Trans-Tasman Accounting and Auditing Standards Advisory Group
2008 Report to Ministers

1. Overview

In 2008, the main activities and achievements of the Trans-Tasman Accounting and Auditing Standards Advisory Group (the Group) were:

  • implementing strategies to promote the influence of Australia and New Zealand, such as establishing a sub-committee to identify and support suitable candidates for representation on international bodies and inviting a number of guest presenters from international bodies to enable the Group to better understand the work of these bodies;
  • considering a range of policy issues to inform policy development and further align the frameworks in both countries. These issues included emissions trading, asset valuation in thinly traded markets, requirements relating to the payment of dividends, parent‑entity financial statements, reporting by not‑for‑profit entities and differential auditing;
  • promoting regional engagement by identifying a host for the next IFRS regional policy forum and contributing to the arrangements for the forum. The forum provides a valuable opportunity for policy setters within the region to exchange ideas and gain a better shared understanding of the financial reporting issues affecting the region; and
  • undertaking joint initiatives to further promote communication and co‑ordination between Australia and New Zealand. For example, by placing an Australian representative on a steering committee to provide input into New Zealand's proposed reforms to its financial reporting framework.

In 2009, the main objectives of the Group will be to:

  • develop a set of outcomes relating to accounting and auditing matters that would apply reciprocally between Australia and New Zealand. Given the differing legal system between the two countries, obtaining agreement to identical law has been and will continue to be difficult to achieve. However, an agreement to a shared outcome is much more achievable and can have a significant impact for harmonising the nations relatively quickly without the need for developing joint single law or joint institutions.
  • work together to consider the accounting issues that have arisen in the context of the global financial crisis, and where possible, contribute to work being undertaken at an international level as part of the broader response to the global financial crisis and longer term impacts;
  • facilitate greater engagement with the Asia-Pacific region by considering ways to expand the IFRS regional policy forum, both in terms of issues considered at the forum and jurisdictions represented at the forum;
  • consider the potential application of an international accounting standard for Non‑publicly Accountable entities (which is expected to be released in the first half of 2009), as a means of reducing the financial reporting burden on small to medium entities in Australia and New Zealand;
  • enhance the profile and influence of Australia and New Zealand in the international area by prioritising the work of the Group's nominations sub‑committee. In 2009, the sub-committee will continue to identify and support suitable candidates, and continue to invite guest presenters from international bodies to the Group's meetings;
  • facilitate greater collaboration between the auditing standard setters, for example, by promoting cross-appointments between Australia and New Zealand; and
  • examine opportunities to formalise the established collaborative processes that exist between the professional accounting bodies in Australia and New Zealand, and consider mechanisms for providing feedback to the Group on these issues.

2. Background

On 30 January 2004, the then Australian Treasurer and the New Zealand Minister of Finance announced the formation of the Group. The announcement was made in the context of the business regulatory environment becoming an increasing focus for the Closer Economic Relations (CER) framework that has assisted the development of the Australia/New Zealand relationship since 1983. The Memorandum of Understanding (MoU) on the Coordination of Business Law, signed by the two Governments in 2000, and the special Ministerial forum held in August 2003 to mark the 20th anniversary of CER, affirmed the commitment of both countries to increase trans‑Tasman business activity including by harmonising accounting standards.

The overriding goals of the Group are to advise the respective Governments and standard-setters on ways to reduce business costs and improve efficiency through:

  • Identifying inconsistencies in the accounting standard-setting framework and assisting the move to a single approach to accounting standard-setting to apply in both jurisdictions; and
  • Identifying areas where audit and assurance standards and auditor regulation create impediments to trans-Tasman business activity, and assisting in the removal of those impediments.

The other major goal of the Group is to enhance the influence of the two countries in the development of international accounting, audit and assurance standards.

Terms of Reference

The Group is given the task of providing advice under four broad headings:

  • Standard-setting – advice primarily to the oversight and standard-setting bodies on achieving greater coordination and information exchange between the countries, including how to progress the alignment of Australian and New Zealand financial reporting standards in light of the adoption of international accounting standards;
  • Policy coordination – advice primarily to the Australian and New Zealand Governments on the broader policy and legal framework for financial reporting, with a view to ensuring that, amongst other things, a consistent approach is taken to the application, monitoring and enforcement of standards where appropriate;
  • Joint institutions – advice primarily to the Australian and New Zealand governments on the specific institutional arrangements that might be established over time to ensure 1) that the objective of a single set of trans‑Tasman accounting standards is achieved and maintained effectively and efficiently; and 2) audit and assurance standards and auditor regulation do not create unnecessary impediments to trans-Tasman business activity; and
  • International influence – advice to both the Australian and New Zealand Governments and to the oversight and standard-setting bodies on strategies to maintain Australia's and New Zealand's influence in the development of international accounting standards and international standards on auditing through involvement in relevant forums, such as the IASB.

The Group includes representatives from Australia's Financial Reporting Council (FRC), Australian Accounting Standards Board (AASB), and Audit and Assurance Standards Board (AUASB), and New Zealand's Accounting Standards Review Board (ASRB), Financial Reporting Standards Board (FRSB), and Professional Standards Board (PSB), as well as representatives from the professional accounting bodies in Australia and New Zealand, and officials from the Australian Treasury and the New Zealand Ministry of Economic Development (MED).

The Group met on four occasions in 2008. These meetings were chaired by a representative of Australian Treasury.

Information on the Group's work has also been placed on its website.

3. Major activities and achievements in 2008

a) Implementing strategies to promote the influence of Australia and New Zealand, such as establishing a sub-committee to identify and support suitable candidates for representation on international bodies and inviting a number of guest presenters from international bodies to enable the Group to better understand the work of these bodies.

In 2008, the Group established a nominations sub-committee comprising of representatives from the ASRB, FRC, MED and Australian Treasury. The purpose of the sub-committee is to maximise the influence of Australia and New Zealand in the development of international accounting and auditing standards.

The nominations sub-committee held five teleconferences during the year to discuss upcoming vacancies on key international organisations. Throughout the year, the nominations sub‑committee made a number of representations in support of Australian and New Zealand candidates. Several of these candidates have since been successfully appointed.

The appointment of candidates from Australia and New Zealand ensure that both countries views are taken into consideration in the standard setting process and this, in turn, facilitates the influence of both countries in the international arena.

In addition, the Group has invited several guest presenters to attend its meetings and provide insights into the work currently being undertaken by these international bodies and their views on major current issues. This has enabled the Group to better understand the work of these bodies and the type of candidates that would be suitable for appointment to these bodies.

b) Considering a range of policy issues to inform policy development and further align the frameworks in both countries.

Throughout 2008, the Group identified and discussed a range of common policy issues in Australia and New Zealand, with a view to informing policy development on these issues. These discussions have also highlighted areas where the frameworks in each country could be further aligned or areas where further co-ordination could occur. A summary of the key policy topics discussed in 2008 is outlined below. The Group has also identified a number of issues to be discussed in 2009, including references to IFRS in domestic legislation and standard business reporting.

  • Requirements relating to the payment of dividends

The Group discussed the requirements in Australia and New Zealand relating the payment of dividends. The Group noted that this was an issue where both countries could further align their frameworks, particularly as Australian Treasury is currently considering whether there are opportunities to allow greater flexibility on the payment of dividends, as is currently the case in New Zealand. The Group agreed that Australia will consult with New Zealand on any reform proposals relating to the payment of dividends.

  • Parent‑entity financial statements

The Group discussed the requirements in Australia and New Zealand relating the requirement to prepare parent-entity financial statements. The Group noted that this was an issue where, currently, both the Australian and New Zealand frameworks were aligned, and where any reforms could be undertaken by both countries on a co‑ordinated basis. The Group agreed that Australia and New Zealand would take a co-ordinated approach to any reforms in this area.

  • Reporting by not-for-profit entities

The Group examined the overall position of not-for-profit financial reporting in Australia and New Zealand. Both Australia and New Zealand are facing similar issues in relation to the potential to reform the financial reporting requirements of these entities and, as such, the Group agreed that work should be progressed on a parallel basis. The Group will continue to progress this work in 2009.

  • Asset valuation in thinly traded markets

The Group discussed the requirements relating to asset valuation in thinly traded markets and the IASB's work on this issue, including the IASB's establishment of an expert advisory panel. This issue has been highlighted in the current global financial crisis, and the Group agreed to monitor developments on this issue.

  • Emissions trading

The Group monitored developments on the proposed emissions trading schemes in Australia and New Zealand, and the key accounting and auditing implications of the schemes. The Group has also monitored the International Accounting Standards Board's (IASB's) work in this area in case an international accounting standard is not finalised in time to coincide with the commencement of the domestic emissions trading schemes in Australia and New Zealand. The IASB is expecting to release an exposure draft in 2009 and a final standard in 2010. If the IASB does not meet this timeframe, the domestic standard setting bodies will consider their options, including resurrecting previously withdrawn accounting interpretations on emission rights.

c) Promoting regional engagement by identifying a host for the next IFRS regional policy forum and contributing to the arrangements for the forum.

During 2008, the Group was active in promoting regional engagement by identifying a host for the next IFRS regional policy forum. The next forum will be held in Beijing on 16 April 2009. It will be attended by delegates from across the Asia Pacific region, including senior representatives of accounting standard setting and oversight bodies, professional accounting bodies and government officials.

The forum provides a valuable opportunity for policy setters within the region to exchange ideas and gain a better shared understanding of the financial reporting issues affecting the region. The forum also enables delegates from within the Asia Pacific region to continue working towards common global accounting standards.

The Beijing forum will provide an opportunity to discuss key reform measures proposed by the Group of Twenty (G-20) to respond to the global financial crisis, particularly in respect to the development of single, high quality global accounting standard.

d) Undertaking joint initiatives to further promote communication and co ordination between Australia and New Zealand

In 2008, Australia and New Zealand undertook several joint initiatives to further promote communication and co-ordination in a number of areas. For example, in the context of New Zealand's proposed reforms to its financial reporting framework, it established a steering committee that included an Australian representative to provide a trans-Tasman dimension to the review. In addition, Australia has provided input into New Zealand's proposed reforms to its audit regulation framework. This joint work will ensure that there is greater coordination and information exchange between the countries, which will promote further alignment of the Australian and New Zealand frameworks.

The AASB and the FRSB also continued to jointly progress a range of financial reporting projects. The Chairs of these boards continue to hold cross appointments and the boards themselves hold an annual joint meeting to discuss issues of mutual interest. This work is fundamental to maximising the influence of Australia and New Zealand in the international arena. Both boards will continue to update the Group on their activities in 2009.