Minutes of Meeting
9.00am-3.00pm, Thursday 25 February 2010
Deloitte Boardroom. 10 Brandon Street, Wellington
|Kevin Simpkins – Chair||Accounting Standards Review Board (ASRB) - NZ|
|Merran Kelsall||Audit and Assurance Standards Board (AUASB) - Aust|
|Mark Shying (until 12:45)||Certified Practising Accountants (CPA) - Aust|
|Genevieve Watson||Financial Reporting Council (FRC) - Aust|
|Joanna Perry (from 12:30)||Financial Reporting Standards Board (FRSB) - NZ|
|Lee White||Institute of Chartered Accountants Australia (ICAA) - Aust|
|Bruce Bennett||NZ Institute of Chartered Accountants (NZICA) - NZ|
|David King||Ministry of Economic Development (MED) - NZ|
|Geoff Connor||Ministry of Economic Development (MED) - NZ|
|Sheryl Chase||Ministry of Economic Development (MED) - NZ|
|Bob Stephens||Ministry of Economic Development (MED) - NZ|
|Geoff Miller||Australian Treasury - Aust|
|Bede Fraser||Australian Treasury - Aust|
|Vicki Stylianou (until 2:05)||National Institute of Accountants (NIA) - Aust|
|Kevin Stevenson||Australian Accounting Standards Board (AASB) - Aust|
|Angus Thomson||Australian Accounting Standards Board (AASB) - Aust|
|Jeffrey Lucy||Financial Reporting Council (FRC) - Aust|
|Terry McLaughlin||NZ Institute of Chartered Accountants (NZICA) - NZ|
|Andrew Conway||National Institute of Accountants (NIA) - Aust|
|Neil Cherry||Professional Standards Board (PSB) – NZ|
1. Welcome from the New Chair
The new TTAASAG Chairperson, Mr Kevin Simpkins, welcomed members to the first meeting of the Group of 2010.
2. Minutes from the meeting of 2 December 2009
The minutes from the previous meeting, held in Melbourne on 2 December 2009, were confirmed without alteration.
3. Action items from previous meetings
The Group noted the list of action items from the previous meeting. The Group noted four items that were not covered in agenda items later in the meeting. The first of these was around the wording and meaning of the not-for-profit outcome agreement. There was discussion as to whether this outcome agreement included both private and public sector not- for-profit entities. Some members commented that they would like to see the outcome agreement include both private and public sector not for profit entities. Mr Bede Fraser commented that, as the outcome agreement currently stands, Australian Treasury reads it only to include private sector not-for-profit entities.
MED and Australian Treasury will, by the next meeting, clarify whether the not-for-profit outcome agreement includes only private sector not-for-profit entities or also includes public sector not-for-profit entities.
Mr Kevin Simpkins and Mr Geoff Connor reported that they had tried to arrange for the new Chairperson of the International Public Sector Accounting Standards Board, Prof. Andreas Bergmann, to attend the meeting of TTAASAG. Prof. Bergmann was unable to attend because he flew out the day before the meeting. He returns to New Zealand for most of the month of October and MED will consider rearranging the third TTAASAG meeting of 2010 to coincide with his second visit to New Zealand.
MED will consider rearranging the third meeting of TTAASAG for 2010 to coincide with the Chair of IPSASB's second visit to New Zealand in October 2010.
Mr Lee White commented that the professional accounting bodies have been considering potential nominees for the IFAC's Sempier Award.
Members decided to hold a Nominations Sub Committee meeting on Wednesday 3 March to consider a number of forthcoming vacancies for international positions, including the soon to be vacant IASB Chairperson position.
4. TTAASAG 2009 report to Ministers
The Group discussed the draft 2009 TTAASAG report to Ministers and a number of changes were suggested. MED will make the suggested changes and circulate the report to members within the next few weeks.
5. Outcomes Agreement between Australia and New Zealand
Mr Geoff Miller gave the Group a brief update on the work of the Trans – Tasman Outcome Implementation Group since the last TTAASAG meeting in December. Mr Miller mentioned that the level of work and focus of the Trans-Tasman Outcomes Implementation Group (TTOIG) has increased recently with the New Zealand Treasury starting research and analysis projects in regards to certain of the outcome agreements.
MED will invite a representative from the New Zealand Treasury to a TTAASAG meeting, either later in 2010 or early 2011, to discuss progress with their work in the outcome agreements area.
5.1. Not-for-profit entities are able to use a single set of accounting standards and prepare only one set of financial statements
Mr Bede Fraser commented that the reforms being proposed in the MED's review of the financial reporting framework will bring the New Zealand not-for-profit reporting framework further in line with Australia. Mr Kevin Stevenson said that the AASB and FRSB will be discussing New Zealand's proposals at their next meeting in March. A possible difference would arise if New Zealand followed through on proposals to adopt International Public Sector Accounting Standards (IPSAS). Australia is currently monitoring the development of IPSAS.
5.2. Auditors registered in one country can operate in the other country
The Group briefly discussed this matter but deferred substantive discussion to agenda item 6.4.
5.3. Financial reporting standards bodies in Australia and New Zealand have functional equivalence.
Mr Geoff Connor updated the Group on the progress being made in New Zealand on reconstituting the Accounting Standards Review Board and aligning the New Zealand structure more closely with the Australian standard setting structure. Mr Connor said that this work has been accelerated and is ahead of schedule. Mr Connor mentioned that submissions on the recent MED discussion document on the review of the financial reporting framework were generally in favour of consolidating the accounting and assurance standards setting responsibilities within one body. This is proposed to be a reconstituted Accounting Standards Review Board to be known as the eXternal Reporting Board (XRB).
Mr Connor commented that there is some work still to be done around funding the new Board. It is being proposed that beneficiaries of financial reporting and assurance standards will fund the activities through fees and levies.
6. Policy developments in Australia and New Zealand, including:
6.1. Tran-Tasman convergence on the following reporting issues
6.1.1. requiring consolidated financial statements of domestic groups
Mr Angus Thomson mentioned that there is disparity between the Australian and New Zealand system for dealing with consolidated financial statements of domestic groups. Australia deals with this in accounting standards and New Zealand deals with it through legislation. The Group agreed that having the requirements in legislation is preferable.
6.1.2. disclosure of auditor remuneration
6.1.3. disclosure of imputation tax credits
6.1.4. disclosure of KMP equity holdings and loans
These three agenda items were discussed briefly. The major issue is whether these matters should be dealt with in legislation or accounting standards. The Group came to the conclusion that agenda items 6.1.1 and 6.1.4 are policy issues that should be considered jointly by MED and the Australian Treasury. Agenda items 6.1.2 and 6.1.3 should be dealt with in accounting standards and should be addressed by the standard setting bodies.
MED and Australian Treasury will consider in greater detail the issues relating to consolidated financial statements of domestic groups and disclosure of KMP equity holdings and loans and report back to the next meeting of TTAASAG.
The AASB and the FRSB will consider further the disclosure of auditor remuneration and disclosure of imputation tax credits in accounting standards and report back to the next meeting of TTAASAG, if appropriate.
6.1.5. joint membership of the AASB and FRSB
Mr Kevin Stevenson updated the group on discussions by the accounting standards boards to increase cross appointment opportunities. It was noted that it would be necessary to wait until the formation of the eXternal Reporting Board (XRB) when greater functional equivalence between the standards setting bodies in Australia and New Zealand would be achieved before more significant changes could be advanced. Some members expressed the view that the more cross appointed members in both countries the better. The possibility of 100% cross appointment between the AASB and FRSB and between the AUASB and the PSB (or equivalent bodies) was also discussed.
The Group supported initiatives by the respective Boards to explore enhanced ways of working together ahead of the establishment of the XRB.
Include a separate agenda item on this topic at the next TTAASAG meeting.
6.2. Update on Australiaís proposed corporate reporting reforms
Mr Bede Fraser updated the group on recent proposals made by the Australian Treasury to reduce "red tape" in the corporate reporting area. The proposals include a change to the not-for-profit reporting and assurance requirements, moving to a solvency test based system for the payment of dividends and streamlining parent entity reporting requirements. Mr Fraser indicated that the Australian Treasury were looking to have the reforms passed by 30 June 2010.
Mr Geoff Connor updated the Group on how the review of the financial reporting framework proposes to address related issues in New Zealand.
6.3. Update on New Zealandís financial reporting framework review
Mr Geoff Connor updated the Group on the developments in the MED review of the financial reporting framework. Mr Connor informed the Group that the Minister of Commerce has decided not to introduce filing requirements for large non-issuer companies in New Zealand. Submissions received were not supportive on this matter. This will cause the New Zealand reporting framework for large non-issuer entities to diverge from the Australian model.
Mr Connor advised that submissions were largely supportive of other proposals in the discussion document. There was some concern from submitters that the $20,000 reporting threshold for not-for-profit entities was too low and should be increased to the $60,000 mark. MED is considering this. On the whole, submitters were positive about the proposals in relation to the not-for-profit sector.The Group discussed in detail the appropriateness of making auditing standards legally enforceable. Some members believed that such a move could have a negative effect on audit quality and could lead to a tick-box mentality and less auditor's judgement. Australian members did not agree that this had occurred since auditing standards were made legally enforceable. It was also acknowledged that it was difficult to separate the effects of that change on audit quality from a number of other changes to various audit standards which emanated from the International Auditing and Assurance Standards Board (IAASB) which had occurred at approximately the same time. Furthermore it was noted that no criminal prosecutions had as yet been tested in the Courts. Members expressed the view that if New Zealand were not to make auditing standards legally enforceable, this would not constitute a significant trans-Tasman harmonisation issue.
MED will update the Group on any developments in its review of the financial reporting framework at the next TTAASAG meeting.
6.4. Update on New Zealandís audit regulation review and auditor liability
Mr Geoff Connor updated the Group on developments in the auditor regulation oversight work that MED is undertaking. Mr Connor informed the Group that the New Zealand Government has approved the proposal to regulate auditors as a specialist profession. Mr Connor also noted that the XRB is currently the body proposed to undertake the oversight role. The other possible candidate is the Securities Commission.
Mr Connor and Mr Kevin Simpkins updated the Group on a conversation they had with the European Commission on whether New Zealand's auditor regulation oversight proposal would meet their expectations. The key point to emerge from that conversation was that the European Commission expects oversight of the auditor regulation system to be undertaken by a body independent of the profession. MED is to do further work on the auditor regulation oversight proposal in response to the clarification of the European Commission's expectations.
Mr Geoff Connor also reported that auditor liability is not a high priority for the Minister of Commerce and work on this has been deferred. Some members expressed concern that auditor liability was not being progressed and mentioned that it is a very important piece of work from the perspective of the accounting profession.
MED will provide an update on New Zealandís review of the auditor regulation oversight framework at the next meeting of TTAASAG.
6.5. Update on the Capital Markets Development Taskforce
Mr David King gave a brief update on New Zealand's Capital Markets Development Taskforce and their report that was released late in 2009. The Group noted that there were no accounting or auditing changes recommended in the report and the Group took this to mean that the Taskforce did not consider there were any major issues with accounting and auditing standards and associated matters in New Zealand.
7. Progress with accounting and auditing outcomes, including joint work by the AASB and the FRSB
7.1. 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.
7.2. Differential reporting, FRSB and AASB update
Ms Joanna Perry covered both items and informed the Group that there was very good progress being made in this area. Mrs Perry advised that the AASB and the FRSB have a joint meeting in mid-March when they will be considering a joint exposure draft to eliminate most current differences between Australian and New Zealand standards. The meeting was also advised that the AASB was about to release an exposure draft on differential reporting in Australia. The group noted with pleasure the progress on removing differences between Australia and New Zealand but noted that further discussions are needed on differential reporting where there is the possibility of divergence between the two countries.
8. Ken Warren's report on the IPSASB meeting in Rome, December 2009
The Group noted Mr Ken Warren's paper. Mr Kevin Simpkins reported that the new IPSASB chairman, Prof. Andreas Bergmann, attended an ASRB meeting during his recent visit to New Zealand and discussed with ASRB members his plans for the future operations, priorities and credibility of the IPSASB. Mr Simpkins said Prof. Bergmann's visit was very beneficial to the ASRB.
9. Professional accounting bodies joint report on activities
The Group noted the joint report from the professional accounting bodies. Mr Lee White updated the Group on the ICAA's activities. Mrs Vicki Stylianou updated the Group on the NIA's activities.
10. Auditing standard setters
10.1. Report from the PSB
Mr Bruce Bennett updated the Group on the PSB's activities. Mr Bennett mentioned that the PSB are considering submissions on an exposure draft on quality control and possible changes to the Code of Ethics relating to independence.
10.2. Report from the AUASB
Ms Merran Kelsall updated the Group on the recent activities of the AUASB. Ms Kelsall proposed and the Group agreed that the AUASB and PSB will prepare a forward-looking paper for the next TTAASAG meeting about the issues and impediments of cross appointments between auditing standard setting boards in Australia and New Zealand.
The AUASB and PSB will provide TTAASAG with a paper on the issues and impediments of cross appointments between auditing standard setting boards in Australia and New Zealand.
11. Accounting standard setters
11.1. Joint report from the FRSB and AASB
Mr Kevin Stevenson updated the Group on the current activities of the AASB and the joint work of the two boards. Mr Stevenson said that the two bodies were working well together. The Group noted the report from the FRSB and the AASB.
12. TTAASAG terms of reference
Mr Kevin Simpkins provided the Group with the current TTAASAG terms of reference and proposed that it was an appropriate time to update them. The Group discussed the terms of reference and decided that it was important to reflect the recently agreed outcome agreements and international influence work that TTAASAG is now involved in. Mr Simpkins will update the TTAASAG terms of reference and circulate a draft to members. It was noted that the proposed revised Terms of Reference will be submitted to the Ministers for their approval following the next meeting.
Mr Kevin Simpkins will update the TTAASAG terms of reference to better reflect the Group's current activities and focus and circulate a draft to members for comment before the next meeting.
13. The next IFRS Regional Policy Forum, Singapore 12-13 May 2010
Mr Bede Fraser updated the Group on the recent developments in relation to the next IFRS Regional Policy Forum. The draft agenda is more focused towards technical aspects of accounting standards than expected and Mr Fraser reported that no auditing bodies had been invited to attend. The Group discussed this and agreed that TTAASAG supported a greater focus on policy issues and the inclusion of auditing policy issues in the deliberations of the Forum. MED and Australian Treasury would look at the possibilities of Australia or New Zealand hosting the 2011 IFRS Regional Policy Forum.
Australian Treasury and MED will further reconsider the original objectives of the Regional Policy Forum and, in the light of that reconsideration, discuss the possibility of Australia or New Zealand offering to host the 2011 IFRS Regional Policy Forum.
14. Other business
The Group discussed the possibility of inviting the Vice-Chairman of the IASB Standards Advisory Council (SAC), Mr Charles Macek, to a future meeting of TTAASAG.
Mr Bob Stephens informed the Group that he is leaving the MED on March 19 and this would be his last TTAASAG meeting. He thanked the Group for all their help and support and wished TTAASAG members all the very best in the coming years. Mr Simpkins thanked Mr Stephens for his work on behalf of the Group over recent months and wished him well for the future.
MED will invite the Chair of the IASB Standards Advisory Council (SAC), Mr Charles Macek, to a TTAASAG meeting in 2010.
15. Next Meeting in May
Mr Bob Stephens informed the Group that the scheduled TTAASAG meeting in May now conflicts with the 2010 IFRS Regional Policy Forum in Singapore. Mr Stephens will circulate some possible alternative meeting times to TTAASAG members and reschedule the second meeting of TTAASAG for 2010 at the most convenient time.
MED will keep TTAASAG members up to date on scheduled meetings in 2010.