AASB 1039 Concise Financial Reports

28 June 2004

Mr David Boymal
Chairman
Australian Accounting Standards Board
PO Box 204
COLLINS STREET WEST VIC 8007

Dear David

AASB 1039 Concise Financial Reports

The Group of 100 (G100) believes that with the implementation of the Year 2005 strategy and the changes to the Corporations Act resulting from CLERP 9, the AASB should give a high priority to amending AASB 1039 ‘Concise Financial Reports’.

The G100 recommends that AASB 1039 be amended as follows:

Additional/Specialised Disclosures
Further examples of the types of additional/specialised disclosures that would be expected in the light of the circumstances of the entity should be added to paragraph 4.1.4. Additional items should include:

Information about the funding status and arrangements in respect of defined benefit superannuation plans including the entity’s obligations;
The nature and extent of share-based payment arrangements and their effect on the profit or loss for the period and the entity’s financial position;
Financial risk management objectives and policies including hedging arrangements, interest rate and credit risk and the use of derivative financial instruments; and
The magnitude and impacts of write-downs arising from impairments of assets including goodwill.

Statement of Changes In Equity
Paragraph 5.1 should be amended to require a statement of changes in equity to maintain consistency with AASB 101 ‘Presentation of Financial Statements’.

Discussion and Analysis
The Corporations Act, Section 299A, requires listed entities to include an operating and financial review as part of the directors’ report. The G100 believes that compliance with this requirement should adequately address the discussion and analysis which is presently required by AASB 1039, paragraph 5.3, and that accordingly this requirement should not apply in respect of listed entities. To require otherwise would be an unnecessary duplication and potentially confusing to shareholders. Additionally, because the S299A report is not subject to audit it is more likely that the information content of this report will be more useful than the information provided in accordance with AASB 1039. The Notes to the CLERP 9 Bill refer to the Group of 100 ‘Guide to Review of Operations and Financial Condition’ and its use for the purpose of satisfying the legislative requirement. We believe that the G100 Guide should be acknowledged in the revised Standard in respect of entities that are not listed.

Disclosures
The G100 believes that paragraph 6.4 should be amended to:

include a requirement to disclose the functional currency of the entity and when the presentation currency is different from the Australian currency, the reason and justification for not using the Australian currency;
delete the requirement in respect of extraordinary items; and
require dividend and franking disclosures consistent with those in AASB 137.

Accountability
In view of the ongoing debate about corporate governance including that relating to independence of auditors and remuneration of directors the G100 believes that the following disclosures should be required:

information about auditor remuneration required by AASB 101 ‘Presentation of Financial Statements’ paragraph AUS 126.2; and
information about remuneration of directors and executives required by AASB 1046 Director and Executive Disclosures by Disclosing Entities, paragraphs 7.1 and 8.2 if such information is not otherwise provided in the Directors’ Report.

Yours sincerely

John V Stanhope
National President