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

Minutes of Meeting

9.00am-3.00pm, Monday 11 April 2011

Ministry of Economic Development, 33 Bowen Street, Wellington


Kevin Simpkins Accounting Standards Review Board
Joanna Perry Financial Reporting Standards Board
Merran Kelsall Auditing and Assurance Standards Board
Neil Cherry Professional Standards Board 
Denis Pratt CPA Australia
Lee White Institute of Chartered Accountants in Australia
Patricia McBride New Zealand Institute of Chartered Accountants
Vicki Stylianou National Institute of Accountants
Geoff Miller Australian Treasury
Michael Lim Financial Reporting Council
Andrew Jackson Ministry of Economic Development
Geoff Connor Ministry of Economic Development
Laura Stuart Ministry of Economic Development
Video conferencing
Kevin Stevenson Australian Accounting Standards Board
Angus Thompson Australian Accounting Standards Board
Michelle Embling New Zealand Accounting Standards Board chair designate
(Item 9.3.1)
Ken Warren
International Public Sector Accounting Standards Board
Lynn Wood Financial Reporting Council
Mark Shying CPA Australia
Jim Murphy Australian Treasury
Mark Sewell Australian Treasury
Ronita Ram Australian Treasury
David King Ministry of Economic Development

Agenda Items

1. Welcome from the Chair

The Chair welcomed members to the meeting.

2. Minutes of the meeting of 3 December 2010

The minutes were approved.

3. Action items from the previous meeting

3.1 Key management personnel disclosures

3.1.1 It was noted that the AASB has proposed to remove individual key management personnel disclosure requirements from AASB124 for the sake of converging with New Zealand standards and IFRSs, and on the basis that such requirements are more in the nature of governance disclosures. It was also noted there will be a two-year transition before the removal becomes effective, and the policy agencies were strongly encouraged to take the opportunity to consider the alignment of any statutory requirements to make such disclosures.

Action item

TTAASAG to include integrated reporting to the standing agenda

3A. Draft 2010 Report to Ministers

A draft report had been circulated to members and the comments received taken account of. It was proposed and agreed that the final report should contain an introductory paragraph to emphasise the role of accounting and auditing standards in relation to capital markets, the operation of business, and trans-Tasman business activity.

There was discussion and agreement that further development could occur to provide measurable targets for the objectives for the next year.

It was agreed that the signing-off of the final report would be delegated to MED, Treasury, and the Chairman.

Action item

Secretariat to forward a copy of the final Report to members and notify members when Ministers have received the report.

4. TTAASAG Terms of Reference Update (Kevin Simpkins)

A further revised draft Terms of Reference had been circulated by the Chairman. There was a discussion on the content and minor changes agreed.

It was noted that NIA will change its name to the Institute of Public Accountants prior to 1 July 2011.

TTAASAG approved the proposed Terms of Reference for submission to Ministers with a recommendation that they be approved with effect from 1 July 2011. The Chairman will liaise with MED and Treasury to forward the TOR to the respective Ministers.

Action item

Proposed Terms of Reference to be finalised by Chairman and Secretariat and forwarded by MED and Treasury to Ministers for consideration.

5. Monitoring Policy Developments in Australia and New Zealand

5.1 Update on Australian corporate reporting reforms (Geoff Miller)

Geoff Miller provided an update on issues arising from the recent Australian corporate reporting reforms including that a Discussion Paper was intended to be issued in May. Two key issues have emerged under the Corporate Reporting Reform Act:

  1. Parent entity reporting: Treasury is likely to recommend amendments to the Minister relating to outstanding technical issues in relation to parent entity reporting including to permit sub-entity reports. MED has recommended to the Minister the removal of the requirement for parent financial statements from the Financial Reporting Act. The NZ standard setter would then have full responsibility to determine what parent entity disclosures are appropriate. TTAASAG generally supported the proposed New Zealand approach but more particularly noted the opportunity to achieve common solutions. It was agreed that New Zealand and Australia (MED, Treasury and the proposed NZ Accounting Standards Board) should work together on this issue.
  2. Solvency test: The Minister has asked Treasury to prepare a consultation paper on the issue of the test for paying dividends. A key issue arises in relation to the relationship between assessing solvency and the requirements to prepare financial statements. As New Zealand is proposing to remove the obligation for many small and medium –sized entities to prepare financial statements, New Zealand and Australia now face the same issue in relation to this. The Group strongly encouraged Treasury to consult with MED in progressing this issue over the coming months.

The issue of requiring a single set of consolidated accounts by parent entities with trans-Tasman subsidiaries was raised. It was agreed that this is related to the mutual recognition issue discussed later in the meeting.

It was also noted that ASIC had released consultation paper CP 150 Disclosing financial information other than in accordance with accounting standards. Aspects of this consultation paper were closely related to the objectives of the group and it was noted that the issues raised in the paper were common to New Zealand and Australia. The Group agreed to monitor those aspects of the paper that are relevant to the Group's objectives.

Action item

TTAASAG to request ASIC, through Treasury, to provide an update on issues of relevance for the next meeting.

5.2 Update on New Zealand's Auditor Regulation and External Reporting Bill and Financial Reporting Framework Review (Geoff Connor)

    1. Auditor Regulation and External Reporting Bill

    The Commerce Committee removed audit offence provisions from the Bill as the Committee considers alternative measures provide the incentive for auditors to comply with the standards. The Bill is still consistent with mutual recognition principles in relation to overseas auditor recognition. The standard setting responsibilities will move from NZICA to the XRB once the relevant parts of the Bill have been brought into force – this is still expected to be 1 July 2011. Professional and ethical standards will be incorporated within the definition of audit and assurance standards to enable the XRB to set ethical and professional standards to the extent that they relate to auditing of issuers.

  1. Financial Reporting Framework Review

The Minister has received the Cabinet paper and Regulatory Impact Statement arising from this review for his consideration. This is expected to go to Cabinet on 26 April. Two significant matters were noted:

  1. The proposal to remove reporting requirements for small and medium companies; and
  2. Not-for-profit reporting- charities. There was discussion about the different approaches between Australia and New Zealand and different bodies and processes currently underway in both countries.

5.3 Update on New Zealand's review of the Accounting and Auditing Standards under the new Financial Reporting Framework (Michele Embling)

MED and the ASRB released associated discussion documents in late 2009. The ASRB has been considering the submissions. The ASRB is taking a long term view, focusing primarily on accounting standards to provide quality information for those using the reports. The ASRB have decided that a multi-standards framework is appropriate while retaining the commitment to IFRS for profit-oriented entities and will propose IPSAS-based standards for public benefit entities. 

A Chief Executive- Tony Dale- has been appointed to the ASRB/XRB and the XRB will have permanent offices in Wellington and Auckland. Five current NZICA staff have accepted offers and will commence with the XRB on 1 July 2011. A process has been initiated leading to appointment of members of the two subsidiary Boards of the XRB.

6. Outcomes Agreement between Australia and New Zealand

6.1 Trans Tasman Outcomes Implementation Group

6.1.1 Verbal Report on recent meeting (Geoff Miller)

TTOIG noted that as it is an election year in New Zealand Ministers will seek specific achievements this year. TTOIG has agreed to reassess the timing of the outcome statements and will establish dates of delivery for all outcomes.

6.2 Note proposed revision to outcome statements (Kevin Simpkins)

At its meeting on 17 March 2011, TTOIG agreed to seek ministers' agreement to the outcome statement changes proposed by TTAASAG.

6.3 Review of progress on outcome statements (Kevin Simpkins)

6.3.1 For-profit entities are able to use a single set of accounting standards and prepare only one set of financial statements

There is only one outstanding issue before the harmonisation project relating to Tier 1 entities is completed. This relates to the 'true and fair override'. The FRSB and AASB are working on resolving this issue.

The ASRB and FRSB have been working on the delineation between Tier 1 and Tier 2 in New Zealand and the standards which should apply at Tier 2. They have decided to recommend a reduced disclosure regime (RDR) that will be modelled on the Australian RDR. A Consultation Paper and associated Exposure Draft will be issued within the next month which, if finally adopted, would lead to substantive harmonisation across Tier 2 as well.

TTAASAG congratulated Kevin Stevenson and Joanna Perry and their Boards for their achievement in relation to harmonising Tier 1 reporting. Mutual Recognition of For-profit entities

Overall the differences between Australian and New Zealand Tier 1 requirements will be minimal once the current harmonisation project has been completed. In the light thereof Kevin Stevenson and Joanna Perry proposed that there ought to be mutual recognition between the two countries - allowing entities to comply with domestic GAAP requirements and have their financial statements accepted in the other country.

It was agreed that TTAASAG should take responsibility for leveraging further benefits from what has already been achieved in this space. It was noted that issues such as sub-entity reporting requirements across the two countries was an important aspect of capturing the benefits. The significant role of other regulators and tax authorities was also noted. It will also be necessary to consider audit issues in due course.

Action item

AASB and FRSB will produce an information document to clarify the precise differences in requirements between Australia and New Zealand for Tier 1 for-profit entities.

Action item

MED and Treasury will commence consideration of the possibilities of mutual recognition and prepare a joint update on their progress in relation to these issues at the next meeting.

6.3.2 Trans-Tasman companies have to prepare only one set of financial statements to one set of standards

Covered under 6.3.1.

6.3.3 Not-for-profit entities are able to use a single set of accounting standards and prepare only one set of financial standards

New Zealand proposes to move to an application of IPSAS for not-for-profit private sector entities. Australia is currently using IFRS as the base. There was discussion whether this outcome statement should remain on the TTOIG programme. There are few benefits for the preparing entity; however, there are indirect benefits for standard-setting and transfer of skills. It was agreed that TTAASAG should consider whether to remove this outcome statement following publication of the New Zealand government's decisions relating to the financial reporting framework and in the light of updated information on the current Australian developments for private not-for-profits. A recommendation would then be made to TTOIG.

It was noted that NZASB and AASB will be having discussions to find a way forward in relation to working together in relation to private and public sector not-for-profit entities.

Action item

AASB and NZASB to report back on the not-for-profit developments in both countries and consider whether to recommend retaining, varying, or removing the outcome statement to TTOIG.

6.3.4 Auditors registered in one country can operate in the other country

Excellent progress in relation to this outcome was noted. MED will be meeting with the new Financial Markets Authority, NZICA and the Registrar of Companies to work out a timeline. The importance of dialogue with ASIC in relation to fully achieving this outcome was also highlighted.

6.3.5 Financial reporting standards bodies in Australia and New Zealand have functional equivalence

Passage of the Auditor Regulation and External Reporting Bill in New Zealand will see achievement of this outcome.

7. Engagement with Asia-Pacific Region

7.1 IFRS Regional Policy Forum

There was a discussion about the ongoing importance of ensuring a policy orientation to sessions on this programme. However the strong involvement of Australian presenters in the programme was also noted. There was support to encourage India to host the next Regional Policy Forum.

7.2 Update on AOSSG (Kevin Stevenson)

AOSSG is progressing very well in relation to its strategic objectives and is gaining an important profile on the international stage. The next step is for AOSSG to move on towards a thought leadership role. It is helping individual countries transition to IFRS and the development of national standards. AOSSG adds weight to Australian and New Zealand submissions and acts as a platform. Members noted that AOSSG had achieved an enormous amount in the two years since it was formed.

TTAASAG congratulated Kevin Stevenson and Joanna Perry for their significant contributions to the development of AOSSG.

Action item

The FRC, XRB and accounting boards should consider their input in preparation for the AOSSG conference in Melbourne in November for inclusion on the agenda for the August meeting of TTAASAG.

8. Cross-appointment arrangements

8.1 Auditing and assurance standard-setters

Kevin Simpkins will be meeting with Lynn Wood later this month and will discuss cross-appointments to the new New Zealand boards. The ASRB/XRB plans to invite a nominee from the FRC for appointment to the NZ AUASB. It was noted that there is a current vacancy on the Australian AUASB which has been held to facilitate a New Zealand cross-appointment.

It was also noted that the NZ Minister of Commerce has written to his Australian counterpart inviting a nominee for appointment to the External Reporting Board from 1 July 2011.

9. Enhance Profile and Influence in the International Arena

9.1 Nominations Committee update on the activities since the last meeting

The Nominations Committee had supported Joanna Perry's application for reappointment to the IFRS Interpretations Committee.

9.2 Discuss current Australian and New Zealand representation

It was agreed that the appointment of an Australian member to the PIOB and the current AOSSG appointments should be added to the list and that this item should be a standing item at each meeting. No significant gaps in representation were noted.

9.3 Reports from International Representatives

9.3.1 Ken Warren (IPSASB)

Ken Warren gave an update on the conceptual framework activity of the IPSASB. The framework is aimed at accountability and decision making. The IFAC Board will initially be consulting with selected governments (including New Zealand and Australia) in relation to the oversight and resourcing of the IPSASB. Thereafter there will be a public consultation. Two options are proposed:

  1. Adapted Public Interest Oversight Board approach; or
  2. Independent oversight process.

The first option is currently favoured because it is the lower cost option. IFAC will also consult with governments on whether they would support IPSASB financially. The Group encouraged both countries to participate in the consultation process.

9.3.2 Joanna Perry (IFRS Interpretations Committee)

Joanna thanked TTAASAG and individual members for the support she had received for her application to be reappointed to the Interpretations Committee. She gave an update on the role of the Interpretations Committee and discussed some of the issues around the current role, review and appointments process. Joanna emphasised the importance, if she gets reappointed, to maintain close linkages with the standard setting boards.

TTAASAG thanked Joanna for her contribution to TTAASAG and wished her well for reappointment.

10. Professional accounting bodies' joint report on activities

The report was noted.

11. Auditing standard setters

11.1 Report from the AUASB

There have been significant international debates on the role and regulation of auditors. International developments in relation to auditor regulation will raise policy issues in Australia and New Zealand. One issue impacting TTAASAG is how Australia and New Zealand can best work together when the new regime in New Zealand is implemented.

11.2 Report from the PSB

The report was noted.

12. Accounting standard setters

12.1 Joint report from the FRSB and AASB

The report was noted.

Action item

Kevin Stevenson will provide the paper on national standard setters to the TTAASAG secretariat for circulation to members.

13. Future issues/work programmes (Treasury)

The FRC is looking into international integrated reporting and TTAASAG agreed to monitor that work with interest. An Executive Remuneration Bill is expected to be enacted in the near future.

Action item

FRC to prepare update on its integrated reporting work for the next meeting.

14. Other Business

The Chairman noted that three members would no longer be members of TTAASAG (at least in their current roles) when the Group next meets – Joanna Perry, Neil Cherry and Patricia McBride. He thanked all three for their important contributions to the work of the Group. In particular he acknowledged the substantial contribution of Joanna Perry throughout the period since the Group was formed as a champion for Trans-Tasman efforts.

15. Next meeting – 12 August 2011, Melbourne