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

Minutes of Meeting

10.00am-3.30pm, 12 August 2011

Australian Accounting Standards Board, Level 7, 600 Bourke Street, Melbourne


Kevin Simpkins External Reporting Board
Merran Kelsall Australian Auditing and Assurance Standards Board
Kevin M Stevenson Australian Accounting Standards Board
James Chisholm Australian Treasury
Mark Shying CPA Australia
Lynn Wood Financial Reporting Council
Kerry Hicks Institute of Chartered Accountants in Australia
Tom Ravlic Institute of Public Accountants
David King Ministry of Economic Development
Neil Cherry New Zealand Auditing and Assurance Standards Board
Richard Moon New Zealand Institute of Chartered Accountants
In Attendence:
Ronita Ram Australian Treasury
Laura Stuart Ministry of Economic Development
Speaker Phone:
Geoff Connor Ministry of Economic Development
Michele Embling New Zealand Accounting Standards Board
Michael Lim Financial Reporting Council
Mark Sewell Australian Treasury
Doug Niven Australian Securities & Investments Commission
  (Items 5.5 and 5.6.1 only)
Terry McLaughlin New Zealand Institute of Chartered Accountants
Vicki Stylianou Institute of Public Accountants
Lee White Institute of Chartered Accountants in Australia

Agenda Items

1. Welcome from the Chair

The Chair welcomed members to the meeting.

2. Minutes of the meeting of 11 April 2011.

The minutes were approved.

3. Action items from the previous meeting

The Chair noted that the Report to Ministers and the Terms of Reference had been approved and signed off by both Ministers. It was noted that the SEM outcomes agreed by the respective governments have now been incorporated into a Memorandum of Understanding on the Coordination of Business Law.

Kevin Stevenson of the AASB agreed to circulate a revised version of the paper on national standard setters.

Action item: Secretariat to circulate revised version of paper on national standard setters to TTAASAG members.

4. Monitoring Policy Developments in Australia and New Zealand

4.1 Update on Australian executive remuneration reforms, and key management personnel disclosures under AASB 124 (James Chisholm)

It was noted that the Australian executive remuneration reforms came into effect on 1 July 2011. The reforms encompass a two strikes test and strengthen the framework around remuneration of executives. It was also noted that the Corporations and Markets Advisory Committee (CAMAC) released a report in May on executive remuneration disclosure requirements. TTAASAG noted that New Zealand was not currently considering any changes to executive remuneration; however there may be scope for such consideration within the possible review of the Companies Act 1993 being considered by MED.

4.2 Update on New Zealand's Auditor Regulation Act and the Financial Reporting Amendment Act (Geoff Connor)

It was noted that the Auditor Regulation Act 2011 and the Financial Reporting Amendment Act 2011 were enacted in May 2011 and that the financial reporting changes came into force on 1 July 2011. The auditor oversight arrangements will come into force on 1 July 2012. It was noted that the legislation would permit overseas accounting bodies to be recognised in New Zealand as "accredited bodies" for the purposes of the legislation.

4.3 Update on New Zealand's Financial Reporting Framework Review (Geoff Connor)

It was noted that the proposals have been delayed and are expected to be considered by the relevant Cabinet Committee at the end of August.

It was also noted that a draft Financial Markets Conduct Bill had been published by the Minister of Commerce earlier in the week.  This constitutes a thorough update of the Securities Act.  TTAASAG inquired about any implications for financial reporting or auditing and assurance.

Action item: MED to keep TTAASAG members up to date on progress with the Financial Reporting Framework Review.

Action item: MED to consider any implications for TTAASAG arising out of the Financial Markets Conduct Bill and update TTAASAG members accordingly.

4.4 Update on New Zealand's review of the Accounting and Auditing Standards under the new Financial Reporting Framework (Kevin Simpkins)

A report from the XRB was noted. The release of a Position Paper and two Consultation Papers by the XRB are dependent on the Government's final decisions on the Financial Reporting Framework Review. The Consultation Paper relating to for-profit entities will propose further harmonisation in line with the SEM outcome statements.

5. Significant issues for discussion

5.1 Parent entity reporting (MED, Treasury)

Treasury is developing a discussion paper in response to issues which have been raised relating to parent entity reporting. The paper considers whether sub-entity reports can be prepared. It was noted that in New Zealand the Financial Reporting Framework Review proposal is to remove the parent entity reporting requirements and that the requirements will be determined by the XRB (in practice by the New Zealand Accounting Standards Board). Kevin Simpkins and Michele Embling have been having discussions with the FMA about the current issues for Australian entities which comply with their domestic requirements but do not simultaneously comply with New Zealand requirements. The FMA is considering a proposal to exempt Australian entities that comply with Australian requirements subject to possible additional disclosures about any significant issues relating to the parent entity. TTAASAG welcomed this advice.

It was noted that there will be an on-going difference if Australia retains the parent entity requirements in law and New Zealand addresses the issue through standards.  TTAASAG members generally supported the proposed New Zealand approach.

5.2 Solvency test - Treasury to consult with MED

As part of the discussion paper mentioned under 5.1, Treasury intends to respond to issues which have been raised concerning the solvency test. The options will include removing the reference to accounting standards from the solvency test; adopting a New Zealand styled test; or allowing entities to report under either the old or new test. In New Zealand there is a two-step test - cash flow and balance sheet solvency. However as the Financial Reporting Framework proposals will remove the reporting requirement for many SMEs, similar issues to those which have recently arisen in Australia will emerge.

TTAASAG urged Treasury and MED to consider the issues jointly.

Action item: MED and Treasury to discuss issues relating to application of the solvency test.

5.3 Mutual Recognition

5.3.1 Note report from AASB and FRSB on Tier 1 for-profit entities reporting

5.3.2 Update from MED/Treasury

TTAASAG received and noted a report from the FRSB and AASB identifying some outstanding areas of difference between Australia and New Zealand's financial reporting requirements. However the requirements are substantially consistent. It was noted that the different reporting requirements relating to superannuation and prospective financial statements may need to be considered in the future.

The Chairman noted recent calls for more formal "mutual recognition" of financial reporting across the two countries and advised that Treasury and MED had agreed to co-ordinate a stock take to identify all circumstances in which entities, which comply with the requirements in their home jurisdiction, face additional requirements in the other.  The results of this work would be reported to TTAASAG in December enabling an informed discussion of the need for and benefits of any form of mutual recognition.

Action item: MED and Treasury to co-ordinate preparation of a full list of all additional reporting requirements imposed on entities which operate across the Tasman and comply with their home requirements. This will be tabled at the December meeting

5.4 Intergrated Reporting

5.4.1 Recieve and consider update from FRC

5.4.2 Discussion of developments

It was noted that the FRC had established an Integrated Reporting Taskforce which had its first meeting on 6 June 2011. The Taskforce has developed a set of objectives and is considering its agenda. The Taskforce is considering a framework for integrated reporting and will consider the IIRC discussion document on integrated reporting when it is released later this year. It was noted that the IASB has flagged integrated reporting as a strategic issue in the recent Agenda Consultation document.

5.5 Disclosing information other than in accordance with the accounting standards

5.5.1 Update from ASIC/Treasury

TTAASAG was advised that ASIC has been considering responses to its consultation paper and is preparing a guide for directors for release around November or December. The purpose of the guide will be to promote meaningful reporting and greater clarity around what is acceptable. In the New Zealand context the Securities Commission has been reviewing financial statements prepared by issuers for some time and has expressed concern about reporting of non-statutory information.

Action item: XRB to consider the relevance of the ASIC guidance in the New Zealand context and discuss the issues with the Financial Markets Authority.

5.6 Auditing Issues

5.6.1 Mutual recognition of auditors under the TTMRA (Treasury, MED)

It was noted that both Governments are committed to mutual recognition of auditors. One point of difference is that New Zealand regulatory system focuses on issuers only whereas the Australian system focuses on auditors of corporations. Recent discussions among the relevant bodies had made good progress. It was noted that there may be potential limitations on ASIC's ability to provide information to non-government bodies such as NZICA. It was also noted that there would need to be careful consideration of the impact of either country entering into mutual recognition arrangements with other countries, which could be dealt with through the creation of a memorandum of understanding between both countries.

5.6.2 Update on solicitors' representation letters (Treasury)

Treasury will be releasing an exposure draft of a Bill that will seek to provide certainty regarding the legal privilege attaching to solicitors' representation letters. It was noted that New Zealand faces similar issues, but no specific action is currently being considered.

6. Outcomes Agreement between Australia and New Zealand

6.1 Trans Tasman Outcomes Implementation Group report on latest meeting (David King)

David King gave an update on the TTOIG meeting in June. It was noted that the outcomes achieved had been considerable over the first two years. However, it was noted that TTOIG is looking to more precisely define the timeframes for the medium term outcomes and is reconsidering some outcomes.

6.2 Review of progress on the (financial reporting) outcome statements (Kevin Simpkins)

It was noted that:

  • the outcome regarding for-profit entities that are publicly accountable has been achieved;
  • the outcome regarding for-profit entities that are not publicly accountable will be achieved if forthcoming New Zealand proposals are adopted;
  • the outcome regarding private not-for-profit entities will be discussed at the December meeting;
  • the outcome regarding recognition of auditors is expected to be achieved when the Auditor Regulation Act takes effect in 2012;
  • the outcome regarding financial reporting structures has been achieved.

The Chair proposed TTAASAG consider at the December meeting whether other outcomes warranted inclusion in the list and should be recommended to TTOIG.

Action item: The secretariat is to locate the document recording Trans-Tasman differences and circulate that to TTAASAG members.

Action item: The Chair and secretariat are to initiate a process leading to consideration of possible new outcomes at the December TTAASAG meeting.

7. Cross-appointment arrangements

7.1 Update on current status of cross-border appointments (Kevin Simpkins)

It was noted that there are now Trans-Tasman representatives on each accounting and auditing body on both sides of the Tasman. It was agreed that this item can be taken off the agenda.

8. Enhance Profile and Influence in the International Arena

8.1 Nominations Committee update on the activities since the last meeting

The Nominations Committee has not met this year. However, TTAASAG did support Joanna Perry's reappointment to the IFRS Interpretations Committee.  It was also noted that TTAASAG members should begin consideration about possible candidates to replace Jeff Lucy as a Trustee of the IFRS Foundation in two years.

Action item: The Nominations Committee to meet to consider upcoming vacancies, in particular that on the IFRS Foundation Trustees.

8.2 Discuss current Australian and New Zealand international representation

The updated list of representatives was noted. It was noted that there are two tiers of international representation - national nominations and individual organisation (generally professional body) nominations. TTAASAG discussed the possibility of getting better value from interacting with the international representatives perhaps through greater interaction and more focussed updates. The Chair agreed to work with other bodies to facilitate this.

Action item: The secretariat to update list of international representatives.

Action item: The Chair to work with other bodies to facilitate improved interaction with international representatives.

8.3 Engagement with Asia-Pacific Region

8.3.1 IFRS Regional Policy Forum and arrangements for next forum (Treasury)

The next IFRS Regional Policy Forum will be held on 26 and 27 March 2012 in Kuala Lumpur. A steering committee has been established (including Treasury representatives) and it has produced a draft agenda.

8.3.2 Discuss input to AOSSG conference in November (Kevin Stevenson)

The AOSSG conference will be held in Melbourne on 23 and 24 November (followed by an IFRS conference in Asia-Oceania 2011 on 25 November also in Melbourne). A draft agenda has been prepared for the AOSSG conference. TTAASAG discussed suggestions for engaging with AOSSG members. It was noted that AOSSG is particularly interested in transition to IFRS. It was suggested that New Zealand attendees should be utilised by the hosts as necessary.

Action item: The Chair to advise Kevin Stevenson who is attending the AOSSG conference from New Zealand.

8.3.3 Discuss AOSSG vision statement

The vision statement was noted and briefly discussed.

8.4 Report from International Representative

    8.4.1 Merran Kelsall (IAASB)

    Merran Kelsall gave an update on the activities of the IAASB. The IAASB have established an Audit Quality Task Force which is currently developing a framework for audit quality. A consultation paper will be released around March/April 2012. Merran is a member of the Task Force.

    The IAASB has also recently released a consultation paper on "Enhancing the Value of Auditor Reporting: Exploring Options for Change" and is meeting with various stakeholders to discuss the paper.

    It was suggested that TTAASAG members should consider joint submissions in order to have greater international influence. It was noted that Merran's position on the IAASB will be helpful to both Australia and New Zealand.

    It was noted that Treasury has prepared a draft Bill on audit quality which will soon be available for public consultation.

    Action item: Merran Kelsall to distribute the IAASB consultation paper on audit quality to TTAASAG members when it is released.

    Action item: Treasury to update TTAASAG members on progress with the draft Bill on audit quality.

9. Reports from member bodies

9.1 Professional accounting bodies' joint report on activities

The report was noted. Warren McGregor's retirement from the IASB was also noted and that there would be a dinner on 6 October to acknowledge his contribution.

    9.2 Auditing standard setters

    9.3 Joint report from the AUASB and the NZAuASB

    The report was noted. The two Boards are considering key differences in the standard setting framework and considering longer term outcome objectives. They are working towards concurrent processes including consultation, discussions, and joint TTAASAG reports. TTAASAG congratulated Merran Kelsall and Neil Cherry for the progress made in such a short timeframe. 

    9.3 Accounting standard setters

    9.3.1 Joint report from the NZASB and AASB

    The report was noted.

10. Other business

It was agreed that TTAASAG members should give greater consideration to TTAASAG's role when proposing and presenting agenda items.

11. Next meeting –Tuesday 13 December 2011, Melbourne