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Course in basic accountancy principles that is approved by the Board Exposure draft 2010

Exposure Draft
Course in basic accountancy principles that is approved by the Board

This draft information sheet is also available as a PDF, download  link is provided at end of page.

The Board has released this draft information sheet as an exposure draft and invites comments and submissions in relation to the information contained in it within 60 days. The closing date for submissions is 17 August 2010 after which time the Board will consider any submissions made before seeking to finalise the information sheet.

Any written submissions in relation to this exposure draft should be made to the Secretary of the Board via email at tpbwebsite [at] ato.gov.au or by mail to:

Tax Practitioners Board
PO Box 9825
PENRITH NSW 2740

Disclaimer

Please note that this document is in draft form, and when finalised, will be intended as information only. While it seeks to provide practical assistance and explanation, it does not exhaust, prescribe or limit the scope of the Board’s powers provided in the Tax Agent Services Act 2009.

Additionally, the principles, explanations and examples in this paper do not constitute legal advice. They are also at a preliminary stage only. The Board’s conclusions and views may change as a result of the comments the Board receives or as other circumstances change.

Document history

This draft information sheet issued on 15 June 2010 and is based on the Tax Agent Services Act 2009, the Tax Agent Services Regulations 2009 and the Tax Agent Services (Transitional Provisions and Consequential Amendments) Act 2009 as at 1 March 2010.

Information regarding ‘a course in basic accountancy principles that is approved by the Board’

This information sheet sets out the preliminary views of the Tax Practitioners Board (Board) in relation to the meaning of ‘a course in basic accountancy principles that is approved by the Board’ for the purpose of Items 202(b)(i), 204(a)(ii) and 205(a)(i) of Part 2 of Schedule 2 to the Tax Agent Services Regulations 2009 (TASR).

The information draws on advice given to the Board in May 2010 by Professor Keryn Chalmers.

The purpose of this information is to assist relevant institutions, professional associations, potential registrants and the wider community to understand the factors that provide the basis for the Board’s approach to the educational eligibility requirements for registration as a tax agent.

All preliminary views expressed in this document are subject to ongoing consultation by the Board with relevant stakeholders. The Board intends to adopt these preliminary views until they are finalised.

The Board will publish a separate information sheet outlining its general approach regarding the approval of courses for the purpose of Schedule 2 to the TASR.

Introduction

  1. As the Tax Agent Services Act 2009 (TASA) is designed to “… ensure that tax agent services are provided to the public in accordance with appropriate standards of professional and ethical conduct” (see section 2-5 of the TASA) it is both necessary and desirable, in certain respects, to increase the expectation of the thoroughness of education and training that a registered tax agent should have when compared with the expectations under the registration rules applying before the commencement of the TASA.
  2. The Board recognises that a balance must be struck between what is reasonably achievable within the modern educational and professional paradigm and assuring the public of high professional standards. In doing so, regard has been had to the educational qualifications, and the types of providers of training and education recognised within the Australian Qualifications Framework (see www.aqf.edu.au).

Course in basic accountancy principles

Background

  1. To become a registered tax agent, an entity must meet certain eligibility criteria, including the requirements prescribed by the TASR. In certain cases, one such prescribed requirement is that a tax agent seeking registration must have successfully completed a course in basic accountancy principles that is approved by the Board.
  2. Individuals must have successfully ‘completed a course in basic accountancy principles that is approved by the Board’ if they are seeking registration under the following:
    • Tertiary qualifications in law (Item 204(a)(ii) of Part 2 of Schedule 2 to the TASR).
    • Work experience (Item 205(a)(i) of Part 2 of Schedule 2 to the TASR).
  1. Individuals must also, if the Board considers it relevant to the tax agent services to which the application relates, have successfully ‘completed a course in basic accountancy principles that is approved by the Board’ if they are seeking registration under the following:
    • Tertiary qualifications in another discipline — specialists (Item 202(b)(i) of Part 2 of Schedule 2 to the TASR).
  1. According to advice given to the Board, an appropriate course in basic accountancy principles should cover the following topics, taking a user-orientated approach rather than a preparer-orientated approach:
    1. Sources of regulation of accounting
    2. Understanding financial statements for different business structures
    3. Transaction analysis
    4. Cash and accrual accounting
    5. Key concepts and rules integral to understanding financial statements including
      1. Definition and recognition of revenues and expenses
      2. Definition and recognition of assets
      3. Definition and recognition of liabilities
      4. Measurement of current-assets, including receivables and inventory
      5. Measurement of non-current assets including depreciation and impairment, and
      6. Measurement of liabilities
    6. Taxable income and accounting profit or loss.
  1. The topics identified in paragraph 6 are premised on a user-oriented approach for a course in basic accountancy principles. As an introduction to accounting, such an approach focuses on understanding accounting information. This can be contrasted with a preparer-focused approach with a strong emphasis on record keeping, accounting procedures and information preparation functions in preparing professional accountants. The user-orientated approach is deemed to be more relevant for applicants seeking registration as a tax agent with tertiary qualifications in another discipline (specialists), tertiary qualifications in law or work experience.

Course structure under the new regulatory model

  1. Obviously there can be no objection to a course in basic accountancy principles covering other areas of accounting, in addition to those noted above.
  2. Applicants for tax agent registration under Items 204 and 205 must complete a course in basic accountancy principles that is approved by the Board and applicants applying under Item 202 may also need to complete such a course. There is no difference between what an appropriate course in basic accountancy principles should cover for such an applicant under Items 202, 204 and 205. This is because the fundamental elements of a basic accountancy principles course are the same regardless of the identity of the applicant.

Duration of course/s

  1. It is expected that the topics, listed at paragraph 6 above, will fit within a single standard 12 to 14 week teaching period made up of formal instruction (such as lectures), exercises in applying knowledge (such as tutorials) and private study (such as research, reading, and assignment preparation) totaling 100 to 130 hours.
  2. Accordingly, the Board is of the preliminary view that the duration of the course in basic accountancy principles should not be less than the equivalent of one quarter of a semester’s full-time work load amounting to a total of 100 to 130 hours of study and tuition.

Manner of delivery

  1. Although the suggested duration of 100 to 130 hours is based on an assumption of a traditional lecture/tutorial/self study model there is a diversity of delivery models available, many are delivered in an intensive format. Others may be delivered by “distance” or “flexible” study modes involving engagement with teaching materials and teaching staff via mechanisms such as interactive compact disc, video conference and the internet. Some courses may not require any attendance at lectures or seminars but may rely upon the students’ performance in assessment tasks such as a single final examination as a measure of the competence of the students.
  2. Accordingly, the Board does not believe that a hard and fast rule on manner of delivery is necessary. Provided that whatever manner is adopted in the course or its components involves an expectation that students will develop a thorough understanding of the basic accountancy principles through technical content, its application and appropriate research, it is immaterial whether they are usually present in a room with the teacher or not. The outcomes of the course in basic accountancy principles or its components should be discernible by reference to how the course/components of the course are assessed.

Assessment

  1. The Board is of the preliminary view that some means of objective assessment is a key aspect of the approval of courses for registration of applicants as tax agents. The Board takes the preliminary view that it must be satisfied that applicants have demonstrated their knowledge and skills in the relevant course or components by some means of an independent and objective assessment. Such assessment should be rigorous and have integrity. Various forms of assessment may be employed. Ideally because of different learning styles and what is appropriate for different aspects of a course, each course or component should employ a mix of assessment practices including:
    • tests
    • examinations (oral and written)
    • problem based assignments
    • essays and reports and
    • computer-based assessment tasks.
  1. Not every one of these needs to be present in an approved course.
  2. The Board proposes not to accept assessments that either lack rigour or are too narrow in their focus. Such assessments may be seen to be recognised as being one element which is a contributor to overall determination of a student’s performance in a course, rather than being treated as the sole measure of their skills and knowledge in basic accountancy principles.

The meaning of 'course'

What is a course?

  1. A course in basic accountancy principles may be a series of components which make up one or more units offered by an Australian tertiary institution or other equivalent body. Such a series of components will lead to an overall knowledge of selected basic accountancy principles. Such components may take the form of small units designed for tuition or training of discrete aspects of accountancy principles. The Board notes that although coherence between the parts/units of the course is desirable, not all applicants will have completed a single coherent series of units delivered, for example, by one provider. Accordingly, the Board is of the preliminary view that provided the content set out in the list of topics at paragraph 6 above is addressed and provided the material addressed is reasonably current the components need not be part of a coherent stream and may include some duplication and overlap with each other provided there is not a substantial duplication of content.

Does a course need a formal assessment component?

  1. The Board is of the preliminary view that there must be a formal assessment component in a course or in the components of a course. This assessment should be sufficient to assure the Board that there has been a test or examination to ensure relevant content and skills expected in a course have been learned/acquired by the applicant and that rigour has been employed in the testing of the knowledge and skills.
  2. The Board does not propose to be prescriptive about the style and content of assessments, provided the assessments employed represent a genuine test of relevant knowledge and skills and subject to integrity to ensure the relevant applicant will have undertaken the assessment task/s in question.
  3. The Board is of the preliminary view that the assessment should, to a significant degree (that is, at least 40%), be done under some form of independent supervision.

Can a course be constituted solely by recognised prior learning?

  1. The Board is of the preliminary view that assessment of knowledge and competence is the best safeguard for the Board to ensure that it admits to registration only applicants who have the necessary technical qualifications to competently deal with taxpayers’ affairs. The Board recognises that prior learning through experience may be regarded as a proxy for content but it does not propose to accept evidence of prior learning in the workplace, which prior learning has not been formally assessed in some way.
  2. In principle, prior learning which has itself been formally assessed would not require further assessment. However, it is unlikely the Board will approve an application if all the education requirements were satisfied by prior learning as the ability to keep up to date with changes requires the acquisition of essential learning skills (interpretative, analytical and cognitive skills) that come from the rigour associated with formal training courses.

How current should a course be?

  1. Due to changes in regulation and accounting standards many tertiary institutions do not normally grant credit for units of study completed more than ten years prior to application. The Board considers that this standard should be prima facie adopted in respect of the recognition of components completed to satisfy the requirements of a course in basic accountancy principles.
  2. However, the Board notes that the age of the course has to be balanced with the knowledge and experience of the applicant. Well educated professionals will keep their knowledge and skills up to date and will be required to do so through continuing professional development requirements of professional associations. Given such a person’s knowledge, a requirement to repeat their studies after 20 years of practice would run counter to the policy of the legislation.
  3. Therefore, the Board proposes to accept as approved courses of study in basic accountancy principles:
    • where the component unit of study was completed fewer than 10 years from the date of the application for registration, or
    • where the component unit of study was completed more than 10 years from the date of the application for registration and the applicant can demonstrate an updating of those skills through work experience and continuing professional development.
  1. The Board recognises that there may be applicants that fall outside these two broad guidelines. In these cases, a submission should be included with the application for registration, which the Board will consider on its merits.

Summary and conclusion

  1. The Board is of the preliminary view that a course in basic accountancy principles should include the following topics:
    1. Sources of regulation of accounting
    2. Understanding financial statements for different business structures
    3. Transaction analysis
    4. Cash and accrual accounting
    5. Key concepts and rules integral to understanding financial statements including
      1. Definition and recognition of revenues and expenses
      2. Definition and recognition of assets
      3. Definition and recognition of liabilities
      4. Measurement of current-assets, including receivables and inventory
      5. Measurement of non-current assets including depreciation and impairment, and
      6. Measurement of liabilities
    6. Taxable income and accounting profit (loss).
  1. Further, the Board is of the preliminary view that a course in basic accountancy principles be of 100 to 130 hours duration. This would equate to one quarter of a semester’s full-time work load.
  2. Finally, the Board takes the view that all courses should be assessed to a significant degree under supervision and in a manner demonstrating rigour and integrity.