22 July 2011

Dear Mr Seidenstein

Trustees' Strategy Review 2011

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. We are pleased to provide further comment on the Trustees' Strategy Review.

Mission: defining the public interest to which the ifrs foundation is committed.

Purpose of financial statements: The G100 agrees with the stated purpose of financial reporting standards. However, as noted in our earlier submission (10 February 2011) the reference to global financial stability may create a perception that the objectives of financial reporting and prudential regulators can be achieved by developing standards to satisfy regulators rather than investors. We agree that the primary purpose of financial reporting is to provide a faithful presentation of an entity's financial position and performance. However, we suggest that while ensuring financial stability is not the primary role of the Foundation, the Foundation should recognise a responsibility to not inadvertently promote financial instability. This responsibility can (and presently is) discharged by consultation with prudential regulators during the development of financial reporting standards, to ensure potential impacts are well understood.

Adoption of IFRSs: The G100 believes that if the benefits of a globally accepted set of financial reporting standards are to be achieved IFRS should be applied as issued by the IASB and, as such, not modified to meet national 'idiosyncrasies'. Accordingly, as indicated in our earlier submission, efforts to converge IFRSs and US GAAP should not detract from the balanced development of the IASB's work program.

The G100 agrees that convergence or other mechanisms such as "condorsement" can only be appropriate as a means of transitioning from entrenched national approaches to full adoption of IFRSs. Departures from IFRSs as issued by the IASB serve to diminish the credibility and acceptability of IFRSs and the process.

The G100 notes that it can be difficult for users to determine the extent to which an individual jurisdiction or regulator has required the use of IFRS. That is, audit reports will frequently refer to "IRFS as adopted in...", and will not explain the extent of any carve outs, amendments or other variations from the IFRS in force at the relevant date.

The G100 suggests that the Foundation could play a useful role by providing a comprehensive and factual list of jurisdictions that have adopted IFRS, along with a note indicating the extent of any variation from full IFRS. A comment on any legal or other regulatory impediments to adoption of full IFRS, along with any plans for change, would also be a useful inclusion. The G100 suggests that such a note could be agreed with local regulators or national standard setter, to ensure its accuracy.

The commitment of the Foundation to the adoption of IFRS without modification is supported by the G100. A reliable reference point, detailing any modifications in the adoption of IFRS by individual jurisdictions, would assist this aim by providing transparency on the progress of jurisdictions towards full adoption.

Adoption of IFRSs as issued by the IASB is needed if the benefits are to be achieved. However, this need not preclude additional disclosures being required by national regulators. The motivation for such additional disclosures or divergence from recognition and measurement requirements would be minimized if IFRSs are of high quality and determined in a transparent manner. It is likely that the publication of dissenting views may contribute to variations from IFRSs as a country adopting IFRSs may argue that the existence of the dissenting view provides grounds for not accepting/adopting certain components of a standard.

In the final analysis compliance with IFRSs, where adopted, is a matter for national regulatory bodies not the IFRS Foundation which can only encourage compliance. In addition, if the IFRSs are high quality and globally accepted, non-compliance would be penalized in the market place.

Scope of Standards and IFRS Activities: The G100 agrees that the IASB should continue to focus on the development of IFRSs for private sector entities. In addition, the G100 believes the IASB should redirect its activities to better service the needs and expectations of companies in those jurisdictions that have adopted IFRSs.

Consistency of application and implementation: The G100 agrees with the proposed recommendations, with the recommendation re encouraging transparent reporting of divergence from full IFRS amended as per our comments above recommending that the Foundation publishes a list of jurisdictions adopting IFRS, noting the modifications made on adoption.

Governance: independent and publicly accountable

The G100 believes that the independence of the standard-setting process is an integral component of the development of high quality financial reporting standards and their acceptability in capital markets:

1. supports the current three-tier structure subject to the Monitoring Board's sole focus being on monitoring the activities of the IFRS Foundation consistent with our submission in response to the Monitoring Board's consultation dated 28 March 2011. We acknowledge that the strategic reviews have posed questions that seek to determine whether any change should be made to the boundaries of the accountabilities of the Trustees and the Monitoring Board, and look forward to the clarification that will be provided when the strategic review is finalised;
   
   
2. agrees that there should be a greater transparency about how the Trustees discharge their oversight responsibilities. This should also apply to the activities of the Monitoring Board;
   
   
3. agrees that public reporting of activities of the Trustees and Monitoring Board will enhance transparency; and
   
   
4. acknowledges that Trustees could take a more pro-active role in advancing understanding of the IASB structures and governance while avoiding the perception that they are able to influence the technical content of the standards.

Process: Ensuring that standards are of high quality, meet the requirements of a well-functioning capital market and are implemented consistently across the world.

The G100:

1. agrees that a detailed, well understood and transparent due process is essential to the development and acceptability of a high quality set of standards. The G100 supports the IASB due process arrangements, including the formation of a Due Process Oversight Committee (DPOC) and the clarification of its role. However, given the substantive role of DPOC, in addition to the outreach of the IASB, the reasons for the publication of dissenting views are no longer applicable. The "Basis for Conclusions" provides a mechanism for explaining why decisions have been made by the IASB, and why alternative views have been rejected. The G100 suggests that this transparency removes any need for individual members of the IASB to explore their own individual positions by publishing dissenting views. Once a standard is made, all members of the IASB must fully support that standard, notwithstanding that they may have individually disagreed with elements of final decision or voted against its adoption. Continued publication of dissenting views may give the impression that full acceptance of the final standard, without modification for areas of disagreement, is an option.
   
   
2. believes that extensive consultation and transparency about setting agenda priorities is essential. As part of this process, agenda proposals should provide sufficient information to enable constituents to make informed judgments. This may include an initial effects analysis of the agenda proposal;
   
   
3. agrees that the IASB should develop an agreed methodology for undertaking effects analysis and for conducting field tests/visits. In particular, the G100 emphasizes the importance of effects analysis being completed as soon as practical after a project has been taken onto the agenda of the IASB;
   
   
4. believes that XBRL developments are an adjunct to IFRSs and, accordingly, should not influence the content or requirements in a set of high quality financial reporting standards. The primary focus of the IASB should continue to be on the development of IFRSs without being constrained by the integration of XBRL. XBRL should adapt to meet the requirements of IFRSs not vice versa;
   
   
5. agrees with the recommendation to foster consistent application of IFRS. However, in respect of co-operation with national standard-setters we are uncertain of the current status of the Memorandum of Understanding with National Standard-setters which was agreed some years ago;
   
   
6. agrees that the maintenance of a network of national and other standard-setters should be encouraged as a means of engaging with bodies who will normally be closer to the experiences of constituents in applying the standards;
   
   
7. considers that the IASB should foster thought leadership and research activities. Consistent with comments in previous papers, the G100 suggests that research would assist the development of the conceptual framework, and also the development of a disclosure framework. We suggest that due process should incorporate comment on the alignment of a standard with the conceptual and disclosure frameworks (providing such are in place).
   

FINANCING: Ensuring that the organization is financial in a manner that permits it to operate effectively, efficiently and independently.

The G100 agrees with the recommendations relating to financing. The G100 believes that the way in which the structure is funded is critical to maintaining its independence, accountability and credibility.

Yours sincerely
Group of 100 Inc

Peter Lewis
President