28 August 2003

Ms Ruth Picker
Acting Chairman
Australian Accounting Standards Board
PO Box 204
COLLINS STREET WEST VIC 8007

Dear Ruth

Presentation Currency of Australian Financial Report

The Group of 100 comments on the Invitation to Comment ‘Presentation Currency of Australian Financial Report’ are set out below.

The Group of 100 is a strong supporter of the convergence and harmonisation strategy of the Board and believe that the Board should apply its policy on the presumption that IASB Standard reflect best international practice and that the Board should only depart from IASB Standards in rare and exceptional circumstances.

Yours sincerely

John V Stanhope
National President

Presentation Currency of Australian Financial Report

Specific matters for comment

Is it appropriate to continue to mandate the Australian currency as the presentation currency for Australian incorporated reporting entities and, if so, under what approach?

No. The Group of 100 believes that consistent with the the policy to adopt IASB Standards and IAS 21, as proposed to be amended, the Board should not mandate the presentation currency of financial reports. In the vast majority of cases the functional and presentation currency will be the same.

Directors and management of an entity are in the best position to make a judgement as to the functional (measurement) currency of a reporting entity (which is the primary issue in the proposed IAS 21) and to then determine the presentation currency which best meets the needs of users of those reports including shareholders and capital market participants.

However, where directors and management determine that the presentation currency is not the Australian currency the Group of 100 considers that the basis and reasons for he decision be disclosed in the financial report. We consider that directors and management would only make such a choice where the company was in substance an international company operating in the international marketplace.

It is preferable that directors and management exercise judgement in making the decision and explain their reasons for doing so rather than to seek relief from the relevant regulator. It is extremely unlikely that directors would adopt a presentation currency that is not relevant to the entity.

Where the functional and presentation currency is not Australian currency a convenience conversion to Australian currency would be appropriate.

Is it appropriate (please discuss the costs and benefits) to continue to mandate the Australian currency as the presentation currency for Australian incorporated entities that are not reporting entities and, if so, under what approach?

No. Refer above.

If the free choice of presentation currency as proposed in proposed improved IAS 21 is favoured, what are the benefits/savings in costs that result?

The benefits of a company being able to determine its presentation currency are that:

its management decision making and reporting systems will reflect the operating and investment environment of its activities. As such the reporting of financial performance and financial position will provide a more faithful reflection of the underlying business and the way it is managed;
communication with users including shareholders is enhanced because of the use of a common language;
enhancement of comparability with competitors & understanding by capital market participants; and
companies will be spared considerable effort and cost incurred in undertaking reconciliations.

As these benefits are primarily available to global companies operating in the international marketplace it is likely that only a small number of companies would use a presentation currency other than the Australian currency.