Members' Update

National Executive

At the AGM on 14 September the following were elected to serve a two-year term on National Executive:

Accounting Standards

Director & Executive Disclosures

The AASB has issued ED 143 ‘Director & Executive Disclosures by Disclosing Entities Removal of AASB 1046 and Addition to AASB 124’. Submissions are due by 15 November 2005.

The AASB’s intention is to issue the Standard before the end of 2005 which will apply to annual reporting periods ending on or after 31 December 2005, which coincides with adoption of Australian equivalents to IFRSs from 1 January 2005. The ED can be downloaded from www.aasb.gov.au

The purpose of ED 143 is to clarify the application of AASB 124 and to the extent feasible, remove duplication and conflict with the Corporations Law. This ED, consistent with IFRSs, proposes to remove parent relief from AASB 124 and relies on the definition of key management personnel. ED 143 also seeks to clarify the disclosure requirements relating to managed investment schemes on the basis that individuals of the responsible entity are the key management personnel of the managed investment schemes.

The changes in AASB 124 will not affect compliance with IFRSs as the proposals are additional to those in IFRSs.

IASB Technical Corrections

The IASB is finalizing a ‘fast-track’ process for dealing with corrections and clarifications of IFRSs. The G100 submission on the process is posted on the website.

The IASB has issued Draft Technical Correction 1 (www.iasb.org.uk) dealing with net investment in a foreign operation (IAS21/AASB 121). In line with the fast-tracking process comments are required by 31 October 2005. Changes to the Standard will take effect immediately.

Inventory Rebates

Guidance on accounting for inventory rebates and settlement discounts has been posted on the AASB website. This follows UIG consideration of the issue and the AASB’s decision not to approve an Interpretation because the IFRIC Agenda Committee has already dealt with the issue. In view of the diversity of practice in Australia the guidance may have significant implications for some entities.

ASIC Issues

Dividends

ASIC Information Release 05-57 deals with the impact of adoption of Australian equivalents to IFRSs on payment of dividends. ASIC’s view is that under the Year 2005 standards a company must refer to restated amounts for retained profits and current profits in determining compliance with the Corporations Law (s245T).

On a related issue, the G100 has supported proposals to replace the present dividend rules with a solvency-based regime in respect of payment of dividends.

Pro Forma Information

The G100 has responded to the ASIC Invitation to Comment ‘Disclosing pro forma financial information’. The G100 expressed concerns about the scope of disclosures that the proposed guidance refers to and the extent of the disclosures.

Corporate Social Responsibility

The G100 has made a submission to the Joint Parliamentary Committee inquiry into amendments to the Corporations Act in respect of placing corporate social responsibility requirements on companies. The G100 view is that these activities are already encompassed in the responsibilities of directors under the Corporations Act on the basis that they must act in the best interests of the company. The view taken is that the best interests of the company is for long-term survival through enhancing shareholder value and that this is achieved by incorporating sustainability and other socially responsible issues in its decision making.

It should be noted that Senator Ian Campbell spoke to the ASX Corporate Governance Council (CGC) on proposals to deal with sustainability reporting issues under the CGC Guidelines on an “if not, why not” basis. The CGC has formed a Working Party (G100 is a member) to consider the feasibility of different approaches and to prepare a paper for consideration at its December meeting.

October 2005

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