Policy
| The AASB has recently issued a Policy Statement on International Harmonisation and Convergence. In view of this and the restructure of the International standard setting regime, the Group of 100 has reviewed its policy on the International Harmonisation and Convergence of Accounting Standards. |
The Group of 100 believes that:
Fundamental to the application of this policy is the endorsement of a comprehensive set of IASB Standards by the International Organisation of Securities Commissions (IOSCO) for cross-border capital raising and the resultant acceptance of those standards in international capital markets, particularly the USA.
The Group of 100 believes that until IASB standards are generally accepted as the global set of accounting standards the Australian Accounting Standards Board (AASB) should:
The Group of 100 believes that harmonisation and convergence with IFRSs should, by 2006, supplant the need for national standards (except where national, legal and cultural differences require otherwise).
The Group of 100 (G100) is an association of Australia's senior finance executives from the nation's business enterprises. The G100 has an association with the Business Council of Australia (BCA) and deals with financial reporting issues in consultation with the BCA.
International Financial Reporting Standards (IFRSs) are issued by the International Accounting Standards Board (IASB). The IASB (which commenced operations in 2001) has endorsed international accounting standards (IASs) issued by its predecessor body, the International Accounting Standards Committee (IASC). The IASC entered arrangements with the International Organisation of Securities Commissions (IOSCO) relating to the endorsement of IASs for cross-border capital raising and listing purposes. Accounting Standards issued by the IASC are described as IASs and those issued by the IASB will be described as IFRSs.
The objective of the G100 is to achieve cross-border capital raisings and international listings without the need to prepare reconciliations of financial statements. As such, harmonisation with IASB standards and those endorsed by the IASB (or other set of internationally accepted standards) is not an end in itself but a means of achieving the overall objective.
The G100's harmonisation policy is a response to the increasing globalisation of business.
The G100 believes that ultimately there should be a single set of generally accepted global accounting standards. In the meantime it supports the principle of international harmonisation and the process of convergence of accounting standards.
The G100 policy on international harmonisation and convergence is:
Compliance with Australian Accounting Standards should result in automatic compliance with International Financial Standards issued by the IASB.
An issue in this regard is what constitutes global acceptance and acceptance in the major international capital markets. Fundamental to the application of this policy is the endorsement of a comprehensive set of IASB Standards by IOSCO for cross-border capital raisings, and the resultant acceptance of those standards in international capital markets, particularly the USA.
In the Australian context, the requirement that the Financial Reporting Council report to the Treasurer on the desirability of adopting international standards is ample recognition of the potential significance of international harmonisation and convergence for Australian practice.
With the formation of the IASB, and the appointment of the AASB as one of eight liaison national standard-setters that will work in 'partnership' with the IASB through alignment of agendas and promoting convergence, the G100 believes that the AASB should be an active and vigorous participant in the international standard-setting process.
The G100 is concerned about the pace of the Australian harmonisation program and the potential for changes resulting from harmonisation with IASB standards being different from the requirements in the major capital markets, particularly the USA, prior to the IOSCO endorsement. There are also significant concerns that the US Securities and Exchange Commission (SEC) will delay its consideration of the IOSCO endorsement of IASB standards.
The IASB completed the core set of standards identified in its agreement with IOSCO. IOSCO reviewed those standards to determine whether to endorse them and recommend to its members that they be adopted for cross-border capital raisings. IOSCO identified a number of potential improvements in the process of its review and has not formally endorsed these standards. The IASB has initiated an improvements project to raise the overall quality of its standards, to deal with the issues identified in the IOSCO review, to address inconsistencies between standards and to assess whether to permit alternative treatments. The outcome of this process also has implications for Australia particularly where Australian standards harmonise with these IASB Standards.
The harmonisation program undertaken by the former AASB and PSASB and continued by the restructured AASB is nearly complete. The AASB has not yet issued exposure drafts in respect of IASC standards dealing with superannuation liabilities, intangible assets and the recognition and measurement of financial instruments, and recently issued an exposure draft on impairment of assets. Harmonisation with these standards will be controversial for Australian companies because many requirements are significantly different from current Australian practice and, in some cases, US practice.
The AASB has indicated an intention to issue IASB exposure drafts on intangible assets and the recognition and measurement of financial instruments as AASB exposure drafts for comment. The G100 supports this initiative of the AASB as an important step in accelerating the process of international harmonisation and convergence.
April 2002
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