Trans-Tasman Accounting and Auditing Standards Advisory Group
2010 Report to Ministers

1. Introduction

Trans-Tasman trade and investment are important drivers of economic growth in both Australia and New Zealand. It is important to facilitate efficient cross-border business transactions by minimising the costs of compliance. Harmonisation of standards is thus crucial for the effective operation of business across the Tasman and capital market flows. It is in this context that the Trans-Tasman Accounting and Auditing Standards Advisory Group was established by Ministers in 2004 and continues its work.

2. Overview

In August 2009, the Australian and New Zealand Governments agreed to an outcomes framework to progress a wide range of cross-border economic initiatives. The outcomes framework includes four matters relating to accounting and auditing1. The outcomes framework applies reciprocally and once achieved will further align frameworks in Australia and New Zealand with the aim of benefiting both countries and increasing harmonisation. The current accounting and auditing outcomes are:

  1. for-profit entities are able to use a single set of accounting standards and prepare only one set of financial statements with trans-Tasman companies only preparing one set of financial statements to one set of standards;
  2. not-for-profit entities are able to use a single set of accounting standards and prepare only one set of financial statements;
  3. auditors registered in one country can operate in the other country; and
  4. financial reporting standards bodies in Australia and New Zealand have functional equivalence.

In 2010, the main activities and achievements of TTAASAG were:

  • Continuing to monitor and provide guidance on proposed regulatory and legislative reforms in both Australia and New Zealand to facilitate the SEM outcomes to be achieved within the proposed timeframes;
  • Discussing and providing further guidance on the Auditor Regulation and External Reporting Bill which reforms the institutional structures regulating financial reporting and introduces auditor regulation and oversight in New Zealand. These reforms will further align the financial reporting and audit regulation frameworks in both countries and progress SEM outcomes;
  • Continuing to pursue opportunities for collaboration between the audit and assurance standard-setting bodies in both countries. The benefits of cross-appointments between auditing and assurance standard-setting bodies was discussed and TTAASAG intends to facilitate cross-appointments between those bodies from 1 July 2011, the date of establishment of the External Reporting Board in New Zealand and its proposed subsidiary boards;
  • Proposing a revision of the Financial Reporting Policy outcome statements to better reflect the current environment and to extend the outcomes where appropriate; and
  • Reviewing its own Terms of Reference with the intention that it recommends an update to Ministers for possible adoption with effect from the date of the changes in institutional arrangements in New Zealand (expected to be 1 July 2011).
  • Promoting and facilitating greater engagement with the Asia-Pacific region and working to enhance the presence and influence of Australia and New Zealand through TTAASAG members attending and reporting back from the International Financial Reporting Standards Regional Policy Forum held in Singapore in May 2010;
  • Monitoring the development of International Public Sector Accounting Standards developed by the International Public Sector Accounting Standards Board. This activity stream was conducted primarily through the work of the Accounting Standards Review Board and Financial Reporting Council;
  • Continuing to enhance the profile and influence of Australia and New Zealand in the international arena through the work of TTAASAG's Nominations Subcommittee. In 2010, the subcommittee continued to identify and support suitable candidates, and invited presenters from international bodies to TTAASAG meetings;

In 2011, the main objectives of TTAASAG will be to:

  • Continue to monitor and provide guidance on regulation and reforms in Australia and New Zealand to enable the financial reporting policy outcomes agreed upon by both governments to be achieved within the proposed timeframes. Specifically TTAASAG will continue to provide advice and guidance on the proposed reform of the financial reporting framework in New Zealand. These reforms aim to further align the financial reporting and audit regulation frameworks in both countries in line with the outcome statements. TTAASAG will also maintain close contact with the Trans Tasman Outcomes Implementation Group regarding these outcomes;
  • Facilitate the implementation of cross-appointment arrangements between the audit and assurance standard-setting bodies in Australia and New Zealand. The New Zealand accounting and auditing standard-setting framework is scheduled to change to a system that is more aligned with Australia. This represents an optimal time to establish cross appointments;
  • Support increased engagement with and within the Asia-Pacific region and working to enhance the presence and influence of Australia and New Zealand through TTAASAG members attending and contributing to the International Financial Reporting Standards Regional Policy Forum held in Indonesia in May 2011 and supporting Australia and New Zealand's contribution to the Asian Oceania Standard Setters Group;2 and
  • Continue to enhance the profile and influence of Australia and New Zealand in the international arena through the work of the TTAASAG's Nominations Subcommittee. In 2011, the Subcommittee will continue to identify and support suitable candidates, and continue to invite presenters from international bodies to TTAASAG meetings.

3. Background

On 30 January 2004, the then Australian Treasurer and the then New Zealand Minister of Finance announced the formation of TTAASAG. The announcement was made in the context of the business regulatory environment becoming an increasing focus for the Closer Economic Relations 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 Closer Economic Relations, affirmed the commitment of both countries to increase trans‑Tasman business activity including by harmonising accounting standards.

The overriding goals of TTAASAG are to advise the respective governments and standard setters on ways to reduce business costs and improve efficiency while still maintaining high-quality accounting and auditing standards in both countries. TTAASAG seeks to achieve this 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 TTAASAG is to enhance the influence of the two countries in the development of international accounting, audit and assurance standards.

TTAASAG has been involved in a number of initiatives that have benefited both Australia and New Zealand. These include:

  • promoting trans-Tasman cross-appointment opportunities on both audit and financial reporting standard-setting bodies;
  • contributing to further alignment of Australian and New Zealand financial reporting frameworks;
  • contributing to the development of international financial reporting standards;
  • organising the inaugural International Financial Reporting Standards Regional Policy Forum in 2005 and contributing to subsequent policy forums;
  • contributing to the review of auditor regulation in both countries; and
  • contributing to the work to identify ways of facilitating mutual recognition of auditors between New Zealand and Australia.

Terms of Reference

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

  • Standard setting – advice primarily to oversight and standard-setting bodies on achieving greater coordination and information exchange between the two countries, including how to progress the alignment of Australian and New Zealand financial reporting and assurance standards in light of the adoption of international accounting and auditing 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 accounting and assurance 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 that 1) 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 International Accounting Standards Board.

TTAASAG includes representatives from Australia's Financial Reporting Council, Australian Accounting Standards Board, and Audit and Assurance Standards Board, and New Zealand's Accounting Standards Review Board, Financial Reporting Standards Board, and Professional Standards Board, 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.

TTAASAG met on three occasions in 2010. These meetings were chaired by Kevin Simpkins, the chair of New Zealand's Accounting Standards Review Board.

Information on TTAASAG's work has also been placed on its website at www.treasury.gov.au/ttaasag.

4. Major Activities and Achievements in 2010

4.1 Trans-tasman Activities in 2010

  • Continuing to monitor and provide guidance on regulation and reforms in Australia and New Zealand to enable the Single Economic Market outcomes agreed upon by the two governments to be achieved within proposed timeframes

In 2009, the governments of Australia and New Zealand decided upon an outcomes framework that aimed to further align both countries' frameworks. These outcomes were in line with the Closer Economic Relations and Single Economic Market objectives. The outcomes framework applies reciprocally and once achieved will further align frameworks in Australia and New Zealand with the aim of benefiting both countries and increasing harmonisation. Five outcomes relate to financial reporting policy. TTAASAG compressed these five initial outcomes into four because of the similar characteristics of two outcomes. Progress towards the achievement of these four outcomes in 2010 is outlined below.

Objective: for-profit entities are able to use a single set of accounting standards and prepare only one set of financial statements, and trans-Tasman companies have to prepare only one set of financial statements to one set of standards

The Ministry of Economic Development's (MED) current review of the financial reporting framework in New Zealand is proposing to further align the trans-Tasman financial reporting frameworks. The financial reporting frameworks will not be identical but will be substantially more consistent than in the past.

Furthermore the Australian Accounting Standards Board (AASB) and Financial Reporting Standards Board (FRSB) have pursued a convergence project relating to publicly accountable for-profit entities. This project is expected to be completed shortly and will result in substantial alignment between the reporting requirements for these entities.

In June 2010 the AASB introduced a Reduced Disclosure Regime for entities which are not publicly accountable. The Reduced Disclosure Requirements involve full recognition and measurements requirements of International Financial Reporting Standards (IFRSs) as adopted in Australia and substantially reduced disclosures based on the principles applied by the International Accounting Standards Board in formulating its IFRS for small and medium enterprises. It provides a basis for relieving the disclosure burden on many entities preparing general purpose financial statements.

The Accounting Standards Review Board (ASRB) has reconsidered the approach to differential reporting for profit-oriented entities in New Zealand and is likely to propose adoption of a Reduced Disclosure Regime in New Zealand for entities which are not publicly accountable. It will publish its proposals for comment in the near future. The FRSB has, at the request of the ASRB, prepared an exposure draft of a Reduced Disclosure Regime based on the Australian regime for possible introduction in New Zealand.

Taken together the proposed reforms are expected to deliver efficiency gains and help reduce compliance costs for the affected reporting entities. Once the reforms have been completed it is expected that all for-profit entities operating in both countries will only need to prepare a single set of financial reports to satisfy both countries' reporting requirements.

Objective: not-for-profit entities are able to use a single set of accounting standards and prepare only one set of financial statements

Not-for-profit entities fall within the scope of MED's review of the financial reporting framework. Work is also being undertaken by the Australian Treasury which has the potential to further align the not-for-profit sectors of both countries. On the other hand the ASRB is currently considering implementation aspects of its proposal to adopt a multi-standards framework – under these arrangements not-for-profit entities may report under the same accounting standards as public sector entities. This would make this outcome more difficult to achieve. TTAASAG continues to be a focus point of discussion and liaison between Australian and New Zealand officials on developments in the reporting requirements for not-for-profit entities.

Objective: auditors registered in one country can operate in the other country

The Auditor Regulation and External Reporting Bill 2009 will establish a licensing regime for issuer auditors in New Zealand. Auditors will be subject to the independent oversight of the Financial Markets Authority. The Bill is an essential step prior to consideration of mutual recognition of auditors across the two countries. The Bill is expected to be enacted prior to 1 July 2011.

Objective: financial reporting standards bodies in Australia and New Zealand have functional equivalence

TTAASAG consists of members of the financial reporting bodies in Australia and New Zealand. MED's review of the financial reporting framework will reconstitute the ASRB as the External Reporting Board (XRB). The XRB will be responsible for financial reporting strategy and setting all financial reporting and auditing and assurance standards. It will undertake its standard-setting responsibilities through two subsidiary boards3 which will be functionally equivalent to the Australian Accounting Standards Board and the Auditing and Assurance Standards Board. This modification of the standard-setting arrangements in New Zealand is expected to occur on 1 July 2011 will achieve functional equivalence between the financial reporting standards bodies in Australia and New Zealand.

  • Discussing and providing further guidance on the proposed reform of the financial reporting framework and the introduction of auditor regulation and oversight in New Zealand

TTAASAG received updates at each of its meetings in 2010 and provided advice on a range of matters intended to assist further alignment of the financial reporting and audit regulation frameworks in line with the outcomes described above. Significant progress has been made on institutional arrangements and auditor regulation and oversight. Further progress is expected in 2011.

  • Continuing to pursue opportunities for collaboration between audit and assurance standard-setting bodies in Australia and New Zealand

There are four cross-appointments between Australian and New Zealand standards bodies. The chair of the FRC is a cross-appointed member of the ASRB, and vice versa. The chair of the AASB is a cross-appointed member of the FRSB, and vice versa.

TTAASAG has continued to support these cross-appointments and has in 2010 also considered the possible benefits of similar cross-appointments between the auditing standards setting bodies. At the June meeting of TTAASAG, the group agreed that cross-appointments would be desirable but should be implemented from 1 July 2011 to align with the date of establishment of the new New Zealand Auditing and Assurance Standards Board. TTAASAG has in the meantime continued to support initiatives by the Auditing and Assurance Standards Board and the Professional Standards Board to facilitate further collaboration and co-operation between the two boards.

  • Other activities

At the request of the Trans-Tasman Outcomes Implementation Group, TTAASAG reviewed the current SEM outcomes relating to financial reporting policy and proposed a revision of the outcome statements to better reflect the current environment and to extend the outcomes where appropriate, e.g. to cover functional equivalence of auditing and assurance standards bodies in addition to financial reporting standards bodies.

TTAASAG also commenced a review of its own Terms of Reference with the intention that it recommends an update to Ministers for possible adoption with effect from the date of the changes in institutional arrangements in New Zealand (expected to be 1 July 2011).

A new standing agenda item provides an opportunity for the policy agencies to update TTAASAG on future issues and work programmes. The purpose of this is to keep TTAASAG informed of future policy initiatives that are being considered so that it might seek to contribute in a timely manner to outcomes.

Since 2009 the professional bodies who are members of TTAASAG collaborate to produce consolidated updates on their activities. This procedure has been a helpful exercise to keep all the professional bodies and other TTAASAG bodies up-to-date on their individual activities and projects.

4.2 International Engagement in 2010

  • Continuing to work together, and with international agencies, to consider accounting and assurance issues that have arisen in the context of the global financial crisis

TTAASAG continued to remain alert to and, as appropriate, contribute to the responses made to the crisis by international financial reporting standards bodies and to consider how these responses affect Australian and New Zealand entities. TTAASAG members provided comments on relevant exposure drafts released by the International Accounting Standards Board on how the amendments to standards and policies would suit the economic conditions in Australia and New Zealand.

  • Promoting and facilitating greater engagement with the Asia-Pacific region by considering ways to expand and continue the IFRS Regional Policy Forum, including through TTAASAG members attending and contributing to the IFRS Regional Policy Forum held in Singapore in May 2010.

The Regional Policy Forum was held in Singapore on 12 and 13 May 2010. The theme for the forum was “Beyond the Global Crisis – Making Financial Reporting More relevant to Stakeholders' Needs”. The forum provided participants with the opportunity to share their insights and thoughts on the global convergence and adoption of IFRS, policy considerations related to the development of IFRS, lessons learnt from the global financial crisis and its impact on the future of financial reporting.4 A number of TTAASAG members from both Australia and New Zealand attended this meeting and a number were presenters. Topics and developments from the policy forum were discussed at TTAASAG meetings. TTAASAG also contributed to the development of the programme for the forum and to the arrangements for the 2011 forum principally through the former Financial Reporting Council (FRC) Chairman (and IFRS Foundation Trustee) Jeffrey Lucy and Australian Treasury.

  • Monitoring the development of International Public Sector Accounting Standards

The New Zealand ASRB has been considering the appropriate role of IPSAS in New Zealand. A number of reports have been prepared and considered and meetings held with representatives of the International Federation of Accountants and the International Public Sector Accounting Standards Board. The Chairman of the International Public Sector Accounting Standards Board also attended the joint meeting of the AASB and FRSB in October 2010.

In December 2010 the FRC discussed whether accounting standards made by the International Public Sector Accounting Standards Board should have a role in public sector accounting in Australia. Two information papers, one prepared by the Department of Finance and Deregulation, the other by the AASB, were used to facilitate the discussion. The meeting agreed that the Department of Finance and Deregulation and the AASB should monitor developments over the next year and that it would be desirable to have a state representative involved in the work.

  • Continuing to enhance the profile and influence of Australia and New Zealand in the international arena through the work of the TTAASAG's Nominations Subcommittee

TTAASAG supported the nomination of Ms Merran Kelsall, Chair of the Australian Auditing and Assurance Standards Board to the International Auditing and Assurance Standards Board and was delighted that Ms Kelsall was appointed with effect from 1 January 2011. This appointment fills a significant gap in the representation of Australia and New Zealand on major international bodies.

In 2010 TTAASAG invited one outside member5 from an international accounting body to make a presentation at a meeting. In addition TTAASAG members involved in international accounting and auditing bodies updated TTAASAG on the activities of those bodies. These presentations provided TTAASAG members with updates on developments in policy, standard setting and auditing and accounting standards. They allowed TTAASAG members to further understand the functions and responsibilities of the various organisations represented and the importance of their work for accounting and auditing standards development in Australia and New Zealand.


1. Note that as two of the statements are closely related they are considered together in this report.

2. Both New Zealand and Australia are members of the AOSSG. The Chairman of the Australian Accounting Standards Board, Mr Kevin Stevenson, is the deputy Chair of the AOSSG and will assume the Chair in November 2011.

3. The New Zealand Accounting Standards Board and the New Zealand Auditing and Assurance Standards Board.

4. Singapore Hosts the 2010 International Financial Reporting Standards Regional Policy Forum on 13 May 2010, Ministry of Finance Singapore website.

5. Mr Charles Macek, Vice Chairman of the International Financial Reporting Standards Advisory Council.