Trans-Tasman Accounting Standards Advisory Group - Minutes

9.30am, Tuesday 7 December 2004

CPA Australia offices, Level 3, 111 Harrington St, Sydney.

Participants:

Jim Murphy (Treasury - Aust) - Chairman
Charles Macek (Financial Reporting Council - Aust)
Professor David Boymal (Australian Accounting Standards Board)
Warwick Hunt (Accounting Standards Review Board - NZ)
Joanna Perry (Financial Reporting Standards Board - NZ)
Greg Larsen (CPA Australia)
Bill Palmer (Institute of Chartered Accountants Australia)
Peter Mumford (Ministry of Economic Development - NZ)
Patricia McBride (CPA Australia)
Kerstin Wijeyewardene (Treasury - Aust)
Geoff Connor (Ministry of Economic Development - NZ) – by telephone
Peter Taft (Treasury - Aust) – by telephone

Agenda Items

Preliminaries

Apologies were noted from Stephen Harrison (Institute of Chartered Accountants Australia). Bill Palmer was representing the ICAA in Stephen’s place. The minutes of the previous meeting of the Group held in Melbourne on 21 September 2004 had been circulated for comment and, following minor changes, placed on the Trans Tasman Group web page at the FRC website during October.

Agenda item 1: Cross Appointments

The Group noted that the appointment of a New Zealand representative to the FRC was being considered by the Treasurer, and that the Treasurer was likely to write to the New Zealand Minister of Finance, Dr Cullen, nominating Mr Charles Macek for appointment to the ASRB. It is expected that both appointments would be progressed early in the new year.

The Group also noted that at its meeting held on 6 December 2004, the FRC agreed to appoint Ms Joanna Perry, Chair of the FRSB, to the AASB for a term of one year commencing on 1 January 2005.

The FRSB is proposing to appoint the Chairman of the AASB to its Board in time for its first meeting in 2005. Amendments to the constitution of the FRSB are required to be approved by the Board of its parent body, the Institute of Chartered accountants of New Zealand. New Zealand members of the Group indicated that it would be desirable for the matter to be finalised as soon as possible.

Agenda item 2: Report to Ministers

Members of the Group considered the draft report to Ministers. It was suggested that mention be made of the alignment of interpretations and the enforcement regime, although these were likely to be more of a priority in 2006. Information will also be added on the review of New Zealand’s Financial Reporting Act. Members considered that further information on the views coming out of the surveys of businesses regarding the implications of standards differences should also be included. The Group also considered that the setting and status of auditing standards should be mentioned as an issue to be considered in 2005.

The re-drafted report will be circulated to members of the Group prior to forwarding to the Ministers.

Agenda item 3: Influencing international standard setting

Greg Larsen reported back to the Group on the meeting of the Executive Committee of the Confederation of Asian and Pacific Accountants (CAPA) in Sri Lanka. He noted that the discussion focused on convergence of accounting standards and the difficulties associated with translating standards into other languages, and that CAPA had agreed to set up a taskforce to work with the IASB on their small and medium enterprise project.

The Chairman of TTASAG reported on the Four Markets Group (Australia, Japan, Hong Kong and Singapore) meeting in Tokyo in October. At the meeting, the Australian Treasury argued that there was scope to achieve greater consistency in financial reporting requirements across the region and that there were opportunities for regional coordination in the development of International Financial Reporting Standards (IFRS). The arguments were well-received and the other jurisdictions expressed interest in Australia hosting a regional conference where standard setters, the profession and policy advisers could meet to discuss experiences in adopting IFRS including implementation issues, standards development and co-operation on financial reporting issues.

The Group agreed that the Australian Treasury should develop a proposal covering the logistics involved in holding the regional conference, including the time and location, guest list, matters for discussion and funding. Members of the Group considered that the experience of IFRS implementation in Australia and New Zealand would be a key issue of interest to officials from other countries. The meeting would be aimed at Government officials and standards setters in selected countries, with key IASB personnel (including the Chairman, Sir David Tweedie) invited to participate.

The FRC Chairman reported that he had recently met with a number of key organisations in Europe and North America. Coming out of these, he noted the emphasis given by the IASB to enhanced representation from China and India. It was also considered by other members of the Group that the dominance of Europe in standards setting partly reflected that number of countries in the EU. These facts should add further impetus to the need to engage with as many Asian countries as possible on standards setting issues.

Agenda item 4: Alignment of financial reporting standards and survey of New Zealand business

A document prepared by the FRSB was circulated which summarised and classified the key differences between the New Zealand and Australian equivalents to IFRS. It was noted that the most likely candidates for short term convergence are those where the differences are in disclosure, and that difficulties would remain where, for example, Australia included implementation guidance and interpretations as part of the standards. The Group noted that many of the differences stemmed from the quality and disclosure requirements but that these could be dealt with relatively easily. It was also noted that some difficulties arise out of specific circumstances in each jurisdiction. New Zealand members noted for instance the difficulties arising out of the prudential reporting requirements for banks. Significant regulatory differences impacting on convergence included ASIC’s ability to give class order relief and New Zealand’s solvency regime for capital adequacy. Some differences in standards were seen as the end result of these.

It was suggested that FRSB and AASB staff meet in early 2005 with a view to eliminating as many wording differences as possible. Exposure drafts could then be issued later in 2005 with final standards in place at the start of 2006. The Group also recommended that a protocol be developed governing co-operation in standards setting between the FRSB and AASB on an ongoing basis.

Since the last meeting of TTASAG, the New Zealand ASRB had conducted a survey of companies on the costs of differing standards. In general, the companies indicated support for more consistent standards, although this was not seen as critical in the short term.

Agenda item 5: Review of the New Zealand Financial Reporting Act 1993

The Group noted the progress of the review, which is considering a number of issues which will directly impact on the reporting requirements of companies operating in both countries. These include the institutional arrangements and the reporting obligations for different categories of entities. Submissions to the review were being sought by 25 February 2005. The Group agreed that it should make a submission to the review from a trans-Tasman perspective, containing specific recommendations with the aim of reducing differences in the report filing and audit requirements, and also highlighting broader international developments. The submission would take account of the interests of the various members of TTASAG, including the Boards and the professional bodies. A draft submission would be circulated for comment around 10 February.

The Group was informed that the Australian Government is still to respond to a Parliamentary Committee report which raises the quality of financial reporting for small entities. This would cover a similar issue to one that is being considered as part of the New Zealand review. The Group noted that the application of IFRS in Australia was broader than elsewhere, impacting on smaller companies. New Zealand was soon to issue an exposure draft standard on allowing smaller entities to apply differential reporting, and this would be another difference between the countries.

Agenda item 6: General Business

The Group agreed that it would be useful to meet again in late February, and a date and venue would be organised once details of the FRC meeting around that time are known.

It was also agreed that Australia would maintain the Chairmanship of TTASAG for the time being.

List of Proposed Actions

  • The cross-appointment of members is to be finalised. At the appropriate time, a Press Release will be prepared for the respective Ministers to announce the cross-appointments between the Financial Reporting Council and the Accounting Standards Review Board (Treasury, MED).
  • The report to Ministers will be updated to incorporate suggestions from the Group before being forwarded (Treasury, MED).
  • Further consideration to be given to the viability and logistics involved in holding a regional conference on accounting standards setting, including the time and location, guest list, matters for discussion and funding (Treasury).
  • The staff of the FRSB and AASB should arrange to meet early in 2005 to agree on draft wording of standards where possible (AASB, FRSB).
  • A protocol will be developed to set out a co-operative process in standards setting between the FRSB and AASB (Treasury, MED, FRSB, AASB).
  • A submission to the review of New Zealand’s Financial Reporting Act will be prepared and circulated to members (around 10 February 2005) for final approval (Treasury).