At its October meeting the AASB made a number of significant decisions affecting the implementation of the Year 2005 strategy:
Early adoption will not be permitted. The AASB decided to prohibit full or piecemeal early adoption prior to reporting periods commencing on or after 1 January 2005. This means that companies must take a ‘big-bang’ approach to the transition to the Year 2005 standards. The AASB expects to issue these Standards in Q2/2004.
The AASB made the decision on the grounds of maintaining comparability between financial reports of Australian reporting entities, the technical and legal difficulties associated with cross references between standards, and the inconsistency between some transitional provisions and the requirements relating to first-time adoption of international standards.
[Note: ASIC and FRC have written to Company Chairmen that the Year 2005 program is a strategic management issue and not merely a technical accounting implementation issue. ASIC has supported this letter by announcing its expectations that companies will plan appropriately to prepare for compliance with the changes in legal requirements].
The AASB agreed to develop a Standard requiring companies to disclose the impact of adopting IASB Standards in 2005. It is likely that this Standard will be based on IASB proposals regarding the impact of standards that have been issued but not yet applied by a company.
The AASB has requested the UIG to defer its proposals to provide implementation guidance to accompany Abstract 52 until it has discussed issues with the AASB at its November meeting. This was in response to concerns, including from some corporates, that the UIG’s proposed approach would, in effect, require early adoption of some of the requirements of the new AASB 1020 (1999 Standard).
The AASB decided, in principle, that consistent with the requirements of IAS 21 the effects of changes in Foreign Exchange Rates, Australian entities should have free choice of the presentation currency.
The G100 submissions to the AASB recommend that IASB Standards be adopted on an ‘as is’ basis inclusive of options. The AASB decided that it would adopt options included in the new IFRSs but would consider those in IASs on a case-by-case basis. In applying this policy the AASB would not adopt an option not already included in Australian standards unless there is a compelling reason to do so, for example, expensing/capitalization of borrowing costs.
Following the AASB’s decision not to include the ‘corridor approach’ option in respect of actuarial gains and losses of defined benefit superannuation plans on adoption of IAS 19 ‘Employee Benefits’ the G100 will write to the Board expressing its opposition to the decision. The National Executive considered that this decision was premature because the IASB (although indicating its intention to remove the ‘corridor’) has yet to commence due process on revisions to IAS 19 which is not part of the Year 2005 strategy.
The G100, in association with Deloitte, is preparing guidance on compliance with ASX Corporate Governance Council Principle 7 ‘Recognise and Manage Risk’. The G100 will seek Corporate Governance Council endorsement of the Guide which is expected to be released in late November. The Guide uses the COSO model as the basis of guidance and contains sample certification statements.
As previously indicated the G100 and AICD have finalized the Guide and a copy will be sent to members in late November. The Guide explores the effect of behavioural dynamics on effective decision making in boardrooms, in board committees and by senior executives and some types of behaviour that either promote or undermine good corporate governance.
Visit the Group of 100 website for detailed submissions www.group100.com.au
Geoff Harris
October 2003
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