Accounting alert 2009/10 - October AASB meeting highlights
The AASB's October meeting was held on 28-29 October. Most of the meeting was devoted to a joint meeting with the New Zealand Financial Reporting Standards Board (FRSB), where substantial progress was made on a plan for convergence in financial reporting 'across the Tasman'. The AASB also progressed its differential reporting project and decided to issue non-mandatory guidance for those entities that elect to issue GAAP-GFS financial statements.
New Zealand convergence gains impetus
The Joint AASB-FRSB meeting was notable for the amount of goodwill towards achieving convergence between Australia and New Zealand in financial reporting requirements.
Spurred on by the August 2009 Joint Statement by Prime Ministers Rudd and Key on trans-Tasman cooperation, the Boards agreed to:
- Develop a joint exposure draft proposing to eliminate differences from foundation IFRSs and to ensure that supplementary materials in respect of for-profit entities are the same in both jurisdictions
- Consider a separate standard (identical in each jurisdiction) clearly showing any disclosure requirements applying to for-profit entities that are additional to those required by IFRSs
- Longer term, develop a joint exposure draft on convergence for not-for-profit/public benefit entities (based on the existing Process of Modifying IFRSs for PBE/NFP)
- In principle, develop an identical differential reporting framework in each country for for-profit entities, including a second tier for-profit private sector regime involving reduced disclosures but no amendments to the recognition and measurement requirements of IFRSs (i.e. the IFRS for SMEs would not be adopted in Australia or New Zealand)
- To hold three joint meetings in 2010, rather than one as has occurred in the past
- To develop a framework for the Boards to operate together on projects going forward, including the development of joint strategies, Board membership and operating protocols.
What does this mean for financial reporting?
The developments at the October meeting are a significant increase in the convergence efforts in financial reporting between Australia and New Zealand. The principles in the Joint Statement of Intent: Single Economic Market Outcomes Framework (PDF 44kb) issued by the Prime Ministers focus on seamless compliance between the two countries, including:
- Information should only need to be prepared once
- The regulatory outcomes between the countries should be substantially similar.
The push to issued joint exposure drafts on standard setting could see changes in many areas, with the possibility of disclosures and requirements being either added or deleted to achieve consistency. The interaction with the differential reporting and Corporations Act 2001 red tape reviews could see a substantially different reporting framework in the short to medium term.
Should the joint Board's goodwill to achieve these laudable outcomes be maintained and supported by a favourable regulatory environment on both sides of the Tasman, this initiative promises significant benefits and cost reductions to entities operating in both countries. The holy grail is that financial reports would be prepared in the same manner and for the same entities in both countries, without the need to consider differences in law, regulation or accounting standards (even though the same requirement may well be enacted differently between the countries, e.g. through corporations law in one jurisdiction and accounting standard in another).
The commitment of the Boards is a common sense and logical approach to accounting standard setting in today global realities and should be welcomed. The initiative also indirectly endorses other global convergence initiatives, such as the IFRS-US-GAAP convergence project and will serve by example to defend the goals of IFRS against calls for more national control over standard setting.
The other topics discussed at the meeting were as follows:
Joint AASB-FRSB meeting
- Conceptual framework (measurement) - joint letter to be written to the IASB expressing concern about the direction of the paper
- Liabilities/provisions - IASB project update
- Insurance contracts - noted there would be impacts of IASB's project on current Australian and New Zealand requirements
- IPSASB report - presentation from IPSASB Chairman and Chairman-designate on activities. It is understood that the Boards are generally of the view that the IPSASB standards and its governance are not sufficiently developed for adoption of IPSASB standards in Australia and New Zealand at this time
- Rate-regulated activities - both Board's submission will strongly oppose the proposals in IASB ED/2009/8 Rate-regulated Activities
- Not-for-profit disclosures - possibility of a joint project in this area was explored
- Financial instruments - update on IASB project
AASB separate meeting
- Differential reporting in Australia - Consultative Paper to be issued in November, with an Exposure Draft of the reduced-disclosure regime issued during the three-month exposure period. The objective is to publish a final document by mid-2010 to enable early adoption at 30 June 2010.
- GAAP/GFS harmonisation for entities in the General Government Sector - decision to issue non-mandatory guidance, which would be include material based on the proposals in ED 174 Amendments to Australian Accounting Standards to facilitate
- Improvements to IFRSs - draft AASB submission on IASB ED/2009/11 Improvements to IFRSs
- IASCF Constitution review - draft AASB submission.
The next meeting of the AASB is scheduled for 8-9 December 2009 in Melbourne.