2.00-4.45pm, Wednesday 6th December 2006
Australian Accounting Standards Board/Audit and Assurance Standards Board Offices, Boardroom, Level 7, ASX Building, 600 Bourke Street, Melbourne
Warwick Hunt – Chair (Accounting Standards Review Board (ASRB) – NZ)
Charles Macek (Financial Reporting Council (FRC) – Aust)
Professor David Boymal (Australian Accounting Standards Board (AASB) – Aust)
Merran Kelsall (Audit and Assurance Standards Board (AUASB) – Aust)
Mark Shying (Certified Practising Accountants (CPA) – Aust)
Roger Cotton (National Institute of Accountants (NIA) – Aust)
Geoff Miller (Treasury – Aust)
Bede Fraser (Treasury – Aust)
Ronita Ram (Treasury – Aust)
Craig Fisher (Professional Practices Board (PPB) – NZ)
Peter Mumford (Ministry of Economic Development (MED) – NZ)
Geoff Connor (Ministry of Economic Development (MED) – NZ)
Ashley Tomlinson (Ministry of Economic Development (MED) – NZ)
Joanna Perry (Financial Reporting Standards Board (FRSB) – NZ)
Garry Muriwai (New Zealand Institute of Chartered Accountants (NZICA) – NZ)
Graham Meyer1 (Institute of Chartered Accountants of Australia (ICAA) – Aust)
Jim Murphy (Treasury – Aust)
Agenda Item 1: Preliminaries
Welcome New Attendees
The group welcomed Ronita Ram from the Australian Treasury.
Minutes of the previous meeting
The minutes of the previous meeting of the group held in Sydney on 5 September 2006 were circulated for comment on 12 September 2006. Following some minor comments and subsequent changes, the minutes were made available on the Trans-Tasman page of the FRC and ASRB websites.
Action Points from that Meeting
- Australian Treasury will continue to update the group on further developments in relation to the next forum. To be covered under agenda item 5
- The AASB and the FRSB will report back to the group on whether the IASB will be considering prospective financial information as an area of work. To be covered under agenda item 3
- The AASB and the FRSB will provide a written report for future meetings on current activities, including any IASB project work that they are engaged in. To be covered under agenda item 3
- The AASB and the AUASB both expressed an interest in the tiered approach MED currently proposes to take in relation to financial reporting by charities. MED will provide material on this approach to both Boards. Completed
- Members of TTAASAG encouraged the MED to review material prepared in Australia in relation to Auditor liability as it finalises its view for inclusion in the discussion paper. Consideration of this material is ongoing
- The AASB and the FRSB will each prepare a discussion paper on issues associated with the potential adoption of a differential reporting regime for SMEs. This paper will include an analysis of the potential application of the IASB’s SME exposure draft. The group will then discuss whether Australia and New Zealand should look to address this issue separately or jointly on a prospective basis. To be discussed under agenda item 2
- Australia and New Zealand’s audit regulation frameworks will be a standing agenda item at future TTAASAG meetings To be covered under agenda item 7. It was agreed that the AUASB and the PPB will prepare summaries of their recent activities for future TTAASAG meetings
- Australian Treasury will provide MED with material on the approach taken to auditor liability in Australia. Completed
- Australian Treasury and MED will obtain detailed legal advice on the application of the TTMRA to New Zealand auditors practising in Australia, and will then discuss potential approaches to this issue. Australian Treasury and MED will jointly prepare a paper on this issue for discussion at the next meeting. To be discussed under agenda item 4
Agenda Item 2: Australia and New Zealand’s financial reporting frameworks
The AASB and the FRSB both prepared papers on issues associated with the potential adoption of a differential reporting regime for SMEs. Both of the papers included an analysis of the potential application of the IASB’s SME exposure draft. The group discussed both papers and the issues associated with differential reporting in both countries as well as the potential adoption of the IASB’s SME standard. The main points arising out of this discussion were as follows:
- The draft SME standard is expected from the IASB in late January or early February.
- The FRSB will be conducting roundtables throughout New Zealand to obtain stakeholder feedback on the appropriate response to the SME standard.
- The key questions for the FRSB are 1) whether the concessions in the SME standard are appropriate, 2) whether a separate set of standards is more appropriate than the current “top down” approach, and 3) which entities should comply with such a standard.
- A clearer idea of the likely New Zealand response to the SME standard should be available by the end of April 2007.
- The AASB considers that the key issue is one of “cut offs” (i.e. which standards should apply to which groups). The current public accountability test may be too narrow because it excludes public entities, charities, and many economically significant companies.
- Because there is currently some discretion in the preparation requirements for middle tier companies in Australia, the adoption of the SME standard for these companies could actually increase the preparation requirements for some companies.
- Both Australia and New Zealand need to consider the approach taken in the other country when finalising their own views.
- In the first instance, it is more important that companies operating on both sides of the Tasman only have to prepare one set of financial statements, than having consistent requirements about what must be reported in each country.
- It was noted that the application of the SME standard to the middle tier companies in Australia (i.e. those companies that deem themselves to not be reporting entities) needs to be carefully considered.
- It was noted that a solution to this issue could ultimately come from making changes to the regulatory framework for financial reporting in Australia and New Zealand.
- The group noted that divergent views on how to respond to the SME standard in Australia and New Zealand would not be a positive outcome, and encouraged both boards to consult closely on this issue.
- The Australian and New Zealand response to the IASB’s SME project will remain as an item on the agenda for future meetings.
Agenda Item 3: Joint work between the AASB and the FRSB
The group congratulated the AASB and the FRSB on being joint winners of the Environmental, Social, Government and Community Award at the Trans-Tasman Business Awards in September 2006.
The AASB and the FRSB presented papers to the group outlining their activities in recent months. These were then discussed by the group. The main points discussed were as follows:
- The specific IASB projects that the AASB and FRSB are involved in were noted.
- It was noted that the sizable resource commitment involved in participating in these projects.
- It was noted that research projects could help develop influence in a number of ways, including through the development of contacts within industries.
- It was noted that research projects could be initiated independently of the IASB, and then bought to the IASB’s attention.
- It was noted that the contribution to IPSASB was particularly important in relation to technical expertise as IPSASB does not have significant technical resources.
- It was noted that the roles of AASB and the FRSB in relation to IPSASB need to be considered in more detail.
The group discussed two papers prepared by the FRSB on discussions relating to a possible research project for the IASB on prospective financial information. It was noted that the FRSB has agreed not to pursue a project on prospective financial information at this time.
It was noted that a resolution needed to be passed by the group to recommend the reappointment of Joanna Perry to the AASB and to the FRC. The group also noted that it would be easier to appoint the Chairs of the AASB and FRSB to the other board in their roles rather than as individuals.
- The AASB and FRSB will prepare commonly formatted reports on their recent activities for the next meeting of TTAASAG. These reports will contain a specific section on their involvement with IPSASB (especially in relation to their commitment of funding and other resources).
- The report to Ministers could make reference to the resource commitment involved in participating in IASB projects and the benefits received from this participation.
- The group passed a resolution recommending that the Chair of the FRSB should be reappointed to the AASB
- Australian Treasury will see whether it would be possible to appoint the Chair of the FRSB in that role to the AASB on an ongoing basis, without the need to reappoint the individual each year. NZICA will see whether this will also be possible when reappointing the Chair of the AASB to the FRSB.
Agenda Item 4: New Zealand auditors practicing in Australia
The group discussed a paper from Australian Treasury and MED on the mutual recognition of auditors in New Zealand and Australia. The key points arising from this discussion were as follows:
- The group noted that audit quality in Australia and New Zealand appears to be approximately equivalent.
- The discipline, enforcement, and oversight processes for overseas auditors practising in Australia and New Zealand were noticeably different. In Australia, these functions are carried out by a range of bodies including ASIC and the FRC. In New Zealand the only oversight is of audits of issuers by the Securities Commission, and no New Zealand based disciplinary processes for overseas auditors approved by the Registrar of Companies.
- It was noted that in Australia auditors are registered by ASIC, whereas in New Zealand membership of the College of Chartered Accountants of NZICA entitles individuals to conduct audits of companies and issuers. NZICA noted its willingness to consider both a registration regime and putting in place an oversight process for foreign auditors practicing in NZ.
- Australian Treasury and MED will clarify the application of the Trans-Tasman Mutual Recognition Arrangement to auditors from one country practicing in the other.
- Australian Treasury will discuss the ability of New Zealand auditors to practice in Australia with ASIC.
- A roundtable discussion on this issue will be held with Australian Treasury, ASIC, MED, and NZICA.
- NZICA will consider the practicality of putting in place an auditor registration system.
Agenda Item 5: The next International Financial Reporting Standards (IFRS) regional policy forum
Australian Treasury updated the group on the preparations for the next regional policy forum in Japan. The main points arising out of this discussion were as follows:
- The Chairs of the ASRB, FRC, AASB, and the FRSB will all be attending the forum, as will representatives of the Australian Treasury, MED (probably), CPA, NIA, and ICAA (possibly).
- Charles Macek, Joanna Perry, and David Boymal have volunteered to be involved in the sessions dealing with SMEs and IFRS brand.
- Australian Treasury will update the group on preparations for the next forum at the next meeting of the group.
Agenda Items 6: Update on MED work
MED updated the group on developments in MED’s work on amendments to the Financial Reporting Act 1993, and auditor regulation. The main points arising out of this discussion were as follows:
- The Business Law Reform Bill containing amendments to the Financial Reporting Act 1993 has been enacted.
- Subject to ministerial and Cabinet approval, MED expect to publish their discussion documents on auditor regulation and financial reporting by charities in the first half of 2007.
- MED is considering the appropriate content for the new concise annual reports provided for in the Business Law Reform Bill.
- MED will update the group on its work on amendments to the Financial Reporting Act 1993 and auditor regulation at the next meeting of the group.
Agenda Item 7: Australia and New Zealand’s audit regulation frameworks
The group discussed a paper from the PPB on the question of audit reporting on IFRS. The main points arising out of this discussion were:
- The key point is whether auditors should have to report compliance with IFRS as well as compliance with the standards produced by the AASB in Australia and NZ GAAP in New Zealand.
- Consideration needs to be given to whether Australia and New Zealand are getting the full benefits of IFRS adoption if such adoption is not mentioned in the audit report
- It was noted that nothing prevents auditors being engaged to provide reporting on IFRS compliance.
- It was noted that it is important that auditors are not required to report on IFRS compliance in relation to entities that are not required to comply with IFRS.
- It was noted that the AuASB has also prepared a paper for the FRC to consider on this issue.
- It was noted that the key consideration was user usefulness when considering this area, and certain members expressed a strong view that auditors should take a lead in extending their opinion in this regard.
- The AUASB and the PPB will prepare short papers in a common format on their recent activities for future meetings of TTAASAG.
Agenda Item 8: General business
The issue of whether further institutional integration between Australian and New Zealand standard setters should be pursued was raised. It was noted that there was benefits to Australia and New Zealand providing two voices at the international level in terms of achieving greater influence, and that the different company law in Australia and New Zealand could make joint standard setting difficult.
- It was agreed that the next meeting of the group would focus on strategic issues for TTAASAG.
The Secretariat will see if the next TTAASAG meeting could be arranged to coincide with Sir David Tweedie’s visit to Australia and New Zealand in early March 2007 (date and venue to be confirmed).
1 In place of Bill Palmer (Institute of Chartered Accountants of Australia (ICAA) – Aust)