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

10.00am-1.00pm, 30 May 2012

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



Scott Rogers (Chair) Australian Treasury
Kevin Stevenson Australian Accounting Standards Board
Merran Kelsall Auditing and Assurance Standards Board
Lynn Wood Financial Reporting Council
Kevin Simpkins External Reporting Board
Mark Shying CPA Australia
Yasser El-Ansary Institute of Chartered Accountants, Australia
Tom Ravlic Institute of Public Accountants
John Hodge New Zealand Institute of Chartered Accountants
Neil Cherry New Zealand Auditing and Assurance Standards Board

In attendence:

Jane Cheung (Secretary) Australian Treasury
Gaye Searancke Ministry of Economic Development
Kerry Hicks Institute of Chartered Accountants, Australia
Richard Moon New Zealand Institute of Chartered Accountants

Speaker phone:

Geoff Connor Ministry of Economic Development
Michele Embling New Zealand Accounting Standards Board
Doug Niven Australian Securities and Investments Commission
Jeromy Meerman Financial Markets Authority


Vicki Stylianou Institute of Public Accountants

Agenda Items

1. Welcome from the Chair

The Chair welcomed members to the meeting. As the former Chair James Chisholm is no longer working at the Australian Treasury, TTAASAG unanimously agreed that Scott Rogers would be appointed as Chair for the remainder of 2012-2013.

2. Minutes of the meeting of 13 December 2011

The minutes were approved.

3. Action items from previous meetings

The Chair discussed each outstanding action item from the 2011 August and December meetings.

3.1. Nominations Committee to meet to consider upcoming vacancies

It was noted that Judith Downes' term on the IFRS Advisory Council is expiring at the end of the year.

Action: Secretary to monitor appointments and organise meetings for the Nominations Committee where appropriate.

It was noted that John O'Grady has been appointed to the IFRS Interpretations Committee (IFRIC), and that Alex Malley has been appointed to the International Integrated Reporting Council (IIRC). Jane Diplock has also joined the IIRC as a Board member.

It was suggested that TTAASAG maintain a list of Australasian representatives on international bodies. The Group identified several lists that have been, or are being prepared and maintained, by several different bodies.

Action: Secretary to compile a list of Australasian representation on international bodies relevant to TTAASAG, with the assistance of TTAASAG members. ASIC will provide a schedule prepared for the ASIC Accounting Profession Chairs Committee.

3.2. IAASB Audit Quality project

It was noted that the International Auditing and Assurance Standards Board (IAASB) Audit Quality project has been deferred for six months to divert resources to the IAASB project on Auditor Reporting. The IAASB is aiming to finalise an Invitation to Comment on auditor reporting in June 2012.

The members agreed that Australia and New Zealand should provide separate submissions, but ensure that the submissions are as consistent as possible.

3.3. 2011 Report to Ministers

The Chair updated the Group that the 2011 Report to Ministers has been noted by both the Australian and New Zealand Ministers.

3.4. FMA response to ASIC Regulatory Guide 230

The Consultation Paper Draft guidance note: Disclosing non GAAP financial information issued by the FMA was discussed. It was noted that this is guidance similar to ASIC Regulatory Guide 230 (ASIC RG 230), for financial information contained outside of the statutory financial statements.

4. Monitoring policy developments in Australia and New Zealand

4.1. Update on Australian executive remuneration reforms, and key management personnel disclosures

The proposed 2012 executive remuneration reforms in Australia were discussed. The Bill is being prepared and Treasury expects to release a draft Bill for consultation later this year.

It was noted that Treasury would consult with the AASB when incorporating the disclosure requirements currently contained in clause 'Aus 29' of AASB 124 Related Party Transactions into the Corporations Regulations 2001, when the requirements are removed from the accounting standards from 1 July 2013.

It was noted that Treasury should consider how options should be categorised, under the proposed pay classifications of crystallised past pay, present pay and future pay.

4.2. New Zealand's Financial Reporting Framework review and the solvency test in Australia and New Zealand

New Zealand's Financial Reporting Bill was discussed. It was noted that the Bill is currently on track to be introduced in July this year. If the Bill cannot be passed in time to commence in the 2014-15 tax year, the changes will not come into effect until the following year.

The group discussed New Zealand's proposed solvency test, and consideration of including a forward-looking dimension to the definition of solvency, such as a cash-flow projection. Alternative approaches to incorporate the forward-looking element of solvency were discussed. It was noted that the Bill will be considered before a Committee for six months, and as part of the process, there will be opportunities to further consider the solvency test.

It was noted that Australia has received submissions to the consultation paper on the solvency test. Treasury is currently considering the options available.

The Group concluded that New Zealand and Australia should co-ordinate their approaches to the solvency test.

Action item: Australian Treasury and MED/MBIE to discuss solvency test issues in more detail.

5. Significant issues for discussion

5.1. Requirement for overseas companies to prepare financial reports for the New Zealand branch

The group addressed an action item from the last meeting, to expand on the requirement for overseas companies to prepare financial reports for the New Zealand branch. It was noted that the requirement acted as a means for the Inland Revenue Department (IRD) to ensure that New Zealand branches of overseas companies are appropriately taxed, and that it may be problematic for IRD if this requirement was removed.

The group discussed how the Australian Tax Office (ATO) copes with this problem, of ensuring that Australian branches of overseas companies are appropriately taxed without imposing financial reporting obligations. The group requested more information in relation to Australia's situation.

Action: Treasury to gather information on the ATO's approach.

5.2. Mutual recognition of auditors under TTMRA - update

It was noted that there has been good progress made on the mutual recognition of auditors in the lead up to the Auditor Regulation Act 2011 coming into force in New Zealand on 1 July 2012. The group also discussed operational issues with the Trans-Tasman Mutual Recognition Agreement (TTMRA).

It was noted that, as well as licensing individuals, New Zealand is proposing to register audit firms, in line with other countries such as European Union members; while Australia currently does not require audit firms to be registered. This represents a difference in the audit oversight systems between Australia and New Zealand.

5.3. Update on Australia's Audit Quality Bill

It was noted that the Bill has proceeded to the Senate, and has been passed by the House of Representatives. The Bill should hopefully be passed by Parliament before the end of June, as it is a non-controversial Bill.

It was noted that as part of these reforms, the FRC will have a strategic focus rather than an audit independence oversight role.

5.4. Update on the 'Assurance for Charities' discussion paper

The paper Auditing and Assurance for Large Registered Entities by MED was discussed. It was noted that at the moment, auditing for charities is unregulated, and the paper aims to seek comments on whether or not there should be statutory requirements for audits on charities. The MED discussion paper tentatively proposes mandatory assurance for charities with operating expenditure of $200,000 or more.

It was noted that there has been general support for such reforms, as this would strengthen the credibility and reputation of the sector.

The concept of a review rather than an audit, and the various possible thresholds to be imposed, was discussed by the Group. The audit expectation gap surrounding the use of the term 'review' was also discussed.

It was also noted by some that the paper contained estimates of audit fees based on the size of an entity. It was noted that size is not an appropriate basis on which to estimate audit fees, and that estimations of this nature are likely to cause unreasonable expectations in the community on audit fees for these types of entities.

The question about whether non-accountants can provide assurance services was also discussed.

5.5. Developments in integrated reporting

The FRC activities on integrated reporting were considered by the Group. One issue that was discussed was whether or not ASIC RG 230 acts as an impediment to integrated reporting, raised by IIRC. The FRC Integrated Reporting Task Force, with the help of ASIC, replied to the Council outlining why ASIC RG 230 is not an impediment, and it is now agreed that RG 230 should not be an impediment to integrated reporting in Australia

A further concern in Australia has been that integrated reporting would affect financial statements. This concern was addressed by the FRC Chairman in a meeting with the IIRC Chairman, Professor Mervyn King, in March this year to which he replied:

"In regard to your FRC submission, it has never been the intention of the IIRC that the Integrated Report would replace financial statements. It is interesting that in the many submissions that we had in regard to the discussion paper, integrated thinking was generally accepted. The only debate was the form of the Integrated Report. The framework contains guidelines and certainly at this stage there is no intent to have standards. There are excellent standards in financial reporting such as the IFRS, and in sustainability reporting as with the G3 standards. There is much guidance already on management commentary, governance and remuneration."

"With reference to your points, the annual report will be the annual Integrated Report; the Integrated Report will, as the discussion paper indicates, show how the financial has impacted on the non-financial and vice versa but it does not replace the financial report; the Integrated Report does not change the financial statements; the Integrated Report should replace certain forms of reporting but not financial reporting. For example, the Integrated Report may result in there being no need for a Chairman's report and/or a Chief Executive's report. A lot of information which may have been contained in the management commentary could be in the Integrated Report."

It was noted that New Zealand now has a participant in the IIRC pilot.

6. Outcomes agreement between Australia and New Zealand

It was decided that the Group will not recommend any new outcomes for the Trans-Tasman Outcomes Implementation Group in the medium term.

7. TTAASAG project plan

It was noted that the project plan for TTAASAG, as suggested in the last meeting is being drafted.

Action: Secretary to circulate draft project plan for comment out-of-session.

8. Enhance profile and influence in the international arena

8.1. Outcomes from the March IFRS Regional Policy Forum

Kevin Stevenson gave an overview of the IFRS Regional Policy Forum, and related events that were held in Kuala Lumpur during that period. The ongoing role of the IFRS Regional Policy Forum was also discussed.

9. Reports from member bodies

9.1. Professional accounting bodies' joint report on activities

The report was noted.

9.2. Accounting standard setters' joint report on activities

The report was noted.

9.3. Auditing standard setters' joint report on activities

The report was noted.

10. Other business

The date of the next meeting will be decided out of-session.