14 February 2023: Materiality assessment of reported values
Are you a government entity, required to complete interim valuations? Due to the current inflationary environment, many 3 year revaluation cycles will be close to 20% materiality based on forecast PPI construction index rates. It is more important than ever to ensure audit is fully informed. Insight Asset Services can provide independent desktop valuation services, including tailored index rates, to ensure you are not caught out during audit.
When using index rates to conduct desktop assessments under AASB 13 for cost approach assets, replacement costs are the primary input affected by index rates. Having inflation at the historically high levels they currently are, will see audit take a close look at desktop indexation approaches. The best way to support any discussion with audit about materiality thresholds, is to have an independent indexation report or desktop valuations conducted. In most instances once depreciation and other changes are identified and quantified, the materiality of movements are shown to be below thresholds. In some cases, materiality will be above thresholds and audit will request a comprehensive valuation be undertaken. However, conducting independent desktop assessments like this is highly favoured should auditors request a comprehensive valuation for the next financial year. In the current market conditions, this should be on most entities radar.
9 January 2023: Amendments to AASB 13 to apply Prospectively from 2024
The AASB has undertaken a detailed review into the application of AASB 13 Fair Value Measurement of Non-Financial Assets of Not-for-Profit Public Sector Entities. The standard was first implemented in 2014, and has been subject to a number of submissions, with the work Insight Asset Services undertakes for our NFP Public Sector clients the subject of the latest round of review. A summary of the changes and a copy of the Amendments AASB2022-10 can be found here.
These changes are to be implemented to annual periods beginning on or after 1 January 2024, however we would advise implementation in the 2023 financial year. This will ensure any issues can be resolved in the most favourable audit conditions.
There are a number of implications these amendments have to asset valuation methodologies, however Insight Asset Services have a number of strategies in place to meet these amendments with as little disruption as possible. As a positive outcome these amendments to the accounting standards will better align financial reporting outcomes to asset management objectives.