As part of the CLERP 9 reforms and the ASX Corporate Governance Council recommendations (and revisions to the Listing Rules) listed companies are required to provide a Review of Operations and Financial Condition.
The Guide to ‘Review of Operations and Financial Condition’ which is referred to in the Explanatory Memorandum to CLERP 9 and the ASX Listing Rules can be downloaded from the G100 website should members wish to refer to this guidance in preparing the Review.
G100 has written to the Auditing and Assurance Standards Board outlining its concerns about different approaches by major audit firms to the audit status of quantitative disclosures required by AASB 1047 regarding implementation of Australian equivalents to IFRSs. A question arises in respect of residual uncertainties about the requirements and the view of some firms to include an emphasis of matter in their audit report in the event that these uncertainties are not resolved. On the other hand ASIC has indicated its expectation that quantitative information will be provided. A copy of the G100 letter is posted on the website.
Note: Early discussion of potential issues with the audit firm will facilitate resolution of residual concerns.
National Executive discussed concerns about the timely guidance on interpretation of IFRSs and agreed that, in the first instance, issues should be forwarded to IFRIC. Interpretations by other bodies introduced the risk of diverse requirements and non-compliance with IFRSs. However, where timely guidance is not forthcoming and where the issues are of a domestic/national nature it was agreed that a national body, such as the AASB or UIG, should provide guidance so long as it is IFRS compliant. National Executive considered that a process under which such guidance is prepared in conjunction with IFRIC or receives IFRIC approval/endorsement is desirable to avoid the risk of non-compliance.
The AASB is addressing the manner and types of communication with constituents in the context of the post-2005 environment. National Executive took the view that while the AASB Consultative Group should be retained the AASB should also consult more directly with smaller focused groups, such as preparers, users and special interest groups based on industries, not-for-profit sector, public sector and particular projects and issues.
National Executive is considering a proposal that the profit-based rules relating to dividend distribution should be replaced with a solvency requirement, one form which is applied in New Zealand.
As part of this process we are seeking input from tax managers of member companies about the nature and extent of tax implications of a solvency approach to dividends. Could you please provide feedback/comment to g100tech@bigpond.com.
National Executive will form a Working Party to prepare responses to IFRIC and the UIG on IFRIC Draft Interpretations D12-D14 dealing with Service Concession Arrangements. IFRIC comments are required by 31 May 2005. Members interested in joining the Working Party are requested to respond to g100tech@bigpond.com.
Australian trust law has generally been interpreted as requiring the trust deed of a Listed Property Trust (LPT) to stipulate that the LPT will terminate after 80 years. In the absence of a transaction to extend its life, the property of the LPT would be liquidated and each unitholder is entitled to a proportionate share of the liquidation proceeds after other liabilities are met.
The AASB decided that further consultation with the property trust industry, particularly whether the legislative requirements of limiting the life of trusts to 80 years can be overcome through either extension of the trust or removal of the termination clause in trust deeds. The AASB will continue consultation with the IASB on the appropriate treatment of such financial instruments. The outcome of these consultations has potentially significant implications for the way in which LPTs and other limited life entities present their financial statements.
The AASB has made an amended standard AASB 1039 ‘Concise Financial Reports’ which applies to annual reporting periods ending on or after 31 December 2005.
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(All submissions can be accessed via the website www.group100.com.au)
April 2005
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