2.00-4.30pm, Thursday 6th December 2007
Institute of Chartered Accountants of Australia, Level 1, 33 Erskine Street, Sydney
Warwick Hunt – Chair (Accounting Standards Review Board (ASRB) – NZ)
David Boymal (Australian Accounting Standards Board (AASB) – Aust)
Merran Kelsall (Audit and Assurance Standards Board (AUASB) – Aust)
Jeffery Lucy (Financial Reporting Council (FRC) – Aust)
Suzanne Howarth (Financial Reporting Council (FRC) – Aust)
Jim Murphy (Treasury – Aust)
Geoff Miller (Treasury – Aust)
Bede Fraser (Treasury – Aust)
Ronita Ram (Treasury – Aust)
Joanna Perry (Financial Reporting Standards Board (FRSB) – NZ)
Craig Fisher (Professional Standards Board (PSB) – NZ)
Andrew Jackson (Ministry of Economic Development (MED) – NZ)
Ashley Tomlinson (Ministry of Economic Development (MED) – NZ)
Naomi Hamilton (Ministry of Economic Development (MED) – NZ)
Bruce Bennett (New Zealand Institute of Chartered Accountants (NZICA) – NZ)
Charles Macek (Financial Reporting Council (FRC) – Aust)
Mark Shying (Certified Practising Accountants (CPA) – Aust)
Bill Palmer (Institute of Chartered Accountants Australia (ICAA) – Aust)
Andrew Conway (National Institute of Accountants (NIA) – Aust)
Garry Muriwai (New Zealand Institute of Chartered Accountants (NZICA) – NZ)
Peter Mumford (Ministry of Economic Development (MED) – NZ)
Agenda Item 1: Preliminaries
Apologies for absence were noted from Charles Macek (FRC), Bill Palmer (ICAA), Mark Shying (CPA), Garry Muriwai (NZICA) Andrew Conway (NIA) and Peter Mumford (MED).
A special note was made to Charles Macek who has completed his term as the FRC Chair and membership on TTAASAG. He was thanked for his contribution and in particular the policy deliberation he brought to the Group.
Update on Australia’s new government
It was noted that TTAASAG’s role was unlikely to change significantly under a new Australian government and that there would be continued support for policy discussion on Trans-Tasman matters.
Welcome of new attendees
Andrew Jackson (MED), Jeffery Lucy (FRC) and Suzanne Howarth (FRC) were welcomed to their first meeting of the Group.
Minutes of previous meeting
The minutes of the previous meeting of the group held in Sydney on 29 August 2007 were circulated for comment on 7 September 2007. Following some minor comments and subsequent changes the minutes were made available in the trans-Tasman pages of the FRC and ASRB websites.
Action points from that meeting
- It was agreed that there would be an ongoing report back to the group on the Australian and New Zealand responses to the IASB’s SME project. To be covered under agenda item 2.
- Following individual discussions with NZICA, ASRB, Registrar of Companies and the Securities Commission, MED will arrange a roundtable discussion with these four bodies to determine whether a general consensus could be formed as to a way forward in relation to auditor regulation. To be covered under agenda item 3.
- The Secretariat will discuss with members and stakeholders potential research topics and case studies and report back to the group at the next meeting of TTAASAG. To be covered under agenda item 3.
- Australian Treasury, MED and NZICA will update the group on further progress towards mutual recognition at the next meeting of TTAASAG. To be covered under agenda item 4.
- It was agreed that there would be ongoing discussions on a regional network on financial reporting issues and a tentative model of such a network would be prepared to stimulate discussion. To be covered under agenda item 5.
- The Australian Treasury will write to China (Mr Wang Jun, Vice Minister, Ministry of Finance) to ascertain China’s interest in hosting the next forum. To be covered under agenda item 5.
- The Secretariat will update the list of international representatives from New Zealand and Australia for the December meeting to include representatives on secondment to the IASB and/or working on the IASB projects. To be covered under agenda item 6.
- The AASB and the FRSB will prepare commonly formatted reports on their recent activities for the next meeting of TTAASAG. To be covered under agenda item 7.
- The AUASB and PSB will prepare commonly formatted reports on their recent activities for the next meeting of TTAASAG. To be covered under agenda item 8.
Agenda Item 2: Australia and New Zealand’s financial reporting frameworks
Small and Medium sized Entities (SME’s)
The group discussed the Australian and New Zealand progress to date on the IASB’s draft standards for SME’s. The main points arising out of the discussions were as follows:
- It was noted that in September 2007, the ASRB announced the mandatory adoption of NZ IFRS could be delayed for certain entities due to the announcement of a government review of financial reporting requirements to be commenced in mid 2008;
- It was noted that FRSB also deferred IFRS for some other entities not subject to the financial reporting standards approved by the ASRB and that prepare general purpose statements;
- FRSB believes it is appropriate to look at the overall conceptual framework around these entities as to when they should prepare general purpose statements or special purpose statements;
- It was noted that issues had been raised in relation to the application of IFRS in the public sector in New Zealand and Australia. The FRSB and the AASB will continue to work together on this to determine whether any departure from IFRS is appropriate for the public sector;
- It was noted that the FRSB has made a submission to the IASB on its proposed IFRS for small and medium sized entities;
- The AASB also responded to the IASB in relation to their paper on SME’s. The main point in their submission is that the disclosure is too extensive for small entities;
- It was noted that the IASB have a working group organised for January 2008, and they will presumably look at submissions made on IFRS for SME’s;
- It was noted that Australia believes that as it has agreed to adopt IFRS, changes should only be made when absolutely necessary and not on a conceptual basis;
- Australia are not rushing any changes to their financial reporting framework as they believe their present regime is working sufficiently and the recent increase in reporting thresholds for proprietary companies has released the pressure in the short term.
Action points – agenda item 2
- A paper will be prepared by the AASB and the FRSB for the next meeting of the group summarising issues relating to the adoption of IFRS in the Australian and New Zealand public sectors.
Not for profit entities
The PSB prepared a report on feedback on recent Charities Act update Seminars in New Zealand conducted by Hayes Knight Chartered Accountants, on behalf of the PSB and NZICA. The key points arising from the discussions of this issue were:
- It was noted that the seminars have shown that many entities do not know what their existing requirements are, let alone the changes;
- There was a lot of confusion between the distinction between Charities and other not-for-profit entities. The Charities Commission registration process has forced people to confront this issue;
- There are approximately 25,000 charities in New Zealand but there is huge diversity across these;
- It was noted that MED may incorporate a review of the financial reporting requirements for Charities and other not-for-profit entities into the larger review of the Financial Reporting Act 1993 to be commenced mid 2008;
- It was noted that there are a lot of volunteers in this area of the market and there is a large level of concern over the level of work that additional reporting requirements might involve and they might end up losing a lot of their volunteers;
- It was noted that Australia is in the middle of a review of the reporting requirements of unlisted public companies which include a number of not-for-profit entities;
- It was noted that New Zealand and Australia will continue in a parallel process in relation to work on financial reporting requirements for not-for-profit entities.
Agenda Item 3: Common Policy Issues in Australia and New Zealand
Auditor Regulation Oversight and Liability
MED prepared a report on auditor regulation in New Zealand. The report was taken as read. The key points arising from the discussion of this issue were:
- MED has set up a auditor regulation oversight group to determine the best way forward for auditor regulation involving auditor oversight;
- There has been broad agreement for oversight in New Zealand but there are differing views as to the roles of the oversight bodies;
- The next meeting of the oversight group is scheduled for Monday 17 December 2007;
- It was noted that there has been concern in New Zealand that any changes in auditor liability may impact the liability in other industries, but Australian Treasury made the point that Australia did not appear to have this problem when the liability reforms were introduced;
- Australia introduced liability reforms, including;
- The establishment of a proportionate liability regime in relation to economic loss and property damage; and
- The introduction of professional standards legislation (capping of liability). The capping regime applies to occupations and professions in relation to economic loss and property damage.
- These reforms were introduced due to the unavailability and unaffordability of professional indemnity insurance. The introduction of these reforms have encouraged insurers to offer professional indemnity cover.
- It was noted that Australia, represented by ASIC, is part of the International Federation of Independent Audit Regulators (IFIAR) which is made up of 22 countries to examine and discuss issues relating to the oversight of auditors.
Action Points – agenda item 3
- The group agreed that there would be an ongoing report back to the group on the New Zealand progress on auditor regulation oversight and auditor liability.
IFRS in Legislation
The group discussed an issue that had been raised at a recent AASB and FRSB meeting as to whether legislation in both New Zealand and Australia should refer directly to IFRS. The key points arising from the discussion were:
- There are concerns about whether direct reference to IFRS in legislation would result in sovereignty being removed and it would leave the jurisdiction being completely reliant on the IASB;
- It was noted that this issue should not be vigorously pursued at present but should be kept in mind for the future;
- It was noted that Australian auditor’s reports already have to state whether they are IFRS compliant and that there is strong guidance in New Zealand suggesting New Zealand auditors do so as well;
- The intention in New Zealand was to remove reference to NZ IFRS (and simply retain NZ GAAP) once existing NZ GAAP ceases to apply. However, due to the deferral announcement from the ASRB in September 2007 for certain entities adopting IFRS, New Zealand will retain existing NZ GAAP for an extended period.
Shareholder friendly reporting
MED and Australian Treasury prepared a joint report on the overview position of shareholder friendly reporting in Australia and New Zealand. The key points arising out of the discussion of this issue were as follows:
- New Zealand has just introduced provisions for concise annual reports
- Australia is considering the role of non-statutory shareholder friendly reports in addition having full annual reports available on the Internet and concise annual reports;
- The question was raised of whether having too many types of accounts creates confusion;
- It was noted that by the time shareholder friendly reporting has been developed, shareholders may no longer be so needed because they may be able to obtain the specific financial information they are interested in electronically;
- It was noted that the US and various other countries are considering shareholder friendly reporting issues;
- It was noted that consideration needs to be given to where liability lies if something goes wrong and whether there would be a need for more disclaimers.
Potential Research Topics
The following suggestions were made as to potential research topics the group could promote:
- Fair value measurements in relation to subprime mortgages
- Emission trading;
Action Points – agenda item 3
- The Emission Trading issue will become a standard agenda item and Australian Treasury will prepare a preliminary paper outlining the questions that require answering, for the next meeting of the group to prompt discussion on this issue
- Australian Treasury will prepare a preliminary paper on issues associated with fair-value accounting when applied to a thinly traded market for the next meeting of the group to prompt discussion on this issue.
Agenda Item 4: New Zealand auditors practising in Australia
MED prepared a report to update the group on the progress towards achieving the mutual recognition of auditors between Australia and New Zealand. The key point was as follows:
- It was noted that the implementation of mutual recognition arrangements between Australia and New Zealand under the Trans-Tasman Mutual Recognition Arrangement has been intentionally been delayed until such time as the auditor oversight regulation review has been completed.
Action points – agenda item 4
- MED and Australian Treasury will update the group when progress towards mutual recognition commences.
Agenda Item 5: Future IFRS Regional Policy Forum
The group discussed future IFRS regional policy forums. The key points arising from this discussion were as follows:
- The group was updated on work to identify hosts for future IFRS regional policy forums;
- That Australian Treasury has proposed a model based on the Regional Network on Asian Insolvency reform to establish a regional network on financial reporting;
- The proposed network would include a web-based resource aimed at sharing information among policy makers about developments, potential reforms and capacity building relating to financial reporting issues in the Asia Pacific region;
- A bulletin outlining key information would go out quarterly and relevant links would be made available on the networks website;
- It was noted that Australia and New Zealand can play an important role in the adoption of IFRS in the region.
Action Points – agenda item 5
- The Secretariat will progress work on the proposed regional network with a view to launching it at the next IFRS regional policy forum.
Agenda Item 6: Australian and New Zealand international representatives
The group discussed Australian and New Zealand international representatives. The key points arising out of this discussion were as follows:
- It should be an objective of the group to attempt to get potential candidates that could represent New Zealand and Australia on International Accounting and Auditing Boards;
- A sub committee of TTAASAG should be established so potential candidates are not subjected to discussion by a large group;
- It was agreed that the potential candidates should not be solely to replace people on existing boards but also as potential candidates for any positions that might become available;
- Maintenance of influence is the main objective of determining potential candidates.
Action Points – agenda item 6
- The Subcommitee would consist of:
a. Senior member of Australian Treasury
b. Senior member of MED
c. Chair of FRC
d. Chair of ASRB
- The Chair will write to the IASB board of trustees to let them know what we are doing.
Agenda Item 7: Australia and New Zealand’s audit regulation frameworks
The AUASB and the PSB prepared reports on their recent activities for the group. These reports were taken as read. The key points arising out of the discussion of the reports were:
- Emissions trading
- Broader sustainability reporting has been on the agenda for a long time but the AUASB and PSB do not want to develop it if they can follow international standards which may be developed in the near future;
- The AUASB has agreed that guidance on assurance reporting in this area will need to be developed
- Ambition to get someone on the IFAC PIOB It was suggested that if Australia has a representative on the IASB then we should aim to get a New Zealander on the PIOB.
Action points – agenda item 7
- The AUASB and PSB will prepare commonly formatted reports on their recent activities for the next meeting of TTAASAG.
Agenda Item 8: Joint work between the AASB and the FRSB
The FRSB and the AASB prepared reports on their recent activities for the group. These reports were taken as read. The key points arising out of discussion of the reports were:
- Roundtables have been held in Sydney and Melbourne to discuss recent proposals in Australia about superannuation fund reporting;
Action points – agenda item 8
- The AASB and the FRSB will prepare commonly formatted reports on their recent activities for the next meeting of TTAASAG.
Agenda Item 9: General Business / Next meeting
Chair and Secretariat: Rotation
- The rotation of the Chair and Secretariat occurred with Geoff Miller (Australian Treasury) taking over the role of Chair and the Australian Treasury taking over as Secretariat;
- A thank you was extended to the Chair and Secretariat for their work over the past 2 years.
The date of the next meeting of the group is still to be determined.