Trans-Tasman Accounting and Auditing Standards Advisory Group
Minutes of Meeting

10.00am-3.30pm, 13 December 2011

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

Participants:

Present
Kevin Simpkins External Reporting Board
Merran Kelsall Australian Auditing and Assurance Standards Board
James Chisholm (Chair) Australian Treasury
Mark Shying CPA Australia
Tony Dale External Reporting Board
Lynn Wood Financial Reporting Council
Lee White Institute of Chartered Accountants in Australia
Vicki Stylianou Institute of Public Accountants
Geoff Connor Ministry of Economic Development
Neil Cherry New Zealand Auditing and Assurance Standards Board
John Hodge New Zealand Institute of Chartered Accountants
Kerry Hicks Institute of Chartered Accountants in Australia
Tom Ravlic Institute of Public Accountants
David King Ministry of Economic Development
In Attendence:
Richard Mifsud (from item 8 onwards) Auditing and Assurance Standards Board
Ronita Ram Australian Treasury
Jane Cheung Australian Treasury
Michael Lim Financial Reporting Council
Judith Downes (item 7 only)  
Laura Stuart Ministry of Economic Development
Speaker Phone:
Bryan Chapple (item 8 only) Ministry of Economic Development
Michele Embling New Zealand Accounting Standards Board
Apologies:
Terry McLaughlin New Zealand Institute of Chartered Accountants
Kevin Simpkins External Reporting Board

Agenda Items

1. Welcome from the Chair

The Chair welcomed members to the meeting. The Chair also congratulated Lee White for his appointment as CEO of the Institute of Chartered Accountants Australia. Lee will assume the role in January 2012.

2. Handover of chair and secretariat function

The Chair thanked Kevin Simpkins for his contributions to TTAASAG as Chair over the last two years. TTAASAG unanimously agreed that James Chisholm would be appointed as Chair for 2012–2013. The Chair also thanked Laura Stuart for her work as secretariat for 2011 and announced Jane Cheung as the new secretariat.

3. Minutes of the meeting of 12 August 2011.

The minutes were approved.

4. Action items from the previous meeting.

TTAASAG noted that the Report to Ministers needed to be reworked to clearly express the role of TTAASAG and provide greater context behind the objectives of TTAASAG. It was agreed that the key objectives of TTAASAG for 2012 are to:

  • achieve mutual recognition of auditors under the Trans-Tasman Mutual Recognition Act 1997 by 1 July 2012;
  • ensure that for-profit publicly accountable entities can prepare a set of financial statements that may be lodged in both jurisdictions;
  • harmonise the reporting requirements of for-profit non-publicly accountable entities;
  • harmonise auditing standards and ensure both countries work together to form a mutually agreed position and response to any international audit developments; and
  • harmonise annual reporting requirements contained outside of the financial statements.

The inclusion of measurable targets was discussed and it was suggested that the targets should be provided in more detail along with designated responsibilities in a separate project plan.

Action item: secretariat to review and amend Report to Ministers and circulate to members for comment.

Action item: secretariat to prepare a project plan and circulate to members for comment.

5. Monitoring Policy Developments in Australia and New Zealand

5.1. Update on New Zealand's Financial Markets Conduct Bill and potential implications for TTAASAG (Geoff Connor)

It was noted that New Zealand's Financial Markets Conduct Bill does not appear to have any implications for TTAASAG. The Ministry of Economic Development will keep TTAASAG updated if any issues arise.

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

It was noted that the drafting instructions for the Financial Reporting Amendment Bill are completed. Milestones for the Bill are yet to be determined but MED is working on the assumption that it will be introduced in mid-2012 with enactment in 2013. It is expected that the removal of the requirement for small and medium entities to prepare general purpose financial reports will come into force at Royal Assent. It is also expected that the XRB's power to set financial reporting standards for registered charities will come into force a year after enactment.

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

It was noted that the XRB's consultation papers on the accounting standards framework for for-profit entities and public benefit entities were released for public consultation in mid–September 2011 and submissions close on 16 December 2011. The XRB will begin considering the submissions in February and final decisions will be made at the end of March 2012. If the XRB's proposals are adopted they will result in trans-Tasman harmonisation for tier 2 for-profit entities. The Group noted recent developments in Australia in relation to not-for-profit reporting, including the establishment of the Australian Charities and Not-for-profits Commission, and recent proposals for consultation.

5.4. Treasury and MED's report back from discussions on parent entity reporting and solvency test (Geoff Connor and Ronita Ram)

It was noted that Treasury released a discussion paper, Proposed Amendments to the Corporations Act, relating to the test for the payment of dividends in the Corporations Act 2001 and parent entity reporting requirements. In relation to the dividends test, one of the four options proposed in the paper is based on New Zealand's current approach.  Whether the New Zealand and Australian solvency tests will be aligned depends on submitters' feedback on the proposed options. It was noted that, in relation to parent entity reporting, the policy positions of Australia and New Zealand appear to be aligned and legislation to implement that policy in New Zealand is in the process of being introduced. There is no major issue with Australia setting those requirements in regulations and New Zealand setting them in standards.

6. Significant issues for discussion

6.1. Mutual Recognition for for-profit entities

TTAASAG noted the report containing the outstanding reporting requirement differences for trans-Tasman for-profit entities. It was noted that once New Zealand's Financial Reporting Amendment Bill comes into force both countries will accept consolidated financial statements. It was noted that ASIC accepts financial statements prepared in New Zealand so there are no issues that may impede mutual recognition in relation to the Australian reporting requirements. It was noted that the New Zealand Registrar of Companies may allow overseas financial statements if they are substantially the same as the domestic requirements. Financial statements that comply with Australian GAAP meet this requirement.

The only outstanding issue is the requirement for overseas reporting entities to prepare reports for the New Zealand branch. This is not required in Australia however ASIC may request an overseas company to provide such information. TTAASAG requested that more information be provided on the practical implications regarding the New Zealand requirements.

Action item: MED to provide TTAASAG with information in respect of the practical implications of the New Zealand requirement that overseas companies prepare financial reports for the New Zealand branch.

6.2. Auditing Issues

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

It was noted that mutual recognition of auditors will be achieved however there are some outstanding implementation issues, which will need to be settled prior to 1 July 2012. Such issues include information sharing, potential recognition of third parties and compliance with the European Commission requirements. It was noted that the European Commission is proposing that practice reviews of auditors would need to be undertaken by an independent body. TTAASAG encouraged Treasury and MED to engage with the professional bodies about these issues.

6.2.2. Treasury update on bill enhancing audit quality (Ronita Ram)

It was noted that the draft Corporations Legislation Amendment (Audit Enhancement) Bill is scheduled for introduction in the first half of 2012. The audit community is generally supportive of the Bill, with most comments focussing on drafting issues in relation to the Bill. There was a discussion regarding whether the issues addressed in the Bill relate to the broader issues of audit quality and governance matters or to the performance of audit engagement. It was pointed out that the Bill relates to both issues but it is understood that the definition of "audit quality" generally is uncertain.

7. Report from International Representative (Judith Downes, IFRS Advisory Council)

Judith Downes provided an update on the activities of the IFRS Advisory Council. The Council meets three times a year to advise the IASB on a range of issues, including the IASB's agenda and work programme. Judith has been appointed to the Council for another year as the representative of the G100. Judith liaises with both New Zealand and Australia through Patricia McBride of the NZASB and through the AASB and FRC. Judith informed TTAASAG that the IASB has finished public agenda consultation on its future work plan. The agenda consultation enables public input on the broad strategic direction, balance and shape of the IASB's work plan.

8. Outcomes Agreement between Australia and New Zealand

8.1. Trans Tasman Outcomes Implementation Group report on latest meeting (Bryan Chapple)

Bryan Chapple gave an update on the latest TTOIG meeting on 6 December 2011. It was noted that TTOIG intends to deepen its relationship with business stakeholders by working more closely together to identify and resolve issues.

TTAASAG informed Bryan that it will not be clear whether the not-for-profit standards harmonisation outcome is likely to make progress until after the new regime in New Zealand (see item 5.3 above) has been implemented. TTAASAG also noted that there are very few entities that would benefit from harmonisation in this area.  TTAASAG agreed to recommend to TTOIG that this outcome be removed from the outcomes statement, noting that Australia and New Zealand will continue to monitor and progress this issue.

TTOIG will update the Prime Ministers early next year on the outcome statements. TTAASAG indicated that it was exploring further outcomes that could be added to TTOIG's agenda and agreed to update TTOIG on the agreed outcomes.

Action item: TTAASAG to recommend to TTOIG the removal of the not-for-profit outcome statement, and update TTOIG on any further agreed outcomes.

8.2. AASB and NZASB report on the not-for-profit developments

It was noted that New Zealand is in the process of preparing the new financial reporting framework and it will not be clear whether the not-for-profit standards harmonisation outcome is likely to make progress until after the new regime in New Zealand has been implemented. TTAASAG also noted that there are very few entities that would benefit from harmonisation in this area.  It was noted that the AASB and the NZASB will continue to work together on this issue regardless of whether not-for-profit reporting was an outcome.  TTAASAG agreed to remove the not-for-profit outcome.

8.3. Note the report on trans-Tasman differences and discuss proposed additional outcomes (James Chisholm)

TTAASAG held a discussion on potential TTOIG outcomes. It was noted that the next stage of TTAASAG is to encourage New Zealand and Australia to work together on forward looking issues. It was agreed that there will be new outcomes relating to:

  • harmonising audit/assurance standards;
  • monitoring international audit developments to ensure that Australia and New Zealand work together to form a mutually agreed position and response; and
  • harmonising annual reporting requirements contained outside of the financial statements.

TTAASAG also agreed to consider a longer term outcome relating to integrated reporting, and explore in greater detail the possibility of establishing equivalent guidance in relation to 'non-IFRS' reporting.

Action item: secretariat and Chair to draft outcomes and circulate to members for comment.

9. Enhance Profile and Influence in the International Arena

9.1. Engagement with Asia-Pacific Region

9.1.1. IFRS Regional Policy Forum arrangements for next forum (Treasury)

Treasury participated in the September meeting of the steering committee for the next IFRS Regional Policy Forum. The agenda is now close to being finalised. Kevin Stevenson and James Chisholm will be the Australian representatives at the forum.

9.1.2. Discuss outcomes from AOSSG conference in November (Kevin Stevenson)

Kevin Stevenson thanked the FRC, AASB, AUASB, XRB, NZASB and the NZAuASB for their contribution to the AOSSG conference in Melbourne in November. Kevin informed TTAASAG that he has been appointed to chair the AOSSG for the next two years. As Chair, Kevin intends on encouraging the development of greater standards in the less developed jurisdictions to bring the region towards global standards. It was noted that the IASB will set up an Asia-Pacific regional office in Tokyo in 2012.

9.1.3. FRC update on visit to overseas stakeholders

Lynn Wood gave TTAASAG an update on the issues covered on her recent visits to various overseas jurisdictions. Such issues included IFRS convergence, audit quality, integrated reporting, IPSAS and reducing complexity of financial reporting requirements. It was noted that the IFAC seminar on sovereign debt will be held in Vienna in March 2012.

10. Reports from member bodies

10.1. Professional accounting bodies' joint report on activities

The report was noted.

10.2. Auditing standard setters: Joint report from the AUASB and the NZAuASB

The report was noted. It was noted that the two boards are working closely together on a number of projects including preparing a joint guidance paper to provide guidance for SME audits.

10.3 Accounting standard setters: Joint report from the NZASB and AASB

The report was noted.

11. Other business

11.1. Frequency of meetings in 2012

TTAASAG agreed to reduce the number of meetings to two per year, with any further meetings to be scheduled on a needs basis.

11.2. Invitation of regulatory bodies to TTAASAG meetings

TTAASAG agreed to invite the FMA and ASIC to attend the TTAASAG meetings, initially on an observer basis.

11.3. Next meeting – will be held in Melbourne on 30 May 2012 (secretariat to confirm).