17 February 2005

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

Dear Ms David

ED 138 Concise Financial Reports: Revisions to AASB 1039

The Group of 100 (G100) is pleased to comment on the above Exposure Draft. Our views are set out below:

General

a.  It is proposed, in order to minimise duplication for listed companies subject to section 299A of the Corporations Act, that listed companies be exempt from the requirements to include a discussion and analysis of the financial statements in the concise financial report.

Do you agree that listed companies should be granted this exemption, given that information provided under section 299A in the Directors’ Report will not be audited?

The G100 supports the proposed exemption, in paragraph 5.3, for listed companies. The G100 considers that information provided under section 299 of the Corporations Act, while not formally audited and included in the scope of the audit opinion, is subject to review by the auditor in the conduct of the audit. The G100 believes that the discussion and analysis is more likely to convey useful and relevant information if it is not subject to the constraints of being in the scope of the audit opinion.
 
b. It is not proposed to require disclosure in the concise financial report of the remuneration of specified directors and specified executives required in a financial report by either AASB 1046 Director and Executive Disclosures by Disclosing Entities or AASB 124 Related Party Disclosures (whichever Standard is relevant to the reporting entity). Do you:
  • agree with what is proposed; or
  • consider it would be useful to require inclusion of the remuneration disclosures required by ASB 1046 or AASB 124?

The G100 supports the proposal not to require disclosure of director and executive remuneration in the concise financial report in addition to the disclosure required in the remuneration report section of the directors’ report. The G100 believes strongly that the present requirements in respect of director and executive disclosures, including duplication and differences between Accounting Standards and the Corporations Act are confusing and unsustainable. Accordingly, a single set of disclosures should be required.
 
c. It is proposed to require the provision of directions in the concise financial report, in the period in which an entity first adopts the Australian equivalents to IFRSs, to the location in the financial report of the reconciliations and other disclosures required by AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards, rather than disclosure of the reconciliations required by AASB 1. Do you:
  • agree with what is proposed; or
  • consider it would be useful to require inclusion of the reconciliation disclosures required by paragraphs 39 and 40 of AASB 1?

The G100 supports the proposal, in paragraph 6.5, to include directions in the concise financial report on the location of disclosures in relation to the first-time adoption of the Year 2005 Standards. However, commentary in paragraph 4.2.1 could indicate that disclosure of the IFRS reconciliation in the concise financial report would be appropriate where the adjustments are significant. We consider that a balanced and objective discussion of the adoption of Australian equivalents to IFRS should be included in the discussion and analysis, whether located in the directors’ report or the concise financial report in the period in which adoption occurs.
 
d. Do you consider that the concise financial report should be required to include a statement of whether the (full) financial report complies with IFRSs or do you consider this would mislead some users into thinking that IFRS-compliance applies to the concise financial report?

Reference to compliance with IFRSs is unnecessary. This is based on the presumption that, as specified in paragraphs 4.1; 7.1(a) and (b), the financial report (which applies Australian equivalents to IFRSs) is the base document for information reported in the concise financial report and any departures or non-compliance would be noted in the audit report.
 
e. Are there any disclosures proposed in the ED that you believe should be deleted?

No.
 
f. Are there any other disclosures that you believe should be required in a concise financial report?

No.
 
g. Do you consider that the concise financial report is useful, particularly since the adoption of Australian equivalents to IFRSs?

The G100 believes that the adoption of IFRSs has not impacted on the usefulness of the concise financial report. We consider that it is a valuable means of communicating information to shareholders without information overload.

Yours sincerely

John V Stanhope
National President