Trans-Tasman Accounting and Auditing Standards Advisory Group (TTAASAG)

Minutes of Meeting

9.00am-3.00pm, Wednesday 2 December 2009

Level 7, 600 Bourke Street, Melbourne

Participants:

Present
Geoff Miller – Chair (Treasury - Aust)
Jeffrey Lucy (Financial Reporting Council (FRC) - Aust)
Kevin Simpkins (Accounting Standards Review Board (ASRB) - NZ)
Kevin Stevenson (Australian Accounting Standards Board (AASB) - Aust)
Joanna Perry (Financial Reporting Standards Board (FRSB) - NZ)
Merran Kelsall (Auditing 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)
Mark Shying (Certified Practising Accountants (CPA) - Aust)
David Boymal (National Institute of Accountants (NIA) - Aust)
David King (Ministry of Economic Development (MED) - NZ)
Bob Stephens (Ministry of Economic Development (MED) - NZ)
Bede Fraser (Treasury - Aust)
Genevieve Watson (Treasury - Aust)
Ronita Ram (Treasury - Aust)
Speakerphone
Geoff Connor (Ministry of Economic Development (MED) - NZ)
Apologies
Jim Murphy (Treasury - Aust)

Agenda Items

1. Welcome

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

2. Minutes from the meeting of 2 September 2009

The minutes of the previous meeting, held in Wellington on 2 September 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.

4. Outcomes Agreement between Australia and New Zealand

4.1. update on previous TTOIG meeting

Mr Miller updated the Group on the previous meeting of the Trans-Tasman Outcomes Implementation Group (TTOIG) and the Single Economic Market outcomes framework agreed to by the Prime Ministers of Australia and New Zealand. The Group noted that the outcomes are being progressed as intended, and that a progress report will be provided to the Australian and New Zealand Prime Ministers, who are scheduled to meet early next year.

4.2. progress with accounting and auditing outcomes, including joint work by the AASB and FRSB

4.2.1. 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;

Mr Kevin Stevenson updated the Group on the recent joint meeting between the AASB and the FRSB, which considered the key differences between the Australian and New Zealand accounting standards. The boards decided to release a joint exposure draft containing proposals to eliminate differences in IFRS (or to ensure that any supplements to IFRS would be the same in both jurisdictions). The exposure draft is expected to be released in May-April 2010. The Group noted that this work will bring the accounting requirements in Australia and New Zealand closer together.

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

Mr Stevenson noted that the AASB and the FRSB are working through some of the differences in the accounting standards in respect of private sector not-for-profit entities. The Group noted the current projects underway in relation to not-for-profit entities, including the AASB’s project examining disclosures for private sector not-for-profit entities, and the GAAP/GFS harmonisation project for public sector not-for-profit entities.

The Group noted that the current wording of the outcome should be clarified to determine whether it relates only to private sector not-for-profits, or also includes public sector not-for-profit entities. The Group also noted the potential for divergence in respect of the possible future adoption of IPSASB standards.

The Group noted that the progress report to TTOIG would indicate that although progress on this outcome was slowing, there was little need for concern as alignment in this sector, while important, was a lower priority focus.

Action item

MED and Treasury will review whether the wording of the outcome should be clarified at the next meeting of TTOIG.

4.2.3. auditors registered in one country can operate in the other country; and

Mr David King updated the Group on progress with New Zealand’s review of its auditor regulation and oversight system. The Group noted the decision by the New Zealand Government to implement a licensing and oversight regime, which will satisfy the requirements of the Trans-Tasman Mutual Recognition Act 1997. The Group noted that the implementation issues will need to be discussed with regulators in both countries.

Mr King also noted that MED has written to the European Union in relation to whether the proposed reforms are consistent with the EU 8th directive.

Action item

MED and Treasury will further engage with the corporate regulators in both countries on future implementation issues.

4.2.4. financial reporting standards bodies in Australia and New Zealand have functional equivalence.

Mr Kevin Simpkins updated the Group on the proposals set out in the ASRB and MED discussion papers to reconstitute the ASRB into the proposed XRB. Under this model, the XRB would have responsibility for the oversight and governance of the two standard setting bodies. The Group noted that this proposal would establish a financial reporting infrastructure in New Zealand that would be functionally equivalent to that in Australia. The Group noted that these proposals are currently subject to public consultation, which will conclude on 29 January 2010.

5. Presentation by Ms Kate Spargo on APESB

    Ms Kate Spargo delivered a presentation to the Group on the work of the Accounting Professional and Ethical Standards Board (APESB). Ms Spargo informed the Group of the APESB’s vision and role, the history and structure of the board, the standards development process, the structure of APESB pronouncements, and details of the board’s pronouncements to date.

    The Group also noted the board’s upcoming technical work plan and the strategic priorities for 2010, including collaboration between quality review and disciplinary boards of the professional accounting bodies, the effectiveness in making contributions to the international standards development process, and awareness, understanding and acceptance of the APESB and its pronouncements.

    The Group thanked Ms Spargo for her informative presentation on APESB.

6. Differential reporting

    Mr Kevin Stevenson provided an update on the recent developments regarding the AASB’s work on differential reporting. Mr Stevenson noted that the AASB would, following the TTAASAG meeting, release a consultation paper which proposes the introduction of a second reporting tier containing reduced disclosure requirements for entities for both the private and public sectors. Under this option, the full suite of measurement and recognition criteria in the IFRS standards would be maintained. Alternatively, the paper would identify a separate option of adopting the IFRS for SMEs standard as issued by the IASB in mid-2009.

    Mr Stevenson noted that the AASB supported the former option, as the cost of adopting the IFRS for SMEs standard would outweigh the benefits (particularly as entities would be required to familiarise themselves with another set of accounting requirements).

    The Group noted that the changes are expected to be in place by 30 June 2010, to commence from 1 July 2010, with early adoption available for the year ending 30 June 2010.

    The Group noted that proposed reforms to Australia’s corporate reporting framework, being progressed by Australian Treasury, would reduce the impact of the changes for certain companies facing greater reporting requirements under the changes proposed by the AASB.

    The Group noted that New Zealand would be actively involved in the differential reporting project, particularly as this issue is not unique to Australia and similar issues are being considered in New Zealand.

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

7.1. Trans-Tasman convergence on the following financial reporting issues

The Group discussed, at a general level, the requirement to prepare consolidated financial statements of domestic groups, the disclosure of auditor remuneration, the disclosure of imputation tax credits and the disclosure of equity holdings and loans for key management personnel (KMP). The Group agreed that MED and Australian Treasury would consider the policy issues in greater detail and prepare a paper for the next meeting of TTAASAG on these issues, with the exception of the disclosure of imputation tax credits as this issue fell within the scope of Australia’s Future Tax System Review.

Action item

MED and Australian Treasury will consider in greater detail the issues relating to consolidated financial statements of domestic groups, disclosure of auditor remuneration and disclosure of equity holdings and loans for KMP, and prepare a paper for the next meeting of TTAASAG.

7.2. Update on Australia’s proposed corporate reporting reforms

Mr Bede Fraser updated the Group on the proposed reforms to improve Australia’s corporate reporting framework and reduce red-tape, including reforms to introduce a three tiered differential reporting framework for companies limited by guarantee, to streamline parent-entity reporting, to provide greater flexibility for companies to pay dividends by replacing the profits test with a more flexible solvency-type test, and to allow companies to more easily change their year-end date.

The Group noted that the reforms would be released for public consultation following the TTAASAG meeting, and that the consultation period would conclude in early February. The Group also noted that the reforms are expected to be introduced in the 2010 Autumn sittings, and expected to be passed in the 2010 Winter sittings prior to 30 June 2010. This timing would enable the reforms to take effect in the current financial year ending 30 June 2010.

Action item

Australian Treasury will provide an update on the corporate reporting reforms at the next meeting of TTAASAG.

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

Mr David King updated the Group on progress with New Zealand’s Financial Reporting Framework Review. Since the previous TTAASAG meeting, MED’s discussion document on a statutory framework for financial reporting in New Zealand and the ASRB’s companion discussion document on the ‘Proposed Application of Accounting and Assurance Standards under the Proposed New Statutory Framework for Financial Reporting’ were released for public comment. The consultation period will conclude on 29 January 2010, and MED intends to seek substantive decisions from the New Zealand Government in May-June 2010. MED will keep the Group updated on developments.

Action item

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

9. Update on New Zealand’s audit regulation review and auditor liability

    Mr King updated the Group on progress with New Zealand’s review of its audit regulation framework. Since the previous TTAASAG meeting, the New Zealand Government agreed to implement an auditor regulation oversight scheme for statutory audits in New Zealand. The Group noted the two main proposals which have been agreed to, which require accredited professional bodies to introduce auditor-specific licensing and to introduce independent oversight of auditors. The Group noted that the ASRB would monitor and report on the adequacy and effectiveness of the professional bodies’ regulatory systems and processes and instruct it to make changes to remedy any deficiencies.

    The Bill is expected to be introduced by mid-2010, with a view to enactment by mid-2011 and full implementation by mid 2012.

    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.

10. Professional accounting bodies

10.1. Joint report on activities

The Group noted the joint report on the activities of the professional accounting bodies. Mr Bruce Bennett informed the Group that NZICA has renewed a number of international reciprocity agreements. Mr David Boymal updated the Group on the establishment of the NIA’s faculty of external reporting regulation. Mr Lee White updated the Group on the establishment of the Australian Public Policy Committee.

11. Auditing standard setters

11.1. Report from the PSB

The Group noted the recent activities of the PSB.

11.2. Report from the AUASB

The Group noted the recent activities of the AUASB.

The Group also noted measures agreed to by the AUASB and PSB to facilitate collaboration and co-operation between the two boards.

12. Recent workshop on IPSASB

Mr Lee White updated the Group on the ICAA’s recent workshop on public sector accounting. The workshop was chaired by Mr White and the key note speaker was Mr Mike Hathorn, the Chair of the International Public Sector Accounting Standards Board (IPSASB), who spoke about IPSASB’s task to improve the quality and transparency of financial reporting across the public sector.

It was noted at the workshop that convergence to IFRS is almost complete, the conceptual framework project is underway and although it is based on the IASB framework, it will incorporate consideration of specific public sector issues. The Group noted views expressed at the workshop that in order to become a body as respected as the IASB, the IPSASB will need a better governance model taking into consideration the comments of various jurisdictions. It was also noted that the Board would need to formalise its ongoing funding base.

Mr Kevin Simpkins informed the Group that New Zealand had actively engaged with the chief executive of the IFAC board regarding IPSASB’s funding and governance arrangements.

The Group also noted that the incoming Chair of IPSASB is likely to visit Wellington in February and August next year, and that it would be useful for TTAASAG to invite him to a meeting of the Group, subject to his availability.

Action item

MED will explore the possibility of inviting the incoming Chair of IPSASB to a TTAASAG meeting in 2010, subject to his availability.

13. Accounting standard setters

13.1. Report from the FRSB and AASB

The Group noted the recent activities of the FRSB and the AASB.

14. Shanghai Expo

Mr Miller updated the Group on the 2010 Shanghai Expo and Australia’s contribution to the event. Mr Miller outlined Australian Treasury’s proposals relating to the Expo, and noted that, if the proposals are approved by the Department of Foreign Affairs and Trade, TTAASAG members may be invited to contribute.

Mr King informed the Group of MED’s Capital Markets Taskforce and agreed to provide an update on this issue at the next meeting of TTAASAG.

Action item

MED will provide an update on the Capital Markets Taskforce at the next TTAASAG meeting.

15. Other business

The Group discussed potential nominees for IFAC’s Robert Sempier Award. The Group agreed that the professional accounting bodies would consider potential nominees in greater detail and raise this issue at the next TTAASAG meeting.

The Group also noted that applications are being sought for the Chair of the IASB, and that the Group’s nominations sub-committee would meet to discuss potential nominees.

Action items

The professional accounting bodies will consider potential nominees for the IFAC’s Sempier Award and report back to the next TTAASAG meeting.

The nominations sub-committee will meet to discuss potential nominees for the Chair of the IASB.

16. Handover of Chair and Secretariat to New Zealand

Mr Miller noted that the Chair and Secretariat role for TTAASAG would rotate to New Zealand for the next two years. Mr Miller thanked TTAASAG members for their contribution to the Group and reflected on the Group’s achievements over the last two years. Mr Miller also congratulated Mr Simpkins on his appointment as Chair of TTAASAG from 2010, and wished him success in this role.

Mr Simpkins outlined his vision for TTAASAG for the next two years, and thanked Mr Miller and Australian Treasury for providing the Chair and Secretariat function over the previous two years.

The Group noted that MED would circulate potential 2010 meeting dates shortly.