Trans-Tasman Accounting Standard Advisory Group – Minutes

9.00pm-12.30pm, Wednesday 2 September 2009

Ground Floor, MED Building, 33 Bowen Street, Wellington

Present

Geoff Miller – Chair - (Treasury - Aust)
Jeffrey Lucy - (Financial Reporting Council (FRC) - Aust)
Kevin Simpkins - (Accounting Standards Review Board (ASRB) - NZ)
Joanna Perry - (Financial Reporting Standards Board (FRSB) - NZ)
Merran Kelsall - (Audit and Assurance Standards Board (AUASB) - Aust)
Neil Cherry - (Professional Standards Board (PSB) - NZ)
Terry McLaughlin - (NZ Institute of Chartered Accountants (NZICA) - NZ)
Bruce Bennett - (NZ Institute of Chartered Accountants (NZICA) - NZ)
Lee White - (Institute of Chartered Accountants Australia (ICAA) - Aust)
Ken Warren (agenda item 4) - Guest presenter
Andrew Jackson - (Ministry of Economic Development (MED) - NZ)
David King - (Ministry of Economic Development (MED) - NZ)
Melanie Porter - (Ministry of Economic Development (MED) - NZ)
Bob Stephens - (Ministry of Economic Development (MED) - NZ)
Sheryl Chase - (Ministry of Economic Development (MED) - NZ)
Bede Fraser - (Treasury - Aust)
Ronita Ram - (Treasury - Aust)

Speakerphone

Kevin Stevenson - (Australian Accounting Standards Board (AASB) - Aust)
Paul Madden (agenda item 7) - Guest presenter
Vicki Stylianou - (National Institute of Accountants (NIA) - Aust)
Tom Ravlic - (National Institute of Accountants (NIA) - Aust)
Mark Shying - (Certified Practising Accountants (CPA) - Aust)

Apologies

Jim Murphy - (Treasury - Aust)
Genevieve Watson - (Treasury - Aust)

AGENDA ITEMS

1. Welcome

The TTAASAG Chair, Mr Geoff Miller, welcomed TTAASAG members to the third meeting of the Group in 2009.

2. Minutes from the meeting of 19 May 2009

The minutes of the previous meeting, held in Melbourne on 19 May 2009, were confirmed without alteration.

3. Action items from previous meetings

The Group noted the action items arising from the previous meeting, and the relevant agenda item under which these action items would be addressed.

Mr Miller noted that the meeting of the nominations sub-committee was postponed, as there were no vacancies to discuss. The Group reaffirmed the importance of ensuring that Australia and New Zealand are appropriately represented on international bodies, particularly the International Accounting Standards Board (IASB).

4. Presentation by Ken Warren on the International Public Sector Accounting Standards Board (IPSASB)

Mr Ken Warren delivered a presentation to the Group on the work of IPSASB. The Group noted the progress with the adoption of the IPSASs, the current projects being progressed by IPSASB, including convergence with IFRS, the conceptual framework project and public sector specific projects. Mr Warren also updated the Group on the establishment of a joint taskforce between the International Monetary Fund and IPSASB in response to issues that have arisen out of the global financial crisis. The Group also noted the future priorities of IPSASB, including further development of the conceptual framework, and the challenges facing IPSASB, including funding challenges, governance arrangements and implementing effective communication techniques to further promote the adoption of IPSASs.

The ASRB informed the Group that, in the context of its tentative proposal that IPSASs be adopted for (non-profit) public sector entities, it has reservations about aspects of the governance and funding arrangements associated with the IPSASB, and intended to formally write to IFAC in relation to these issues.

The Group thanked Mr Warren for providing an update on the work of IPSASB.

The Group agreed that it would be useful to discuss TTAASAG's action (if any) in relation to these issues.

Action item

The Group will discuss its possible action/s in response to the matters raised about the operation of IPSASB at the next meeting of TTAASAG.

5. Outcomes agreement between Australia and New Zealand

Mr Miller updated the Group on the Single Economic Market (SEM) outcomes framework recently agreed to by the Prime Ministers of Australia and New Zealand. Mr Miller noted that, on 20 August 2009, the Australian and New Zealand Prime Ministers signed a joint statement of intent which agreed on a framework of seven key principles and possible regulatory outcomes for developing cross border economic initiatives. The Group noted that a range of shared outcomes have already been identified across a wide range of business law areas, including in relation to financial reporting and audit matters. Potential outcomes relating to financial reporting and audit matters include:

  • ensuring that for-profit and not-for-profit entities respectively can use a single set of accounting standards to prepare only one set of financial statements;
  • opening up the trans-Tasman market for audit services by allowing auditors registered in one country to operate as though they are registered in the other country. The Group noted that work on this issue is already underway;
  • ensuring that the financial reporting standard bodies in Australia and New Zealand have functional equivalence; and
  • enabling trans-Tasman companies to prepare only one set of financial statements to one set of standards.

Mr Miller also noted that a joint trans-Tasman outcomes implementation group (TTOIG) has been established to progress this work. TTOIG is jointly chaired by Australian Treasury and NZ MED and comprises of senior officials from relevant agencies. The inaugural meeting of TTOIG took place following the TTAASAG meeting.

The Group agreed that it would be useful to discuss further details relating to the financial reporting and auditing outcomes at the next TTAASAG meeting, particularly who will be responsible for progressing each of the regulatory outcomes and the process for delivering the outcomes within the required timeframes.

The Group also agreed that this issue should become a standing item on TTAASAG's agenda.

Action item

The Group will discuss the financial reporting and auditing outcomes in greater detail at the next meeting. This issue will also become a standing item for future TTAASAG meetings.

6. Presentation by Paul Madden on Standard Business Reporting

Mr Paul Madden of Australian Treasury updated the Group on developments with respect to the Standard Business Reporting (SBR) project, which was discussed at the previous TTAASAG meeting. Mr Madden updated the Group on progress with concerns raised with the IFRS Taxonomy, including concerns relating to disclaimers and the absence of quality assurance processes and accountability, change management and consultation with industry to ensure ongoing compatibility and useability.

Mr Madden also updated the Group on the signing of the Memorandum of Understanding in August 2009 to align the XBRL taxonomies being developed in both Australia and New Zealand.

Mr Madden agreed to keep the Group updated on these issues.

The Group thanked Mr Madden for providing an update on the SBR project.

7. Policy developments in Australia and New Zealand, including:

7.1 differential reporting

Mr Jeffrey Lucy provided an overview of the key issues discussed at the recent FRC workshop on differential reporting in Australia, including the appropriateness of the 'reporting entity' concept in Australia and whether the IASB's recently issued standard for SMEs should be adopted in Australia.

Mr Lucy outlined the outcomes of the FRC workshop, including the development of a public consultation document to be prepared jointly by Australian Treasury, the FRC and the AASB. The Group noted that this issue will be considered by the FRC at its next meeting on 21 September 2009. The Group also agreed that Australian Treasury should consult with the ASRB to ensure that both discussion documents are as consistent as possible, and that both discussion papers make reference to the outcomes agreement agreed to by Prime Ministers (refer to agenda item 5).

The Group noted that developments in New Zealand as part of its financial reporting framework review, would more closely align the Australian and New Zealand frameworks in relation to for‑profit entities. Furthermore the ASRB agreed to reconsider its tentative support for the adoption of the IFRS for SMEs and the possibility of giving greater prominence to the possibility of a differential IFRS option which could be developed jointly between Australia and New Zealand. However, in the case of private not-for-profit entities, there is a risk that Australia and New Zealand may be adopting divergent approaches. The Group agreed to work cooperatively to facilitate consistent approaches in line with the statement of intent issued by both Prime Ministers.

Action item

The Group will discuss differential reporting at the next TTAASAG meeting. The Group will work cooperatively to facilitate consistent approaches in line with the statement of intent issued by both Prime Ministers.

7.2 Update on response to the global financial crisis

Mr Andrew Jackson updated the Group on progress with New Zealand's Financial Reporting Framework Review.

MED has prepared a draft discussion document which is expected to be released for public consultation shortly, subject to the Minister's approval. The purpose of the document is to discuss the issue of which entities should have financial reporting obligations. The Group noted the key recommendations contained in the report, including in relation to financial reporting infrastructure, the financial reporting principles and indicators, the application of the indicators to for-profit entities, public sector entities and private not-for-profit entities.

The Group recommended that the document be amended to remove the reference to the potential for legally enforceable audit standards to reduce audit quality.

Australian Treasury agreed to discuss with MED the rationale for requiring large proprietary companies to report.

Action item

MED will consider comments made in the draft report regarding the legal enforceability of auditing standards.

Australian Treasury agreed to discuss with MED the rationale for requiring large proprietary companies to report.

MED will provide an update on New Zealand's financial reporting framework review at the next meeting of TTAASAG.

7.3 discussion on IFRS branding

Mr Bede Fraser provided an overview of the key issues relating to IFRS branding, including:

  • the perception that there is a lack of international awareness of Australia and New Zealand's adoption of IFRS. The Group agreed that no further action was required in relation to issue, however, international perceptions of Australia and New Zealand's compliance with IFRS should be monitored on a periodic basis;
  • the potential for delay between promulgation of new standards or amendments by the IASB and the adoption of those standards or amendments domestically. The Group agreed that the delays are minimal with little impact on business and the scope for reducing them is small although it was noted that the ASRB has written to the New Zealand Government seeking an amendment to allow reporting entities to early adopt standards from the date of gazettal (currently, entities in New Zealand need to wait 28 days); and
  • the costs and potential for savings associated with the review and implementation of IFRS by local standard setters. The Group agreed that the scope for reducing costs through legislative changes to the review process is small. However, to ensure that IFRS can be adopted in the most efficient way, the IASB should continue to be encouraged to draft IFRS effective date requirements in a way that ensures they are workable within the Australasian legislative environment, and only make amendments to IFRS following proper processes rather than through ad hoc changes. New Zealand is continuing to explore the cost effectiveness of mandating a single set of standards across all sectors and, in that context, the possible benefits of direct adoption of IFRS for profit-oriented entities.

8. Update on New Zealand's audit regulation review and auditor liability

Mr Andrew Jackson updated the Group on progress with New Zealand's review of its audit regulation framework and noted that the draft paper on the audit regulation review was recently provided to Government. The Group noted that the Government has requested additional briefing on the benefits of regulation in this area. MED agreed to update the Group on progress with the review at the next TTAASAG meeting.

Action item

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

9. Professional accounting bodies

9.1 Joint report on activities

Due to time constraints, this issue was not discussed.

10. Auditing standard setters

10.1 Report from the PSB

Due to time constraints, this issue was not discussed.

10.2 Report from the AUASB

Due to time constraints, this issue was not discussed.

11. Auditing standard setters

11.1 Report from the FRSB and AASB

Due to time constraints, this issue was not discussed.

12. Other business

Due to time constraints, this issue was not discussed.

13. Next meeting

The Group noted that the next meeting will take place on 2 December 2009, at the AASB/ AUASB boardroom, Level 7, 600 Bourke Street, Melbourne. Due to the Group's full agenda, the Group agreed to extend the next meeting (which was initially scheduled for 1.00 pm – 4.30 pm) to a full day meeting.