Submission - Corporate Reporting Reform Bill 2010

8 February 2010

The Hon Chris Bowen MP
Minister for Financial Services, Superannuation &
Corporate Law
Parliament House
CANBERRA ACT 2600

Dear Minister Bowen

Corporate Reporting Reform Bill 2010

The Group of 100 (G100) is an organization of chief financial officers from Australia’s largest business enterprises with the purpose of advancing Australia’s financial competitiveness. The G100 is pleased to respond to the proposals in the Corporate Reporting Reform Bill 2010 which includes a number of amendments which we have been seeking. We strongly believe that the reforms in respect of parent entity reporting and paying dividends will bring Australian requirements into line with best international practice while reducing the regulatory burden on Australian companies.

Parent entity reporting
The G100 believes the proposed amendments in respect of parent entity financial statements will reduce business costs, remove unnecessary disclosures from an entity’s annual report and contribute to reducing the burden of regulation on business without impairing protection of shareholders, investors and creditors. Our experience following discussions with a broad range of capital market participants is that parent entity financial statements are not needed where an entity prepares consolidated statements.

We believe that the information needs of shareholders and other users of general purpose financial reports can be adequately met with the inclusion of the proposed key note disclosures in the annual report. In addition we believe that a further benefit of the proposals will be to enhance the presentation of financial statements by removing unnecessary clutter and meaningless disclosures and contribute towards making the statements more readable and understandable. However, we do not support proposals that the disclosures be made in half-year financial statements. We do not believe that requiring these additional disclosures at the half-year will enhance the usefulness of the half-year reports to users.

The G100 also supports the proposal that the amendments apply to a financial report of a disclosing entity for financial years of the entity ending on or after 30 June 2010.

Requirements for paying dividends
The G100 welcomes the proposed amendments to the dividend rules which are consistent with views we have expressed over several years. We believe that with the amendments the requirements relating to dividends will be more commercially consistent with recent amendments to the Corporations Law relating to return of capital and share buy-backs.

In addition, it represents an important step in lessening the reliance on the outdated capital maintenance doctrine as applied to the distribution of dividends. This has become particularly evident with the adoption of IFRSs and the recognition of unrealized movements in the assets and liabilities in the determination of profit or loss.

The G100 believes that any consequential amendments to the income tax law should be subject to extensive consultation and liaison to ensure that there is no change in taxing arrangements as a result of the sourcing of dividends.

Changing reporting periods
The G100 supports the proposed amendments to section 323D of the Corporations Act to permit an entity to vary the length of a financial year subsequent to its first financial year by introducing a more flexible regime. However, as the proposals stand, a company must be at least 5 years old before it can avail itself of the proposed amendment.

Extending section 299A of the Corporations Act
The G100 supports the proposal to extend the application of section 299A of the Corporations Act to require all listed entities, not just listed companies, to provide a directors report on the financial condition and operations of the entity.

Solicitors’ representation letters
The G100 supports the proposals to protect solicitors’ representation letters from disclosure to another person or to a court.

IFRS declaration
The G100 supports the proposal to require directors to make a statement of compliance that the company’s financial statements and noted are prepared in accordance with IFRSs as issued by the IASB.

Lost capital reductions
The G100 supports the proposed amendments to section 258F of the Corporations Act to clarify that a company can only cancel share capital where it is not inconsistent with the requirements in Australian accounting standards.

FRC functions and funding
The G100 supports the proposed amendments relating to the functions and funding of the FRC.

Yours sincerely
Group of 100 Inc

Peter Lewis
National President