Trans-Tasman Accounting Standard Advisory Group – Minutes

1.00-4.00pm, Thursday 8th March 2007

PrcicewaterhouseCoopers, Level 22, PricewaterhouseCoopers Tower, 188 Quay Street, Auckland

Participants

Warwick Hunt – Chair (Accounting Standards Review Board (ASRB) - NZ)
Charles Macek (Financial Reporting Council (FRC) - Aust)
Merran Kelsall (Audit and Assurance Standards Board (AUASB) - Aust)
Bill Palmer (Institute of Chartered Accountants of Australia (ICAA) - Aust)
Geoff Miller (Treasury - Aust)
Bede Fraser (Treasury - Aust)
Joanna Perry (Financial Reporting Standards Board (FRSB) - NZ)
Helen Prangnell1 (Professional Practices Board (PPB) - NZ)
Garry Muriwai (New Zealand Institute of Chartered Accountants (NZICA) - 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)

On speakerphone:

Mark Shying (Certified Practising Accountants (CPA) – Aust)
Roger Cotton (National Institute of Accountants (NIA) - Aust)
Andrew Conway (National Institute of Accountants (NIA) - Aust)
Jim Murphy (Treasury - Aust)
Stephen Powell (Treasury - Aust)

Apologies

David Boymal (Australian Accounting Standards Board (AASB) - Aust)

Agenda Items

Agenda Item 1: Preliminaries

Welcome New Attendees

The group welcomed Helen Prangnell who was attending in place of Craig Fisher.

Minutes of the previous meeting

The minutes of the previous meeting of the group held in Melbourne on 6 December 2006 were circulated for comment on 12 December 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

  1. 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. To be covered under agenda item 2. The Recent visit of Sir David Tweedie and other IASB representatives to Australia and New Zealand was also noted.
  2. The Australian and New Zealand response to the IASB’s SME project will remain as an item on the agenda for future meetings. To be covered under agenda item 2
  3. 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). To be covered under agenda item 3. It was noted that as the AASB was unable to send a representative to the meeting Joanna Perry would be speaking to recent AASB activities.
  4. 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 report to Ministers made a reference to this issue
  5. The group passed a resolution recommending that the Chair of the FRSB should be reappointed to the AASB. Completed. It was noted that the reappointment of the Chair of the FRSB to the AASB had been confirmed.
  6. 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. To be covered under agenda item 3
  7. Australian Treasury and MED will clarify the application of the Trans-Tasman Mutual Recognition Arrangement to auditors from one country practising in the other. To be covered under agenda item 4
  8. Australian Treasury will discuss the ability of New Zealand auditors to practise in Australia with ASIC. To be covered under agenda item 4
  9. A roundtable discussion on this issue will be held with Australian Treasury, ASIC, MED, and NZICA. To be covered under agenda item 4
  10. NZICA will consider the practicality of putting in place an auditor registration system. To be covered under agenda item 4
  11. Australian Treasury will update the group on preparations for the next forum at the next meeting of the group. To be covered under agenda item 5
  12. 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. It was noted that no recent developments had occurred in relation to this work and that MED thinking on oversight of the regulation of auditors and whether there was a case for restricting auditors liability remains neutral. It was noted that ASIC would be more comfortable recognising New Zealand auditors as able to practise in Australia if an oversight system was in place. It was also agreed that MED’s work in this area would remain a standing agenda item.
  13. The AUASB and the PPB will prepare short papers in a common format on their recent activities for future meetings of TTAASAG. To be covered under agenda item 6
  14. It was agreed that the next meeting of the group would focus on strategic issues for TTAASAG. To be covered under agenda item 7

Agenda Item 2: Australia and New Zealand’s financial reporting frameworks

The group discussed the Australian and New Zealand responses to the IASB’s draft standard for SMEs. The recent visit by Sir David Tweedie and Warren McGregor was also discussed. The main points arising out of the discussion were as follows;

  • It was noted that the FRSB roundtable discussions on the SME standards encouraged lively debate, which focused on the merits of either a top down or bottom up approach. There are 15 further roundtable discussions to come.
  • It was noted that the FRSB would be releasing a discussion document on the New Zealand response to the SME standard shortly.
  • The SME standard is designed for external general purpose financial statements. While the Financial Reporting Act 1993 does require general purpose financial statements to be prepared in many instances the only users may be he owners, in which case the question arises as to whether the SME standard has the most appropriate requirements. .
  • It was noted that the FRSB has an open mind on the adoption of the standard.
  • It was noted that SME reporting is a major issue in Australia and that the question of not for profit entity reporting could be considered at the same time.
  • The group noted that the introduction of a third tier for general purpose reporting in Australia may be a positive step, in particular as it may act to clarify what constitutes a reporting entity.
  • It was noted that the AASB and the FRSB would work together on the approach to be taken to the SME standard and their respective responses to the standard.
  • The group agreed that it was appropriate for it to make recommendations to the two governments on underlying policy issues that relate to the reporting frameworks in Australia and New Zealand.

Action points – agenda item 2

  1. It was agreed that a paper would be prepared on entities that report which would consider what recommendations could be made to governments on this issue and broader harmonisation of reporting frameworks.
  2. It was agreed that there would be an ongoing report back to the group on the issue of the two countries’ concepts of reporting entity.
  3. Progress on the Australian and New Zealand responses to the IASB’s SME project will be discussed at the next meeting of the group (the responses will not be finalised by the next meeting).

Agenda Item 3: Joint work between the AASB and the FRSB

The group discussed the recent work of the FRSB and the AASB. The main points arising out of this discussion were:

  • The specific IASB projects that the AASB and FRSB are involved in were noted, in particular, the FRSB’s involvement in IASB work on Financial Instruments Puttable at Fair Value.
  • The very positive response from the IASB to New Zealand and Australia’s contribution at the IASB was noted.
  • It was noted that the AASB and the FRSB have agreed to work together to develop a joint standard on Revenue from Non-Exchange Transactions.
  • It was noted that the AASB/FRSB relationship is operating well.
  • Public sector issues were identified as an area where more co-operation could be useful between the boards.
  • The not for profit sector is an issue of particular interest to the AASB at present, and Public Benefit Entities are currently a particular area of interest for the FRSB. It was noted that there may be some scope for single projects in this area.
  • It was noted that Joanna Perry has been appointed to the ASRB for 3 years subject to remaining Chair of the FRSB.
  • It was noted that NZICA can appoint the Chair of the AASB to the FRSB on an ongoing basis. It was also noted that the Chair of the FRSB cannot be appointed to the AASB, only the person holding the position of Chair of the FRSB.

Action points – agenda item 3

  1. 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).

Agenda Item 4: New Zealand auditors practising in Australia

The group discussed the mutual recognition of auditors and the discussions that have taken place on this issue between the Australian Securities and Investment Commission (ASIC), NZICA, Australian Treasury and MED. The key points arising from this discussion were as follows:

  • The discussions have been useful in the development of a shared understanding of either jurisdictions systems for auditor regulation.
  • It was noted that the key concerns for ASIC were the lack of a specific registration process for auditors in New Zealand and the absence of an independent body overseeing the regulation of auditors in New Zealand.
  • It was noted that there is a need for a clear description of what needs to be done in New Zealand to enable ASIC to recognise New Zealand auditors.
  • It was noted that NZICA would be prepared to look at the introduction of a registration system for auditors in New Zealand, subject to some greater certainty that this would help achieve the recognition of New Zealand auditors in Australia.
  • It was noted that Australian auditors are not required to be members of professional bodies.

Action points – agenda item 4

  1. Australian Treasury, MED and NZICA will update the group on progress towards the recognition of New Zealand auditors in Australia at the next meeting of the group.

Agenda Item 5: The next International Financial Reporting Standards (IFRS) regional policy forum

The group discussed the next IFRS regional policy forum to be held in Japan. The main points arising out of this discussion were as follows:

  • It was noted that the following individuals would be attending the forum: Jim Murphy, Geoff Miller, Bede Fraser, and Stephen Powell from Australian Treasury, Warwick Hunt from the ASRB, Roger Cotton and Andrew Conway from the NIA, Charles Macek and Jorge del Busto the FRC, Dennis Pratt from CPA, Peter Mumford from MED, Joanna Perry from the FRSB, and Angus Thomson from the AASB.
  • It was noted that Joanna Perry and Charles Macek would be presenting at the forum, and that Warwick Hunt would be a discussant at one of the sessions.

Action points – agenda item 5

  1. TTAASAG members who are presenting at the forum will share draft presentations before giving their presentations

Agenda Items 6: Australia and New Zealand’s audit regulation frameworks

The group discussed papers prepared by the AUASB and the PPB on their recent activities. The main points arising out of this discussion were as follows:

  • The AUASB has worked closely with the FRC on the issue of reporting on compliance with IFRS in financial statements, and has decided that where it is explicit in the financial statements that they comply with IFRS the audit report must refer to compliance with IFRS. The AUASB also hopes that directors will be required to do this at some stage. The AUASB is working on the release of an appropriate exposure draft, with a view to implementation of changes for 30th June 2007 reports.
  • The AUASB will be releasing a paper on the issue of differential audit requirements. The preferred view of the AUASB on this issue is that differential audit requirements should not be created, as the principles based approach in audit standards permits audits to be customised to fit different sized entities.
  • Recent surveys had suggested that awareness of audit and assurance standards in Australia was deficient in some areas. As a result the AUASB is considering ways to raise awareness of the standards and provide education for smaller auditors on the standards
  • It was noted that the PPB would like to introduce the clarity standards as soon as possible, but that the AUASB would prefer to give more time for the new Australian standards to bed in before considering adoption of the clarity standard. The AUASB and the PPB are working closely on this issue.
  • It was noted that before deciding an approach on auditors reporting on IFRS the PPB would like to wait for discussions on this issue in IAASB. Several members of the group noted their agreement with the approach adopted by the AUASB on this issue and urged the PPB to consider adopting a similar approach.
  • It was noted that some entities in the not for profit sector have difficulty finding auditors in New Zealand. There are also some concerns over audit quality and awareness of audit standards among smaller auditors in New Zealand.
  • Standards which the PPB are currently considering were noted. It was also noted that the PPB will release four draft standards for consultation in April 2007 and hope to have the whole suite of new standards in place by the middle of 2009.

Action points – agenda item 6

  1. The AUASB and the PPB will prepare reports on their recent activities for the next meeting of the group.

Agenda Item 7: TTAASAG’s future strategic direction

The group discussed TTAASAG future strategic direction. The main points arising out of this discussion were as follows:

  • The major achievements of the group were noted. In particular, cross appointments between Australian and New Zealand bodies and the regional policy forum.
  • It was noted that the focus of the group to date had been more on harmonisation at the level of standards.
  • It was noted that policy settings are fundamental to further harmonisation and the focus of the group is likely to be on the policy rather than standard setting level in the next 3-5 years.
  • The group noted that the issue of possible joint institutions could be considered once there is greater harmonisation at the policy level.
  • It was noted that financial reporting had been one of the most successful areas of work under the Single Economic Market agenda.
  • The group agreed that the existing terms of reference did not require changing.
  • It was noted that the important role of TTAASAG is to advise the two governments on further harmonisation or co-ordination, and areas where the two countries may be diverging. Decision making on these issues is up to the two governments. The important issue is that TTAASAG continue to make progress.
  • Having people inside key international organisations is the key to maintaining international influence. This can be achieved by continuing to provide high quality technical expertise and maintaining policy influence.
  • It was noted that there are a number of ways for Australia and New Zealand to work to maintain their influence. These include an active role organising and participating in regional policy fora, networking at the regional level through websites and email lists, and information sharing between jurisdictions.

Action points – agenda item 7

  1. A database should be maintained noting the current Australian and New Zealand representatives at the international level.
  2. The pool of actual and potential Australian and New Zealand representatives at the international level will be a standing agenda item at future meetings of the group.
  3. The group will be provided with government and professional advice on potential multilateral forums to maintain influence. Proposals arising out of this work could be launched at the regional policy forum in 2008.

Agenda Item 8: General business

No matters were raised in general business

Next meeting

The next meeting of the group will be held in Melbourne on 8 June 2007.


1 In place of Craig Fisher (Professional Practices Board (PPB) - NZ)