30 June 2003
Ms Ruth Picker
Acting Chairman
Australian Accounting Standards Board
PO Box 204
Collins Street West
MELBOURNE Vic 8007
Dear Ruth
Exposure Drafts ED 110 - ED 114
The Group of 100 responses to the exposure drafts ED 110 – ED 114 are attached.
The G100 is a strong supporter of the convergence and harmonisation strategy of the Board and considers that implementation of the policy is in the best interests of the Australian economy over the longer term.
The Group of 100 believes that IASB Standards should be adopted for application in Australia without changing the requirements of the IASB Standards unless there are compelling reasons to do so. As set out in our submission on ED 102 ‘International Convergence and Harmonisation Policy’ (29 October 2001) we believe that the Board should apply its policy on the presumption that IASB Standards reflect best international practice and that the Board would only depart from IASB Standards in rare and exceptional circumstances.
Yours sincerely
John V Stanhope
National President
| (a) | Whether continuing to mandate the presentation of cash flow statements using the direct method in the Australian equivalent of IAS 7 is supported.
The G100 believes that the requirements of IAS 7 should be adopted. Where a presentation is not mandated entities will select a method which, in their view, best communicates to users. |
| (b) | Whether the continuation to require disclose of a reconciliation of profit or loss from ordinary activities after income tax to cash flows from operating activities, in addition to the disclosures required by IAS 7, is supported. The G100 believes that the requirements of IAS 7 should be adopted. The reconciliation will be provided where it is viewed by entities as being important to users. |
| (c) | Whether continuing to require entities to classify dividends paid as a financing cash flow rather than allowing choice between classifying dividends paid as an operating or a financing cash flow is supported.
The G100 believes that the requirements of IAS 7 should be adopted. (It is likely that entities would continue to classify dividends as financings). |
| (d) | Whether continuing to require the disclosure of details of the credit stand-by arrangements, including their nature and amounts of unused credit, and a summary of the used and unused loan facilities of the entity and the extent to which these can be continued or extended, in addition to the disclosures required by IAS 7, is supported.
No. The G100 believes that, if required, these disclosures should be included in standards on financial instruments. |
| (e) | Whether any of the features of AASB 1026 identified as different from IAS 7 in the comparison of this Preface should be included in the proposed Australian equivalent of IAS 7, and if so, which features.
The G100 believes that the requirements in IAS 7 should be adopted. |
| (f) | Any regulatory issues or other issues arising in the Australian environment that any affect the implementation of the proposals, particularly any issues relating to:
No comment. |
| (g) | Whether the proposals are in the best interests of the Australian economy.
See covering letter. |
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| (a) | Whether the proposed adoption of IAS 23 is appropriate and workable.
Yes. The G100 supports the adoption of IAS 23. |
| (b) | Whether it would be preferable to remove choice of treatment proposed to be introduced in the Australian equivalent of IAS 23 and, if choice were to be prohibited, which of the two alternative treatments should be specified as the only treatment permitted.
The G100 believes that the choice presently permitted in IAS 23 is appropriate. If choice were to be removed the G100 would support requirements for capitalisation of borrowing on qualifying assets consistent with existing Australian and US GAAP. |
| (c) | Whether continuing to require disclosure of the amount of borrowing costs recognised as an expense for the reporting period, in addition to the disclosures required by IAS 23, is supported.
No. The disclosure of borrowing costs, if required, should be included in standards on presentation of statements of financial performance. |
| (d) | Whether any of the other features of AASB 1036 identified as different from IAS 23 in the comparison in this Preface should be included in the proposed Australian equivalent of IAS 23, and if so, which feature or features.
The G100 believes that IAS 23 should be adopted. We acknowledge that some of the application guidance in AASB 1038 would be lost but consider this is a consequence of achieving the objective of international convergence and harmonisation. |
| (e) | Any regulatory issues or other issues arising in the Australian environment that may affect the implementation of the proposals, particularly any issues relating to:
No comment. |
| (f) | (f) Whether the proposals are in the best interests of the Australian economy. See covering letter. |
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| (a) | Whether the proposed adoption of IAS 29 is appropriate and workable.
Yes. The G100 supports the adoption of IAS 29 |
| (b) | Whether any of the features identified in this Preface as absent from IAS 29 (in the Comparison, or Differences from IPSAS 10) should be included in the proposed Australian equivalent of IAS 29, and if so, which features.
The G100 supports the adoption of IAS 29. We do not provide comment in respect of IPSAS 10. |
| (c) | Any regulatory issues or other issues arising in the Australian environment that may affect the implementation of the proposals, particularly any issues relating to:
No comment. |
| (d) | Whether the proposals are in the best interests of the Australian economy.
See covering letter. |
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| (a) | Whether the proposed adoption of IAS 30 is appropriate and
workable
Yes. However, the G100 does have concerns on practical grounds. IAS 30 is currently under review and it would be inconvenient for entities to apply IAS 30 as adopted in place of AASB 1032 and shortly thereafter to implement a revised standard. This is particularly so in an environment where the regulatory authority has related requirements. In view of regulatory issues deferred application of the adopted standard should be appropriate. |
| (b) | Whether to include the definitions of non-accrual loans, restructured loans, past-due loans and assets acquired through the enforcement of security, currently defined in AASB 1032 in a way that is consistent with APRA guidelines, in the Australian equivalent of IAS 30.
It is unclear whether APRA will retain these guidelines in the context of recent international developments such as the Basle 2 recommendations. |
| (c) | Whether any of the features of AASB 1032 identified as different from IAS 30 in the comparison in this Preface should be included in the proposed Australian equivalent of IAS 30, and if so, which feature.
The G100 supports the adoption of IAS 30 subject to concerns noted above. |
| (d) | Any regulatory issues or other issues arising in the Australian environment that may affect the implementation of the proposals, particularly any issues relating to:
It may be necessary that APRA requirements would need to be revised to take account of changes in financial reporting requirements and for ease and efficiency of implementation of the amended standard. |
| (e) | Whether proposals are in the best interests of the Australian economy.
See covering letter. |
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| (a) | Whether the proposed requirements for accounting for biological assets are appropriate and workable, including whether entities should be allowed to rebut the presumption that fair value can be measured reliably for a biological asset and, accordingly, measure biological assets at cost less any accumulated depreciation and any impairment losses.
The G100 believes that IAS 41 should be adopted. The presence of the rebuttal presumption means that entities are not forced to adopt fair values where the reliability of measurement is subject to question. |
| (b) | Whether any of the features of AASB 1037 identified as different from IAS 41 in the comparison in the Preface should be included in the proposed Australian equivalent of IAS 41, and if so, which features.
No. The G100 believes that IAS 41 should be adopted. |
| (c) | Any regulatory issues or other issues raising in the Australian environment that may affect the implementation of the proposals, particularly any issues relating to:
No Comment. |
| (d) | Whether the proposals are in the best interests of the Australian economy.
See covering letter. |
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