Accounting Research: PCAOB's new auditing standard, IAS 36 and IFRIC 10

This article discusses the PCAOB's new auditing standard on critical audit matters, IAS 36's impairment loss and IFRIC 10's conclusion. It also mentions the latest Blue Book edition and interpretive publications.

03 October 2018
Accounting Research

Question on page 266
The PCAOB has recently adopted a new auditing standard, which requires the auditors to
report and discuss on the critical audit matters (CAMs). This standard calls for the enhanced
transparent reporting mechanism, thereby improving the disclosures for the investors
(PCAOCB, 2017).
Reference
PCAOB. (2017) PCAOB Annual Report 2017. Retrieved from:
https://pcaobus.org/About/Administration/Documents/Annual%20Reports/2017-PCAOB-
Annual-Report.pdf
Reading and Understanding an IFRIC
Answer 1. According to the paragraph 124 of the IAS 36, the impairment loss pertaining to
the goodwill is not required be reversed in the subsequent period. However, IAS 34 requires
to measure the impairment loss in interim financial statements, and reverse the same in the
next interim period.
Answer 2. The conclusion as per IFRIC 10 as stated in paragraph 8 is that the impairment
loss recognised in one interim period, in relation to the goodwill is not required to be reversed
in the subsequent interim period.
Answer 3. According to me, the rationale behind the conclusion as stated above which is
opposed to the IASB is to maintain the consistency of the measurement of the annual results,
thereby making the entity’s reporting requirements simpler.

Questions of Chapter 12
Answer 1. The latest Blue Book Edition of 2018 would be most helpful in reviewing a
transaction that is proposed to be executed in 1 year time. This is because it will comprise of
the latest amendments and the updated versions of the standards.
Answer 2. In order to seek further explanations or context for the interpretation of the
guidance, the researcher must refer to the “The Conceptual Framework of Financial
Reporting plus the amendments to the references to the conceptual framework in IFRS
standards March 2018 edition.
Reference
IFRS. (2018). Product Information. Retrieved from:
https://shop.ifrs.org/ProductCatalog/Product.aspx?ID=2007
The eIFRS website requires login credential hence provided you with the above reference for
the answers.
Other Answers
Answer 1. Interpretive Publications are issued under the authority of the Auditing Standards
Board. The standards issued by the Auditing Standards Board have more authority than
others publications, because it provides an overall guidance to the auditors for the
comopliance of the auditing standards, while the other publications are just incidental aids
that would help the auditor to understand and apply the auditing standards (AICPA, 2018).
Reference
AICPA. (2018). Levels of Authority Retrieved from:
https://www.aicpa.org/interestareas/frc/levelsofauthority.html

Answer 2. As per the section 200 of AU-C, the auditor “should” consider the interpretive
publications that are applicable, while planning or performing the audit. This means the
requirement to abide by the framework of the interpretive publications is “mandatory” in
nature.
Answer 3. The interpretive publication shown in the figure is an “Audit Interpretations”
According to the applicability of the AU-C 230, an auditor must document all the necessary
working papers, observations and other documents pertaining to the audit. This would form
the basis for sufficient and appropriate records, and that the audit was planned and performed
in accordance with GAAS and applicable legal and regulatory requirements.
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