Trans-Tasman Accounting Standard Advisory Group – Minutes

2.00pm-4.30pm, Wednesday 10th September 2008

ICAA Building, Level 1, 33 Erskine Street, Sydney

Present

Geoff Miller – Chair - (Treasury - Aust)
Jeffrey Lucy - (Financial Reporting Council (FRC) - Aust)
Angus Thomson(on behalf of David Boymal) - (Australian Accounting Standards Board (AASB) - Aust)
Bruce Bennett (on behalf of Terry McLaughlin) - (NZ Institute of Chartered Accountants (NZICA) - NZ)
Craig Fisher - (Professional Standards Board (PSB) - NZ)
Andrew Conway (on behalf of Roger Cotton) - (National Institute of Accountants (NIA) - Aust)
Bill Palmer - (Institute of Chartered Accountants Australia (ICAA) - Aust)
Scott McHardy - (NZ High Commission - NZ)
Andrew Jackson - (Ministry of Economic Development (MED) - NZ)
Ashley Tomlinson - (Ministry of Economic Development (MED) - NZ)
Bede Fraser - (Treasury - Aust)
Ronita Ram - (Treasury - Aust)

Speakerphone:

Keith Rushbrook (on behalf of Warwick Hunt) - (Accounting Standards Review Board (ASRB) - NZ)
Merran Kelsall - (Audit and Assurance Standards Board (AUASB) - Aust)
Jim Murphy - (Treasury - Aust)
Suzanne Howarth - (Financial Reporting Council Secretariat - Aust)
Mark Shying - (Certified Practising Accountants (CPA) - Aust)

Apologies

Joanna Perry - (Financial Reporting Standards Board (FRSB) - NZ)
Geoff Connor - (Ministry of Economic Development (MED) - NZ)

AGENDA ITEMS

1. Welcome

The TTAASAG Chair, Mr Geoff Miller, welcomed TTAASAG members to the third meeting of the Group in 2008.

2. Minutes from the meeting of 27 June 2008

The minutes of the previous meeting, held in Melbourne on 27 June 2008, were confirmed without alteration.

3. Action items from previous meetings

In relation to action item 1, the Group noted that Ms Judith Downes was unavailable to deliver a presentation at either the current meeting or the next meeting in December.  Treasury agreed to identify another board member to deliver a presentation to the Group at the next meeting in December.

In relation to action 2, the Group agreed to defer discussion on the role of cross appointees to the next meeting in December.

All other action items were completed.  The Group noted the relevant agenda item under which these action items would be addressed.

Action items

Australian Treasury will identify a board member to deliver a presentation to the Group at the next meeting in December.  [Ms Downes has since indicated her availability to attend the December meeting].

The Group will discuss the role of cross appointees at the next meeting in December.

4. Comparison of past and future legislative reforms

The Group noted a paper summarising the key legislative provisions in Australia and New Zealand.  The purpose of the paper was to identify where differences existed in the legislative frameworks and whether there were any areas that could be examined to further align the frameworks.

The Group noted that the paper was a useful reference and discussed some of the key similarities and differences in the legislative frameworks, and identified some initial priority areas where co-ordination could occur, including auditor regulation, auditor liability, parent-entity financial reports, the requirements relating to the payment of dividends and IFRS branding.  The Group agreed that a prioritised list of issues should be prepared for discussion at the next meeting.

Action item

Australian Treasury and MED will prepare a prioritised list of issues where co-ordination could occur with a view to aligning the legislative requirements in Australia and New Zealand.

5. Update on New Zealand’s audit regulation review

MED updated the Group on progress with New Zealand’s review of its audit regulation framework.  MED has undertaken targeted consultation with key stakeholders on the position paper previously distributed to members.  MED provided an overview of the final proposals and how these vary from the earlier position paper, including in relation to the scope of oversight, the ability of the oversight body to make directions to professional accounting bodies, the registration of audit firms and the oversight body’s degree of involvement in the practice review process.  MED agreed to prepare a paper outlining its proposals for the next meeting of the Group.

Several Australian members emphasised the need for the final audit regulation model to be consistent with international best practice.  In this regard, it was noted that the European Union’s Eighth Directive mutual recognition framework could provide some useful guidance.  Australian Treasury agreed to provide MED with a copy of the EU Eighth Directive questionnaire, provided there are no confidentiality constraints with distributing the questionnaire.

MED also updated the Group on its work in relation to auditor liability.  The Group noted that MED intends to release a discussion document on this issue at the beginning of 2009.

Action item

Australian Treasury will provide MED with a copy of the EU Eighth Directive questionnaire, provided there are no confidentiality constraints.

MED will prepare a paper outlining its proposals for auditor regulation for discussion at the next meeting of the Group.

MED will provide an update on New Zealand’s review of its audit regulation framework at the next meeting of TTAASAG.

6. Update on New Zealand’s financial reporting framework review

MED updated the Group on progress with New Zealand’s Financial Reporting Framework Review.  As part of this review, MED has established a steering committee to consider proposed reforms and to inform development of a public consultation paper, which it intends to release for comment in 2009.  The steering committee comprises of representatives from MED, FRSB, ASRB and the Australian Treasury.

The steering committee has met a number of times since the last TTAASAG meeting.  To date, the steering committee has considered the rationales for requiring entities to report against a wide range of legal forms.  Following a full meeting of the steering committee to be held on 9 October 2008, MED will prepare a paper outlining the committee’s initial conclusions and reporting tiers for discussion at the next meeting in December.

The Group also acknowledged that this review could be mutually beneficial and help strengthen the financial reporting frameworks in both countries.

Action items

MED will prepare a paper outlining the steering committee’s initial conclusions and reporting tiers in relation to the financial reporting framework review for discussion at the next meeting in December.

7. Report from the professional accounting bodies

Each representative of the professional accounting bodies provided an update on current issues of relevance to the Group, as outlined below.

Mr Bill Palmer informed the Group of the ICAA’s work to strengthen regional accounting bodies.  Mr Palmer also noted that the ICAA has released a paper on the impact of the sub-prime crises.  The report provides insights into the factors involved in the United States sub-prime mortgage market collapse and examines its impact on the financial statements of banks and other financial institutions.

Mr Andrew Conway informed the Group of a publication prepared jointly by the three professional accounting bodies, which provides guidance to practitioners on audit independence issues.  Mr Conway also informed the Group of the NIA’s recent launch of a textbook comparing IFRS with Chinese Accounting Standards.  The NIA has also launched a program to deliver accountancy education throughout China, and has established 44 membership service centres throughout 25 provinces in China to deliver the program.

Mr Mark Shying updated the Group on the current IFAC meeting in Malaysia at which Ms Jocelyn Morton, IFAC board member, would be presenting a paper.  Mr Shying also noted that the 2010 World Congress of Accounting would take place in Malaysia.  Mr Shying also updated the Group on the CPAA’s 12th regional conference held in Kuala Lumpur, and the public sector forum held in Indonesia.

Mr Bruce Bennett updated the Group on a review undertaken by NZICA on conduct and disciplinary processes.  Mr Bennett noted that the review has been finalised and tabled, and that feedback indicates that the arrangements are working well.  The ICAA also noted that it was monitoring the review.

8. Report from the auditing standard setters

8.1 Report from the PSB

Mr Craig Fisher provided an update on the current work activities of the PSB.  The key issues noted by the Group included progress on the adoption of international standards on assurance engagements, and the PSB’s role in identifying issues for consideration in the revision of various international review engagement standards.  Mr Fisher also noted the PSB’s staggered approach to adopting International Standards on Auditing (ISAs) by 1 October 2009.

Mr Fisher also updated the Group on the PSB’s submission to the Reserve Bank concerning the audit reporting requirements for New Zealand registered banks, reporting by auditors to the trustees of an issuer of debt securities, guidance on the use of disclaimer of liability clauses and the PSB’s monitoring role in relation to New Zealand’s auditor regulation review.  The Group also noted progress on the PSB’s other domestic and international projects.

8.2 Report from the AUASB

Ms Merran Kelsall provided an update on the current work activities of the AUASB.  The key issues noted by the Group included the board’s transition to the Financial Management and Accountability Act 1997 on 1 July 2008 and the board’s progress with the Clarity Project.  The Group noted that the Clarity Project is scheduled for completion in October 2009, and the AUASB’s intends the revised ASAs to be operative for financial periods commencing on or after 1 January 2010.

Other issues currently being addressed by the AUASB include the proposed audit requirements on greenhouse and energy reporting, performance engagements, and a guidance statement relating to self‑managed superannuation funds.  The Group also noted progress on the AUASB’s other domestic and international projects.

Action items

The PSB and the AUASB will prepare commonly formatted reports on their recent activities for the next meeting of TTAASAG.

9. Report from the accounting standard setters

9.1 Report from the FRSB

Mr Bruce Bennett, on behalf of Ms Joanna Perry, provided an update on the current work activities of the FRSB.  The key issues noted by the Group included an overview of the joint meeting with the AASB held in Auckland in July, the FRSB’s involvement in the financial reporting framework review and proposals for a revised approach to developing standards for PBEs.  The Group also noted progress on the FRSB’s other domestic and international projects.

9.2 Report from the AASB

Mr Angus Thomson, on behalf of Professor David Boymal, provided an update on the current work activities of the AASB.  The key issues noted by the Group included an update on the exposure draft relating to superannuation plan reporting, and the AASB’s forthcoming new website facility to provide a hyperlinked listing of standards relevant to any particular beginning and ending reporting dates.  The Group also noted progress on the AASB’s other domestic and international projects.

Action items

The FRSB and the AASB will prepare commonly formatted reports on their recent activities for the next meeting of TTAASAG.

10. Nominations sub-committee

10.1 Report from the nominations sub-committee

Mr Geoff Miller provided an update on the previous meeting of the nominations sub-committee held on 15 August 2008.  At this meeting, the nominations sub-committee discussed a range of issues, including upcoming vacancies on Standards Advisory Committee, the International Accounting Standards Committee Foundation (IASCF) and two member positions on the International Accounting Standards Board (IASB) if changes to the composition of the IASB which are currently being proposed by the IASCF are implemented.  It was also noted that successful applicants to these positions may be viewed as possible candidates for the Chair of the IASB following the retirement of the current Chair, Sir David Tweedie.

The Group discussed upcoming vacancies on the Standards Advisory Council (SAC) and agreed to write letters in support of specified potential candidates.

Action item

The Group agreed to write letters in support of potential candidates for upcoming vacancies on SAC.

10.2 IASCF Constitution Review Proposals

The Group noted a letter, dated 2 September 2008, from the Australian Minister for Superannuation and Corporate Law to the Chairman of the IASCF providing Australia’s comments about the composition of the proposed monitoring body.  The letter was copied to the New Zealand Minister of Commerce and Minister of Finance.  MED noted that they were considering whether New Zealand would also provide comments to the IASCF on this issue.

11. Common policy issues in Australia and New Zealand

11.1 Asset valuation in thinly traded markets

Ms Ronita Ram provided an overview of the requirements relating to asset valuation in thinly traded markets, and the IASB’s response to the recommendations of the Financial Stability Forum on this issue, including the IASB’s establishment of an expert advisory panel.  The Group discussed the progress of the advisory panel’s work and noted that this issue would also be discussed at the September IASB meeting.

Action item

The Group agreed to further consider asset valuation in thinly traded markets at the December meeting in light of the IASB’s consideration of this issue at its September meeting.

11.2 Reporting by not-for profit entities

Due to time constraints, the Group agreed to defer discussion on this topic to the next meeting in December.

Action item

The Group will discuss reporting by not-for-profits at the next meeting of TTAASAG.

11.3 Differential auditing

Due to time constraints, the Group agreed to defer discussion on this topic to the next meeting in December.

Action item

The Group will discuss differential auditing at the next meeting of TTAASAG.

12. Update on emissions trading

Mr Jeffrey Lucy provided an update on his recent discussions with Sir David Tweedie, Chair of the IASB, in relation to the emissions trading scheme project.  The Group noted that Mr Lucy had sent a letter to Sir David Tweedie querying whether Australia could adopt the IASB’s exposure draft and claim IFRS compliance.  Mr Lucy noted that, if this arrangement was confirmed, it could potentially overcome the difficulties associated with an IFRS standard not being ready in time to coincide with the commencement of domestic emissions trading schemes.  However, members also noted that this approach has the potential to lead to a departure from IFRS, because the exposure draft may propose treatments that are not in compliance with existing IFRS.

13. Update on IFRS Regional Policy Forum

Australian Treasury updated the Group on recent developments regarding the IFRS regional policy forum.  In a letter dated 21 July 2008, China confirmed that it will host the next IFRS forum in March 2009.  China has also suggested that the host, timing and preliminary agenda for the following forum could be discussed as a separate agenda item at the March 2009 forum.  China indicated that it would send a draft agenda for the next forum to participants by the end of 2008 for comment.

Action item

Australian Treasury will update TTAASAG on any further developments regarding the IFRS regional policy forum.

14. Other business

Although Professor Boymal was not in attendance at the meeting (the final TTAASAG meeting before his appointment as Chair of the AASB expires in November 2008), Mr Miller formally thanked Professor Boymal on behalf of the Group for his contribution to the Group.  The Group also agreed to write a letter to Professor Boymal formally expressing thanks for his involvement in TTAASAG.

Action item

Australian Treasury will prepare a letter to Professor David Boymal thanking him for his contribution to TTAASAG.

15. Next meeting

The next meeting will be held on Wednesday 10 December 2008, 2.00 pm – 4.30 pm at the CPAA Building, Level 3, 111 Harrington Street, Sydney.