ASIC - Defined Benefit Superannuation Plans

31 July 2003

Mr Greg Pound
Chief Accountant
Australian Securities & Investments Commission
GPO Box 9827
MELBOURNE VIC 3001

Dear Greg

Defined Benefit Superannuation Plans

Thank you for your letter dated 23 June 2003 in response to the Group of 100’s (G100) comments on ASIC’s Request for Comment (May 2003).

The Group of 100 is concerned about the timing and nature of ASIC’s actions. Australian companies must comply with the requirements of AASB 1028 ‘Employee Benefits’ in respect of accounting for defined benefit superannuation plans and make disclosures in accordance with that Standard. This Standard has been in place for some years and its acceptability was reinforced in recent revisions to AASB 1028 in June 2003. The issue is well known and has been debated often. ASIC, to our knowledge, has not previously raised concerns or challenged this method of accounting for defined benefit superannuation plans.

The Group of 100 considers that the role of ASIC as a regulator is to ensure compliance with Accounting Standards and not, through its actions, establish Accounting Standards or change Australian GAAP. While the G100 accepts that ASIC, in discharging its responsibilities as a regulator, will interpret legal requirements we believe that in this case ASIC is seeking to change what is currently regarded as Australian GAAP. As such, it is our strong belief that the determination of Accounting Standards is the function of the AASB and not ASIC.

A further concern is that ASIC is creating uncertainty during the annual reporting cycle for the vast majority of companies and, at the date of your letter, ASIC’s position in terms of regulatory action at 30 June 2003 was yet to be finalised. When the AASB issues new or revised Accounting Standards it provides twelve months notice of the change to facilitate the process of implementation. Further, we are not aware of any public statement by ASIC regarding this position and this is unsatisfactory for companies seeking to finalise their financial reports. The G100 considers that the timing of ASIC’s action is increasing the level of uncertainty for companies and their auditors at a time when there should be clarity in regulatory expectations and outcomes.

On a related matter, the Group of 100 does not believe that the interpretation of the hierarchy of pronouncements as referred to in AASB 1001 ‘Accounting Policies’ is as clear and certain as stated in your letter. This is particularly so in the context that AASB 1001 ‘Accounting Policies’ which refers to the hierarchy and the use of judgment in selecting accounting policies that provide useful information to users. This matter was discussed by the AASB at its May meeting. The AASB view that Statements of Concepts are not mandatory and, as such, serve as guidance only was clear and unambiguous.

Yours sincerely

John V Stanhope
National President