monitoring of to any fluctuations in foreign currencies.
with a limit of $25,000,000. The interest
specific credit balances to manage
rate is based on the 30-day bank bill swap
credit risk
rate plus a margin.
> Liquidity risk monitoring through the
development of future rolling cash
flow forecasts.
Principal Principal
subject to subject Non- Average Average
floating to fixed interest interest rate interest rate
interest rate interest rate bearing Total Floating Fixed
$’000 $’000 $’000 $’000
3. Financial risk management objectives and policies (continued)
2008
Financial assets
Cash and cash equivalents – 4,475 – 4,475 – 4.70%
Trade receivables – – 3,221 3,221 – –
Other receivables 350 – 1,342 1,692 8.40% –
Total financial assets 350 4,475 4,563 9,388
Financial liabilities
Trade and other payables – – (9,650) (9,650) – –
Total financial liabilities – – (9,650) (9,650)
2007
Financial assets
Cash and cash equivalents – 22 – 22 – 0.01%
Trade receivables – – 1,764 1,764 – –
Sundry debtors – – 13,966 13,966 – –
Other receivables – – 1,297 1,297 – –
Total financial assets – 22 17,027 17,049
Financial liabilities
Trade and other payables – – (9,534) (9,534) – –
Bank overdraft – (49) – (49) – 4.35%
Interest-bearing loans and borrowings (10,000) – – (10,000) 6.39% –
Total financial liabilities (10,000) (49) (9,534) (19,583)
A sensitivity of 50 basis points shift has been selected as this is considered reasonable given
the current level of short-term Australian dollar interest rates.
At 30 June 2008, if interest rates had moved, as illustrated in the table below, with all other
variables held constant, post-tax surplus and members’ funds would have been affected
as follows:
Post tax surplus Members’ funds
increase/(decrease) increase/(decrease)
2008 2007 2008 2007
$’000 $’000 $’000 $’000
If there was 50 basis points higher
in interest rates with all other
variables held constant 22 (50) 22 (50)
If there was 50 basis points lower
in interest rates with all other
variables held constant (22) 50 (22) 50
Credit risk
Credit risk refers to the loss that the Institute would incur if a debtor or other counterparty
defaults under its contractual obligations.
Credit risk would arise from the financial assets of the Institute, which comprise trade and
other receivables. The Institute’s exposure to credit risk is limited as there is a significant
amount of low value individual debtors located in multiple geographical areas. Receivable
balances are monitored on a regular basis with the result that the Institute’s exposure to bad
debts is not significant.
Management believes that the Institute does not have a concentration of credit risk.
The Institute’s maximum exposure to credit risk is equal to the carrying value of the
receivables held.
Liquidity risk
Liquidity risk includes the risk that, as a result of the Institute’s operational liquidity
requirements:
> The Institute will not have sufficient funds to settle a transaction on the due date;
> The Institute will be forced to sell financial assets at a value which is less than what
they are worth; or
> The Institute may be unable to settle or recover a financial asset at all.
To help reduce these risks, the Institute has:
> A liquidity policy which targets a minimum and average level of cash and cash equivalents
to be maintained
> Readily accessible standby facilities and other funding arrangements in place.
The Institute receives a substantial part of its cash inflows at the beginning of the financial year
and manages its expenditure within these cash inflows and approved funding arrangements.
The following table details the Institute’s remaining contractual maturity for its financial
liabilities. The table has been prepared based on the undiscounted cash flows of financial
liabilities based on the earliest date on which the Institute can be required to pay.
Less than 6 6 to 12 1 to 5
months months years Total
$’000 $’000 $’000 $’000
2008
Financial liabilities
Trade and other payables (9,309) – (341) (9,650)
(9,309) – (341) (9,650)
2007
Financial liabilities
Trade and other payables (9,296) – (238) (9,534)
Interest-bearing loans
(49) – (10,065) (10,114)
and borrowings
(9,345) – (10,303) (19,648)
2008 2007
$’000 $’000
4. Revenue and expenses
(a) Revenue
Revenue from operating activities:
– Subscriptions and related revenue 33,591 31,166
– Revenue from education and other services 40,394 36,904
Total revenue from operating activities 73,985 68,070
Other expenses
– Bad debts written off 11 117
Finance costs
– Bank loans and overdraft 411 523
2008 2007
$’000 $’000
5. Income tax
Prima facie tax expense from ordinary activities 547 597
Depreciation of plant and equipment, and intangibles 863 377
Entertainment 32 20
Mutual activities (616) (477)
Utilisation of tax losses (826) (517)
Income tax expense attributable to ordinary activities – –
At balance date, accumulated revenue tax losses of $15,926,000 (2007: $16,752,000) existed,
giving rise to a potential future tax benefit. The potential deferred tax asset attributable to the
revenue tax profit is not recognised, as realisation is not probable. The deferred tax asset for
revenue tax losses, which will offset future non-mutual income, will only be utilised if:
> Future assessable income is derived of a nature and of an amount sufficient to enable the
benefit to be realised
> The conditions for deductibility imposed by tax legislation continue to be complied with
> No changes in tax legislation adversely affect the Institute in realising the benefit.
Deferred tax assets not recognised in respect of deductible temporary differences amount to
$235,000 (2007: $239,000).
2008 2007
$’000 $’000
6. Cash and cash equivalents
Cash at bank and in hand 4,475 22
Cash and cash equivalents comprise cash in hand and cash at bank which is at call and which
earned interest at floating rates based on daily bank deposit rates.
At 30 June 2008, the Institute had available $25,000,000 (2007: $15,000,000) of undrawn
committed borrowing facilities (refer Note 12).
Adjustments:
Depreciation and amortisation of property, plant and equipment 2,793 1,205
Net gain on disposal of property, plant and equipment, and
(13) (30)
intangibles
Amortisation of intangible assets 82 53
Bad debts expense 65 (41)
Interest received (205) (227)
Interest paid 411 523
3,133 1,483
Changes in working capital:
Decrease/(increase) in receivables* (1,940) 717
Increase/(decrease) in payables 116 2,990
Increase/(decrease) in provisions (84) 64
Increase in receipts in advance 3,838 1,639
1,930 5,410
Net cash flows from operating activities 6,887 8,882
* The receivable balance as at 30 June 2007 includes the sundry debtor balance of $13,965,865. This balance relates to
the sale of the strata title property at 37 York Street and has been classified as proceeds from sale of property rather than
cash flow from operating activities in the Cash Flow Statement. The decrease in the sundry debtor balance is therefore
not included in the changes in working capital.
2008 2007
$’000 $’000
7. Trade and other receivables
Current
Trade receivables (a) 3,480 1,958
Allowance for impairment loss (259) (194)
3,221 1,764
Non-current
Receivables (c)
– Loan 350 –
(a) Trade receivables are non-interest bearing and are generally on 30-day terms. A provision
for impairment loss has been made for estimated irrecoverable trade receivables determined
by assessment made by management when there is objective evidence that an individual
trade receivable is impaired. An impairment loss of $105,000 (2007: $93,000) has been
recognised by the Institute in the current year. These amounts have been included in the
other expenses line item in the Income Statement.
Included in the Institute’s trade receivables are debtors with a carrying amount of
$1,378,000 (2007: $511,000) which are past due at the reporting date but not considered
impaired as there has not been a significant change in credit quality and the Institute
believes that the amounts are still considered recoverable. The Institute does not hold any
collateral over these balances.
All other balances within trade and other receivables do not contain impaired assets and are
not past due. Based on the credit quality of these other receivables, it is expected that those
amounts will be received when due.
The Institute has no receivables with renegotiated credit terms that would have been past
due under the original terms and conditions.
2008 2007
$’000 $’000
7. Trade and other receivables (continued)
At 30 June, the ageing analysis of trade debtors is as follows:
Neither past due nor impaired 1,843 1,253
2008 2007
$’000 $’000
At 1 July 194 235
Charge for the year 105 93
Amounts recovered (29) (17)
Amounts written off (11) (117)
At 30 June 259 194
(b) Current non-trade receivables are generally non-interest bearing and are normally payable
at call. There are no non-trade receivables that are past due at the reporting date.
The Sundry debtor of $13,965,866 at 30 June 2007 related to the sale of the strata title
property at 37 York Street Sydney. The Institute entered into a put and call option deed
dated 30 June 2006 to dispose of the premises which was settled on 9 August 2007.
(c) The Institute, in conjunction with CPA Australia and the National Institute of Accountants,
has lent funds to the Association of Accounting Technicians (AAT) as agreed under a
Memorandum of Understanding. The non-current loan to AAT is $350,000 before interest
which is charged monthly based on the 90-day bank bill rate plus 0.5 per cent.
2008 2007
$’000 $’000
8. Property, plant and equipment
Freehold property – at fair value 47,346 43,757
Motor vehicles
Motor vehicles are provided to certain senior staff in accordance with approved employment
arrangements and together with residual benefits are included in employee remuneration
packages.
2008 2007
$’000 $’000
8. Property, plant and equipment (continued)
Reconciliations
Reconciliations of the carrying amounts for each class of property, plant and equipment
are set out below:
Freehold property
Carrying amount at beginning of the financial year 43,757 34,060
Additions 1,705 10,226
Revaluation 2,704 –
Depreciation expense (820) (529)
47,346 43,757
Furniture and equipment
Carrying amount at beginning of the financial year 1,083 711
Additions 303 594
Reclassification – (19)
Disposals (4) (11)
Depreciation expense (229) (192)
1,153 1,083
Computer equipment
Carrying amount at beginning of the financial year 1,075 467
Additions 1,202 918
Disposals (19) (9)
Depreciation expense (554) (301)
1,704 1,075
Fixtures and fittings on freehold premises
Carrying amount at beginning of the financial year 7,105 885
Additions 2,331 6,223
Depreciation expense (928) (3)
8,508 7,105
Fixtures and fittings on leasehold premises
Carrying amount at beginning of the financial year 1,695 418
Additions 504 1,391
Reclassification – 19
Disposals (5) –
Amortisation expense (231) (133)
1,963 1,695
Motor vehicles
Carrying amount at beginning of the financial year 64 139
Additions – 23
Disposals (25) (51)
Depreciation expense (31) (47)
8 64
Total
Carrying amount at beginning of the financial year 54,779 36,680
Additions 6,045 19,375
Revaluation 2,704 –
Disposals (53) (71)
Depreciation expense (2,562) (1,072)
Amortisation expense (231) (133)
60,682 54,779
©The Institute of Chartered Accountants in Australia
2008 Report to members
66
2008 2007
$’000 $’000
9. Intangible assets
Computer software – at cost 1,870 1,705
Less: Accumulated amortisation (1,717) (1,636)
153 69
Reconciliation
Carrying value at beginning of the financial year 69 105
Additions 174 17
Disposals (8) –
Amortisation expense (82) (53)
153 69
Non-current
Lease liabilities 341 238
341 238
Liabilities are recognised for amounts to be paid in the future for goods or services received,
whether or not billed to the Institute. Payables are normally settled on 30-day terms and no
interest is incurred on these payables.
Non-current
Bill facility – 10,000
– 10,000
Bill facility
The Institute has entered into an approved overdraft facility with a financial institution with
a limit of $25,000,000 and is secured by a registered mortgage over the property situated at
33 Erskine Street, Sydney NSW. The facility review commenced on 8 July 2008. The effective
interest rate is based upon the 30-day bank bill swap rate plus a margin.
At balance date, the Institute had repaid fully the bill facility (2007: $10,000,000).
2008 2007
Notes $’000 $’000
13. Provisions
Current
Employee entitlements 19 1,749 1,569
Non-current
Employee entitlements 19 75 228
Make good provision 245 356
320 584
Reconciliation make good provision
Balance at beginning of year 356 248
Arising during year 31 83
Utilised during the year (159) –
Discount rate adjustment 17 25
245 356
In accordance with the lease agreements with various third parties, the Institute must restore
leased premises in various locations to their original condition before the cessation of their
respective lease terms.
Because of the long-term nature of the liability, the greatest uncertainty in estimating the make
good provision is the costs that will ultimately be incurred. The provision has been calculated
using a discount rate of 7.5 per cent.
Movements in reserves:
Property revaluation reserve
Balance at beginning of the financial year – 7,367
Increment on revaluation of property (refer Note 8) 2,704 –
Transfer to retained earnings – (7,367)
Balance at end of the financial year 2,704 –
2008 2007
$’000 $’000
15. Commitments
Operating leases – state branch office space
Within one year 1,582 1,390
After one year but not later than five years 6,356 5,312
After more than five years 5,600 5,736
13,538 12,438
The leases are all non-cancellable operating leases. Three leases do not have a renewal option
and are subject to market review at set intervals.
2008 2007
$ $
17. Auditors’ remuneration
Audit services 159,220 139,000
Other services:
Services in respect of Professional Standards
– 5,562
Council contributions
Training & Development presentations 61,800 1,750
Tax and accounting advisory 129,264 5,500
191,064 12,812
The corporation is dormant and has not been consolidated as it is considered to be immaterial.
2008 2007
Notes $’000 $’000
19. Employee entitlements and superannuation arrangements
The aggregate employment liability is comprised of:
Accrued wages, salaries and on-costs 749 976
Provisions (current) 13 1,749 1,569
Provisions (non-current) 13 75 228
2,573 2,773
The Institute contributes at least 9 per cent (2007: 9 per cent) to a variety of superannuation
funds on behalf of its staff.
Financial
liability
measured at
Loans and amortised
Total receivables cost
Notes $’000 $’000 $’000
20. Financial instruments
Fair values
The estimated net fair values of financial assets and liabilities held at balance date are
represented by their carrying amounts. The net fair value of a financial asset or liability is the
amount at which the asset could be exchanged or the liability settled in a current transaction
between willing parties after allowing for transaction costs.
Financial assets and liabilities by categories:
2008
Current financial assets
Cash and cash equivalents 6 4,475 4,475 –
Trade receivables 7 3,221 3,221 –
Other receivables 7 1,342 1,342 –
Total current financial assets 9,038 9,038 –
Non-current financial assets
Receivables 7 350 350 –
Total financial assets 9,388 9,388 –
Current financial liabilities
Trade and other payables 11 (9,309) – (9,309)
Non-current financial liabilities
Trade and other payables 11 (341) – (341)
Total financial liabilities (9,650) – (9,650)
Net financial assets/(liabilities) (262) 9,388 (9,650)
2007
Current financial assets
Cash and cash equivalents 6 22 22 –
Trade receivables 7 1,764 1,764 –
Sundry debtors 7 13,966 13,966 –
Other receivables 7 1,297 1,297 –
Total current financial assets 17,049 17,049 –
Total financial assets 17,049 17,049 –
Current financial liabilities
Trade and other payables 11 (9,296) – (9,296)
Bank overdraft 12 (49) – (49)
Total current financial liabilities (9,345) – (9,345)
Non-current financial liabilities
Trade and other payables 11 (238) – (238)
Bill facility 12 (10,000) – (10,000)
Total non-current financial liabilities (10,238) – (10,238)
Total financial liabilities (19,583) – (19,583)
Net financial assets/(liabilities) (2,534) 17,049 (19,583)
2008 2007
$’000 $’000
21. Related parties
The Institute made payments of a nature detailed below to certain parties, including partners
or employees of director-related entities. The payments were made to all parties on the same terms
and conditions:
> Gifts and fees to guest speakers at Training & Development events
> Author, group leader, reviewer, examination setting and examination marking fees
in respect of the Chartered Accountants Program modules
> Reviewer fees in respect of the Quality Review of certain practices.
The Institute also received the following fees from certain parties, including
director-related entities.
The fees were received from all parties under the same terms and conditions:
> Registration fees for attendance at Training & Development events
> Fees in respect of enrolment of students in the Chartered Accountants Program modules
> Fees in respect of the Quality Review of certain practices
> Fees in respect of attendances at networking functions.
The following table provides the total amount of transactions that were entered into with
director-related entities for the relevant financial year.
All the following transactions were carried out on normal terms and conditions during the year.
The above note reflects only those transactions incurred during the tenure of the respective director.
(ii) Executives
G B Meyer Chief Executive Officer
E McFadzean Deputy Chief Executive Officer
W J Palmer General Manager Standards & Public Affairs
A M McCotter General Manager Business Services
S E Frenkel General Manager Chartered Accountants Program & Admissions
S B M Grant General Manager QLD
M T Jones General Manager SA/NT
M J Nazzari General Manager VIC/TAS
C M Abbott General Manager WA
R J Stewart General Manager Brand & Communications
P Reddy General Manager Support Services
S G Kells General Manager Training & Development
L P Cochineas General Manager NSW
R Le Grande General Manager ACT Appointed 1 July 2007
M A Bevan General Manager Customer Service Division
B Bell General Manager Corporate Strategy & Planning
M A Maky General Manager Human Resources
J Boram General Manager Member Marketing Appointed 13 February 2008
2008 2007
$’000 $’000
22. Director and executive disclosures (continued)
(b) Compensation of key management personnel
(i) Compensation policy
Remuneration of the directors and senior management is
determined by the Executive Review Committee, which also
reviews remuneration levels for all staff. The Committee is
appointed by the Board and consists of three members of the
Board (currently the President, Deputy President, and the
Chairman of the Governance Committee).
(ii) Compensation of executives for the year
Compensation by category
Short term 3,501 3,125
Other long-term leave payments – 31
3,501 3,156
(iv) Other transactions of key management personnel and their personally related entities
There are no other transactions with key management personnel or their personally
related entities.
The by-laws of the Institute indemnify the directors and officers, and provide that each director
and officer:
>S
hall be indemnified against any losses or expenses that such a director or officer incurs
or becomes liable to pay by reason of any act or deed done by the director or officer in the
discharge of that director’s or officer’s duties except to the extent that such act or deed arises
from the director’s or officer’s own wilful default
>S
hall not be liable for the acts of any person or for joining in any receipt or document
or for any act of conformity or for any loss or expense happening to the Institute unless
it arises from the director’s or officer’s own wilful default.
There has not arisen in the interval between the end of the financial year and the date of this
report any item, transaction or event of a material and unusual nature likely, in the opinion of
the directors of the Institute, to affect significantly the operations of the Institute or the state of
affairs of the Institute in future financial years.
The directors of the Institute of Chartered Accountants in Australia declare that the financial
statements and notes set out on pages 46 to 74 which have been prepared as required
under the by-laws of the Institute:
>C
omply with Australian Accounting Standards and other mandatory professional
reporting requirements
> Present fairly the financial position of the Institute as at 30 June 2008 and the results
of its operations and its cash flows for the year ended on that date.
In the opinion of the directors, there are reasonable grounds to believe that the Institute
will be able to pay its debts as and when they become due and payable.
I have audited the accompanying financial report of the Institute of Chartered Accountants in Australia (the Institute), which comprises the
balance sheet as at 30 June 2008, and the income statement, statement of recognised income and expense and cash flow statement for
the year ended on that date, a summary of significant accounting policies, other explanatory notes and the Directors’ declaration.
Audit responsibility
My responsibility is to express an opinion on the financial report based on my audit. I conducted my audit in accordance with Australian
Auditing Standards. These Auditing Standards require that I comply with relevant ethical requirements relating to audit engagements and
plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The
procedures selected depend on my judgment, including the assessment of the risks of material misstatement of the financial report,
whether due to fraud or error. In making those risk assessments, I consider internal controls relevant to the entity’s preparation and fair
presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.
Independence
In conducting my audit I have met the independence requirements of the Australian professional accounting bodies. In addition to my audit
of the financial report, I was engaged to undertake the services disclosed in the notes to the financial statements. The provision of these
services has not impaired my independence.
Audit opinion
In my opinion:
1 The financial report presents fairly, in all material respects, the financial position of the Institute of Chartered Accountants in Australia
as of 30 June 2008, and of its financial performance and cash flows for the year then ended in accordance with Australian Accounting
Standards; and
Environmental sustainability
Until 2006, all Institute members received a hard copy of the Annual Report. However,
in March 2007 the Institute’s by-laws were amended so that a hard copy would only be
provided to members who specifically requested a copy (the report is also available to
members online). Furthermore, all of the hard copies that were requested by members
have been produced using recycled paper.
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