AI 1 Amortisation of Intangible Assets

8 July 1999

Mr. Ken Spencer
Chairman
Australian Accounting Standards Board
PO Box 132
Caulfield Vic 3162

Dear Ken

Accounting Interpretation - AI Amortisation of Intangible Assets

The Group of 100 is seriously concerned about the Board's decision to issue Accounting Interpretation AI 1 "Amortisation of Intangible Assets" without providing adequate notice of its intention or observing due process.

The Group of 100 objects in the strongest terms to the issue of a document series that is not specifically recognised in AASB 1001 - Accounting Policies, which establishes a hierarchy of Australian GAAP. Our members and their advisors can only presume that an Accounting Interpretation does not have the status of an Accounting Standard but as an interpretation by the Board has more authority than a UIG Consensus View. An adequate due process would have avoided this uncertainty as to status.

The Group of 100 accepts that the Board should have the capacity to issue interpretations. However, we do not believe that the Board should issue interpretations without observing a form of due process. As such, the Group of 100 believes that the Board should have followed a due process in developing its interpretation. Under present arrangements deliberations are held in private and constituents must rely on media releases or on subscription services to be aware of the Board's activities. This is unsatisfactory where the Board is issuing documents with immediate or retrospective effect.

AASB 1021 and its predecessor have been operative for several years during which time a body of practice developed. The AASB did not previously see a need to clarify its requirements. In fact it had the opportunity to do so as part of the harmonisation program. It is puzzling why the Board sees the need to issue an Accounting Interpretation at this stage and why it chose to issue it so soon before the end of the financial year.

In addition, we are concerned about the signals that the issue of the Accounting Interpretation sends to the Board's constituents about its consideration of accounting for identifiable intangible assets, a complex and controversial topic that remains to be dealt with as part of the harmonisation program. We believe that, at this stage, it is extremely unhelpful to create a perception that the Board has already decided its position on amortisation of intangible assets notwithstanding the developing international debate and its implications for Australian companies. The Group of 100 expected that following the issue of IAS 38 "Intangible Assets" by the IASC the Board would, as part of its normal due process, undertake a project for development of a standard by exposing its views for discussion and comment.

In conclusion, the Group of 100 wishes to register its strong protest about the process adopted by the Board in issuing the Accounting Interpretation without providing adequate notice to constituents or providing them with the opportunity to influence the Board's views.

Yours sincerely,

Bryce JH Denison
National President

c.c. The Hon. Joe Hockey, MHR
Minister for Financial Services and Regulation