ED 94 Concise Financial Reports

18 September 1998

The Executive Director
Australian Accounting Research Foundation
211 Hawthorn Road
Caulfield Vic 3162

Dear Sir,

ED 94 Concise Financial Reports

The Group of 100 is pleased to respond to requests for comment on the Exposure Draft ED 94 Concise Financial Reports. We strongly support the initiative of the Board and its intention to issue an Accounting Standard before the end of 1998. Our submission is structured as specific responses to the questions raised in the Invitation to Comment.

a. Whether any of the specific disclosures in Section 6 are unnecessary.

The Group of 100 considers the disclosure outlined in Section 6 is adequate.

b. Whether there are any further items from the financial report that should be specifically disclosed.

A shareholder requiring more information than that provided in accordance with the exposure draft should be provided with the full financial report. With the exception of the requirement of paragraph 5.3 which requires a discussion and analysis, the Group of 100 considers disclosure adequate.

c. Whether the requirement for discussion and analysis in paragraph 5.3 may cause audit problems, and if so, suggestions as to how these might be resolved.

The Group of 100 believes that the provision of a discussion and analysis should not be a black letter requirement in an accounting standard dealing with concise financial reports. The provision of a discussion and analysis in this way would require it to be audited. This would involve unnecessary cost to corporations. The Corporations Law requires a Directors Report to be provided with the Concise Financial Report. The Group of 100 believes that a Directors Report should include a discussion and analysis of the matters referred to in paragraphs 5.3 – 5.3.4. We believe that it is inappropriate to include a requirement for discussion and analysis in a concise financial report when there is no equivalent requirement in respect of the full financial report. This is particularly so in view of the fact that proposals in the Company Law Review Bill to require a discussion and analysis were not proceeded with.

The Group of 100 supports the improvement in the presentation of Directors Reports through the encouragement of good corporate governance practices by the inclusion of a Discussion and Analysis prepared in a format set out in the Group of 100’s "Guide to Review of Operations and Financial Condition". Reporting entities should be encouraged to include the same directors report, including a Review of Operations and Financial Condition in the concise report as that which is included in the full report.

Other Comments

~ Paragraph 1.2 : The Group of 100 believes that paragraph 1.2 be amended to include the following:

"Parent entity financial statements are not required to be provided in a concise financial report."

~ Paragraph 4.1.4(a) : Where the financial report has been compiled on the basis that the entity is not a going concern the Group of 100 believes that specific disclosure of that fact should be required.

~ Paragraph 7.1.3 : The Group of 100 believes that paragraph 7.1.3 should be a black letter requirement.

Yours sincerely,

Bryce JH Denison
National President