eligible revenue information sessions for auditors
TRANSCRIPT
Eligible Revenue Information Sessions
For Auditors
Session overview
Purpose Legislative Framework carriers Which carriers are required to report? Why is eligible revenue calculated? Financial Reporting Framework Eligible Revenue Submission Tools for auditors
PURPOSE
Sessions are to assist auditors of industry participants to understand client statutory reporting requirements for conduct of audit and related engagements
Legislative framework for carriers
Set out in
Telecommunications Act 1997 (Telco Act)
Telecommunications (Consumer Protection and Service Standards) Act 1999
Telecommunications Universal Service Obligation (Eligible Revenue) Determination 2003
NEW! Telecommunications (Participating Persons) Determination 2011 (No.1) (Participating Persons Determination)
Telecommunications (Period for Providing Return of Eligible Revenue) Specification 2010
Telecommunications (Approved Auditor) Determination 2010
Which carriers are required to report?
For each eligible revenue period, a carrier is either:
a participating person - and must submit an Eligible Revenue Submission to the ACMA by 31 October
OR
a USO non-participating person – and must submit an eligible statutory declaration to the ACMA by 31 October
A participating person for an eligible revenue period is an entity that was a carrier at any time during that eligible revenue period [section 20A of the TCPSS Act].
However, the minister has determined that a person is not a participating person when the person (or “grouped carrier”) has:• initial sales revenue;• gross telecommunications sales revenue; OR• eligible revenue
of less than AUD$25 million for the eligible revenue period and the person submits an eligible statutory declaration to the ACMA by 31 October [part 4 of the Participating Persons Determination].
Regardless of a carrier earning under AUD$25mil revenue they will be a USO non participating person if they fail to provide an eligible statutory declaration to the ACMA by 31 October
Each participating person must provide a Return and supporting documentation to the ACMA by 31 October or may face penalties/other enforcement action – the Return must be compliant with the Act, i.e. substantially compliant with the form approved by the ACMA
Why is eligible revenue calculated?
Universal Service Obligation Levy (annual)
National Relay Service Levy (quarterly) Annual Carrier Licence Charge (annual variable component)
Financial Reporting Framework
Requirement Reference
Prepare an eligible revenue return and give to the ACMA
What return must set out
subsections 20(1) & (3) TCPSS Act
ACMA approved form of return
Verification by statutory declaration if required
subsection 20(2) TCPSS ActForm & Handbook on ER Portal on ACMA website
Date to provide return as specified by the ACMA (31 Oct)
subsection 20(2) TCPSS ActTelecommunications (Period for Providing Return of Eligible Revenue) Specification 2010
Provide an audit report on return with the return Section 20D TCPSS Act
Calculation of eligible revenue Telecommunications Universal Service Obligation (Eligible Revenue) Determination 2003in accordance with subsection 20B(1) TCPSS Act
Revenue from Australian telecommunications industry
Section 7 Telco Act 1997
Eligible Revenue Submission
for a participating person
Key reporting concepts
All participating persons to report
Eligible Revenue Submission on a group basis vs individual basis
Disclose revenue of Declared Related Parties (DRPs) and consolidated related parties
Key reporting concepts cont.
Evidence for revenues and deductions
Financial statements of carrier and related parties
Audit report OR Audit Waiver granted by the ACMA
Revenue Allocation Schedule – when submitting ERR Form for more than one carrier
Table 1: Gross Telecommunications Revenue allocationA B C
Note Ref Name of Carrier
ABN/ACN (without spaces)
Gross Telecommunicatio
ns Revenue allocationin $AUD
R1 BIGTelco 22,000,000 R2
MedTelco
10,000,000
R3
Total $32,000,000 Total Gross Revenue $32,000,000
Unallocated $0
Revenue Allocation Schedule – when submitting ERR Form for more than one carrier
Table 2: Eligible Revenue allocation
Note Ref Name of Carrier
ABN/ACN (without spaces)
Eligible Revenue
allocation in $AUD
R11 BIGTelco
$19,000,000
R12 MedTelco
$6,000,000 R13
Total $25,000,000
Total Eligible Revenue $25,000,000
Unallocated $0
Related Parties
Consolidated related party
an entity:
(a) that is not the participating person; and
(b) the revenue of which is included in the annual consolidated financial statements of the participating person’s ultimate Australian parent entity (whose revenues are fully accounted for in the ERR Form)
Related Parties cont.
Declared related party
Any entity that earns telecommunications sales revenue from the Australian telecommunications industry and that is not a participating person or a consolidated related party and is owned at any time during the eligible revenue period (>49%) by the owner of the carrier
Multiple Parties Schedule in ERR Form
Table 1: Ownership
Group Name:
Note Ref Carrier Name
Carrier Licence Number
ABN/ACN (without spaces)
M1 BIGTelco
M2 MedTelco
M3
Ultimate holding company
Bluetone
50% 50%
Carrier X
Multiple Parties Schedule in ERR Form
Table 2: Declared Related Parties
Please refer to Sections 6 and 7 of the Telecommunications Universal Service Obligation (Eligible Revenue) Determination 2003 to determine if you have any Declared Related Parties
Declared Related Party (DRP) Name
(A)Proportion of Carrier owned
by Ultimate holding
company (participating
person interest)
(B)Proportion
of DRP owned by Ultimate holding
company (party
interest)DRP Factor
(A x B)M13 0.00%
M14 0.00%
M15 0.00%
M16 0.00%
Bluetone 50% 50% 25%
Carry through to revenue and deductions sheets – example:
Table 1: Sales Revenue (per financial statements)A B D E
Note Ref
Name of Group/Carrier or name of DRP
DRP factor % if applicable
(automatically applied from
"Multiple Parties" sheet)
Total Revenue in $AUD
Carrier/Group Portion of Revenue
R1 Bluetone
R2
25% $100,000 $25,000
Carrier A
Ultimate Australian Parent
Co X
Co Y
Co Y1Co Z
Co M
Co N1
Co N2
Co N3
Co N
100% 50%
Co J
Co K
90%
80%
80%
50%
50%
100%
50%
50%
90%50%
50%
Parent interest in Co N2: =(90%x100%x50%)+(90%x80%x50%)=45% + 36%=81%
Parent interest in Carrier A: =90%x80%x80%=58%
Multiple Parties Schedule in ERR Form
Table 2: Declared Related Parties
Please refer to Sections 6 and 7 of the Telecommunications Universal Service Obligation (Eligible Revenue) Determination 2003 to determine if you have any Declared Related Parties
Declared Related Party (DRP) Name
(A)Proportion of Carrier owned
by Ultimate holding
company (participating
person interest)
(B)Proportion
of DRP owned by Ultimate holding
company (party
interest)DRP Factor
(A x B)M13 0.00%
M14 0.00%
M15 0.00%
M16 0.00%
Co N2 58% 81% 47%
A complete Eligible Revenue Submission (ERS) is made up of two parts:
1. A Return Eligible Revenue Return Form (ERR Form) Final Financial Statements for carrier and related parties Outline of Business Structure
2. Supporting Documents Independent Audit Report Statutory Declaration – Management Certification
ERR Form
>Eight sheets (was 17 in 2008-09) and built in related party percentages>Prepare ERR Form in accordance with relevant Australian Accounting Standards>whole Australian dollars (AUD$) and English >exclusive of GST
Calculating Eligible Revenue Initial sales revenue Less Non-telco sales revenue and revenue earned whilst
not a licence holder = Gross telecommunications sales revenue Less Deductions:
- Overseas Activities and Acts in Australia for services outside Australia
- Customer equipment- Content services- Exempt base station- Infrastructure revenue- Inter-Person Input Payments
What is telecommunications revenue?
> Revenue earned from the telecommunications industry from carrying on business as a carrier or carriage service provider, or….
… supply goods or services for use in connection with the supply of a listed carriage service; supply a content service using a listed carriage service; manufacture or import customer equipment or customer cabling; or
install, maintain, operate or provide access to:
(i) a telecommunications network; or
(ii) a facility; used to supply a listed carriage service.
Audit report on return
An eligible revenue return given to the ACMA under section 20 must be accompanied by a report of an approved auditor that:
(a)is in a form approved in writing by the ACMA; …
This is the ACMA independent audit report form published for the relevant year on the:
ACMA Eligible Revenue Portal http://www.acma.gov.au/WEB /STANDARD/pc=PC_410118
Audit report on return…..
(b)states that the auditor has audited the return; and
(c)contains a determination, in the terms specified in the
form, of the auditor’s opinion; and
(d)states that the auditor has been given sufficient information
and assistance in order to audit the return; and
(e)includes all other statements and information required by the
form to be included.
Audit Report on Return - s20D TCPSS Act
The approved auditor must provide an audit opinion on all components of the Return, not only the ERR Form
Only exception is where an audit waiver or a conditional audit waiver has been granted by the ACMA.
Approved auditor
> Subsection 8F(1) of TCPSS Act – meaning of approved auditor:
A reference in this Part to an approved auditor is a reference to a person included in a class of persons specified in a written determination made by the ACMA for the purposes of this section
Approved auditor cont.
Telecommunications (Approved Auditor) Determination 2010 specifies the following as approved auditors:
1. Registered auditors under Part 9.2 of the Corporations Act 2001
2.Authorised audit companies registered under Part 9.2A of the
Corporations Act
3.Auditors-General
Check your registration as either a registered auditor or authorised audit company by using the professional registers on the ASIC website: http://www.search.asic.gov.au/pro.html
Requesting an Audit Waiver (may be a conditional audit waiver)
> Applies to only one eligible revenue period
> Request prior to lodging all other documents in an Eligible Revenue Submission
> Audit waiver is more likely to be approved where:- other sufficient and appropriate evidence is provided - when carrier did not hold the licence for the full eligible revenue
period- no significant errors in prior period returns- administrative expense is prohibitive for carrier compared to
expected revenue from telecommunications activity in Australia
Other Reports from Auditors -based on conditional audit waiver
> Limited subject matter audit reports> Agreed upon procedures reports> Review Reports> Client may need to provide methodology for revenue
recognition to the ACMA> Early contact with the ACMA Revenue Assurance
Section recommended
Tools
for auditors
Recommended: Point of Contact for Auditors
> Specific carrier representation – use ACMA contact form> Personnel nominated as point of contact for the ACMA
and the carrier for:> Notification of general issues> Discussion regarding the form of the audit report