Mr. Alan Cameron
Chairman
Australian Investments and Securities Commission
GPO Box 4866
Sydney NSW 1042

Dear Mr. Cameron

International Accounting Standards

Following the meeting on International Accounting Standards on 3 March 1999 at which the Group of 100 was represented, I would like to set out the Group’s view on international harmonisation and to set out our views on the Australian input to the endorsement of IASC standards by IOSCO.

Harmonisation Policy

The Group of 100 is a strong supporter of the harmonisation of Australian Accounting Standards with those developed by the IASC. In this regard it supported the imposition of a 3% levy on listing fees for 2 years to fund the international harmonisation program of the Australian Accounting Standards Board and the Public Sector Accounting Standards Board.

Within the above context the Group of 100 supports the harmonisation program such that compliance with Australian accounting standards will ultimately result in compliance with IASC standards.

This support for international harmonisation is founded on the endorsement of IASC standards for cross-border listings and capital raisings.

This broad policy objective has been refined as the harmonisation program has progressed. The Group of 100 in recognition that IOSCO endorsement is only a first step has adopted the position that the benefits of harmonisation will only be captured if IOSCO endorsement of IASC standards is adopted by the US Securities and Exchange Commission. We believe that until such recognition is granted it will be impractical to prepare financial statements on a basis which still requires reconciliation to US GAAP. The Group of 100 policy is that the AASB should defer implementation of new standards that harmonise with IASC standards that are inconsistent with US standards until those IASC standards are accepted in the major capital markets.

IOSCO Endorsement

Within the context of this policy the Group of 100 is concerned about the implications for Australian companies of harmonising with IASC Standards where the requirements differ from those in the major capital markets. In this regard:

• we are strongly opposed to the requirements of IAS38 "Accounting for Intangible Assets", particularly as it applies to the amortisation and revaluation of identifiable intangible assets;
• we believe that IAS21 "Employee Entitlements", as it applies to pensions, contains alternative treatments which are inconsistent with the objective of achieving comparability in financial reporting. We would favour adopting the alternative that most closely follows US GAAP whereby movements to pension fund surplus/deficit is recognised progressively. We do not support adoption of an alternative which is inconsistent with US GAAP, for example, not one which mandates immediate recognition;
• we do not support IAS39 "Financial Instruments" because of its selective treatment of financial assets and liabilities and its reliance on the fair value basis of measurement.

Our concerns about the requirements of these standards will be dealt with specifically in response to exposure drafts issued by the AASB.

Yours sincerely,

Bryce JH Denison
National President

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