ED 102 International Convergence & Harmonisation Policy

29 October 2001

The Chairman
Australian Accounting Standards Board
350 Collins Street (Level 3)
MELBOURNE VIC 3000

Dear Sir

ED 102 International Convergence & Harmonisation Policy

The Group of 100 (G100) is pleased to provide comments on the above Exposure Draft. The G100 is a strong supporter of the process of international harmonisation and convergence. The G100 played a significant role in initiating support of the business community for the international harmonisation activities of the previous Board and development of the legislation relating to the functions of the Financial Reporting Council and the AASB.

It is our view that the recent formation of the reconstituted IASB, its role and relationship with national standard-setters, presents a major opportunity to achieve agreement on the development of a global set of accounting standards which are generally accepted as best international practice.

Our comments on the specific questions raised are set out below.

a. The AASB International Convergence Objective (para 2.1)

The G100 views the overall objective of international harmonisation and convergence as a means of achieving cross-border capital raisings and international listings without the need to prepare reconciliations of financial statements. As such, harmonisation with IASB standards is not an end in itself but a means of achieving the overall objective. The G100 believes that achieving the Board's objective is an important step towards ultimately achieving a global set of accounting standards.

b. The AASB Harmonisation objective (para 2.2)

The G100 supports the Board's objective of harmonising with IFRSs. The G100 believes that compliance with Australian accounting standards should result in automatic compliance with international standards issued by the IASB. However, the manner of the implementation of the interim objective is not clear particularly in view of the strategy as set out in paragraph 4.3(f). We believe that the Board should apply its policy on the presumption that IASB standards reflect best international practice and that the AASB would only depart from IFRSs in rare and exceptional circumstances.

The G100 believes that the Board should adopt a plan and timetable to achieve convergence with existing IASB standards and a time frame for convergence with new IASB standards. In this regard we believe that the Board should commit to a date to achieve convergence in a manner similar to that announced by the European Commission.

c. Work Program Strategies (para 4.3)

The G100 supports the work program strategies of the AASB.

The G100 believes that the alignment of work programs and priorities with those of the IASB, paragraph 4.3 (a), should lead to a more timely and efficient development of accounting standards. In this regard it is important that the Board seeks to deal with projects concurrently with the IASB program. Alignment of work programs and the issue of documents with a minimum of modification will also mean that the AASB's constituents can apply resources to more efficiently participating in the due process without duplicating activity. However, it is also important that the Board has the capacity and resources to address domestic issues on a timely basis as and when they arise.

The G100 believes, in relation to paragraph 4.3 (f), that where the Board departs from the requirements of an IASB standard, the Board should set out the reasons for its disagreement with the views of the IASB and the reasons why it has not accepted a majority approach. In our view this would only occur in rare and exceptional circumstances.

d. International Liaison and Monitoring Strategies (para 4.4)

The G100 supports the AASB's liaison and monitoring strategies.

The G100 believes that, as a IASB liaison standard-setter, the AASB should ensure resources are made available and its work program planned so that the Board makes submissions on all proposed IASB accounting standards. This is particularly important given the anticipated practice of issuing IASB exposure drafts etc. by the AASB.

e. Conformity Statements (para 5.1)

The G100 supports the inclusion of conformity statements with corresponding IASB accounting standards. However, in view of amendments to the Corporations Law to provide a broader international harmonisation objective and to remove specific reference to harmonisation with New Zealand accounting standards, the G100 does not see the need for the conformity statement to refer to New Zealand accounting standards. The principal focus of international harmonisation is the requirements in international capital markets, not the standards in a single jurisdiction and, as such the conformity statement should refer to international financial reporting standards (IFRS).

Yours sincerely

Tom Pockett
National President