Members' Update

Simpler Regulatory System

Chris Pearce, Parliamentary Secretary to the Treasurer, discussed proposals on moving to a simpler regulatory system at a G100 dinner in February. A copy of his speech, G100 media release and G100 submission to the “red tape” Task Force are posted on the website.

Liaison with Treasury

National Executive met with senior Treasury staff to share views on regulatory developments and initiatives. Matters discussed included G100 views on the need to remove duplication of director and executive disclosures under the Corporations Act and Accounting Standards, the usefulness of parent entity financial statements and proposals to replace the profit-based dividend rules with solvency-based requirements.

Trans-Tasman Regulatory Alignment

ASIC and the NZ Companies office have entered an MOU to promote increased regulatory co-operation. This may eventually lead to convergence of the corporate regulation in the two countries.

IFRS Implementation

The experience of December balancers and December half-year implementation of Australian equivalents to IFRSs (AIFRSs) has increased focus on implementation issues. Experience indicates that the process will present greater challenges for June 2006 year-ends and emphasizes the importance of embedding AIFRSs in company practice and ensuring that approaches are designed to meet ongoing issues on a sustainable basis. These and related issues are discussed by PwC in the February issue of ‘Headlines’ (www.pwc.com/au/headlines).

Proposed Interpretations Model

The AASB has outlined a Model to replace the UIG. The main features include:

• the AASB would have direct responsibility for developing and approving Interpretations;
• Advisory Panels would be formed on a topic-by-topic basis with the purpose of making recommendations for consideration by the AASB. Members would be appointed on the basis of experience and expertise in the topic area and Panels would have a balanced composition to ensure that all perspectives of preparers and users are reflected;
• establishing an Interpretations Agenda Committee comprising Board members which would consider issue proposals and recommend a course of action to the AASB;
• issues relating to interpretations of Australian equivalents to IASB requirements would, in the first instance, be forwarded to IFRIC for consideration for inclusion on the IFRIC work program. Under the proposed model the AASB considers that a unique domestic interpretation of Australian equivalents to IASB requirements would only occur in rare and exceptional circumstances; and
• due process would involve publication of Advisory Panel recommendations on the AASB website at least 30 days before a board meeting. Where the AASB proposes to issue an Interpretation it will be further exposed for at least 30 days before it is considered for formal adoption.

Corporate Social Responsibility (CSR)

Tom Honan – National President, gave evidence to the Joint Parliamentary Committee on Corporations and Financial Services Inquiry into CSR. In his evidence he emphasized the G100 view that amendments to the Corporations Act to require directors to take account of CSR in decision-making are unnecessary because the current legal framework is adequate. He also explained that mandating reporting requirements is likely to be counterproductive and may inhibit current developments in CSR reporting.

Management Commentary

The G100 submission on the IASB’s Discussion Paper ‘Management Commentary’ is posted on the website. This is currently an IASB research project and, following review of the submissions, is likely to be included on the IASB’s active work program. The G100 has expressed support for providing a management commentary not subject to audit as part of the annual report and not as part of the audited financial statements.

Standards issued but not yet adopted

At its February meeting the AASB discussed the implications of AASB 108 ‘Accounting Policies, Changes in Accounting Policy and Errors’, paragraph 30, which requires disclosure of the potential impacts of Standards issued but not yet effective that the entity has not applied early. The AASB drew attention to the requirements of AASB 108, paragraph 31, about the Standards and the nature of impending changes.

Members may note that this is a significant change from the requirements applying before Y2005 adoption which has not been highlighted.

Operating Segments:

The IASB and AASB have issued an Exposure Draft ‘Operating Segments’. The project is part of the IASB/FASB convergence proposes to replace IAS 14/AASB 114 ‘Segment Reporting’ with a Standard based on that issued by the FASB. The proposals adopt a ‘management approach’ under which the information reported would be what management uses internally for evaluating segment performance and deciding how to allocate resources to operating segments. In addition, reported segment information can be prepared using accounting policies which differ from those in the consolidated financial statements. The AASB is seeking comments on ED 145 by 20 April 2006 and the IASB is seeking comments on ED 8 by 18 May 2006. Members are requested to provide comments to the Secretariat for inclusion in a G100 submission.

ASIC Relief – Director & Executive Disclosures:

ASIC has issued a Class Order (CO 60/05) to provide interim relief relating to potential confusion as to the basis of calculating amounts disclosed in the directors’ report and financial reports for years ending 31 December 2005 to 31 March 2006.

Note: The G100 is currently active in seeking a longer term resolution of issues relating to director and executive disclosures.

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