Bulletin
2009 / 06 – October 2009
The Financial Reporting Council (FRC) hosted a high level delegation from Japan on a fact finding mission to investigate the adoption of IFRS in Australia, and the lessons to be learnt for the possible adoption of IFRS in Japan from 15-18 September 2009. The principal features of the numerous meetings were:
- reports from and discussions with stakeholder bodies in Sydney, Canberra and Melbourne;
- the consensus that the process had had a 'soft landing' in Australia; and
- promotion of IFRS in the Asia-Pacific region and of a regional perspective.
Japanese delegation
The high level delegation from Japan was composed of:
- Mr Noriaki Shimazaki, of Sumitomo Corporation, a Trustee of the IASCF and Chairman of the Nippon Keidanren's (Japan Business Federation) Subcommittee on Accounting, and Acting Chairman of the Japanese Financial Services Agency's Financial System Council.
- Mr Shimboku Hattori, Deputy General Manager, Head of Accounting Research Team, Accounting and Controlling Department, Sumitomo Corporation,
- Mr Toshio Kinoshita, Chief Executive Japanese Institute of Certified Public Accountants (JICPA)
- Ms Kazumi Kojima, Senior Director-IFRS Desk JICPA; and
- Mr Akiyoshi Maruyama, Technical Manager Accounting Standards Board of Japan.
They were accompanied by a number of Sumitomo Australia representatives - Mr Takechiyo Tanaka, Managing Director; Mr Fumihiko Otsuki, Senior Manager, Corporate Services Division; and Mr Jin Oliver, Financial Controller.
Discussions with stakeholder bodies
They met with a variety of Australian stakeholders, and were accompanied by Mr Jeffrey Lucy* AM (for all but their final meeting) including:
Sydney, 15 September 2009 (including Mr Tim Hicks, Policy Officer, Corporate Reporting and Accountability Unit (CRAU), Corporations and Financial Services Division (CFSD), Markets Group (MG), Australian Treasury)
- Mr Warren Zhang, Adviser, ASX
Mr Michael Coleman*, National Managing Partner, Risk & Regulation, KPMG
Mr Stuart Wilson* CEO, ASA - Mr Keith Reilly, National Head of Professional Services, Grant Thornton
- Mr Geoff Steel, Head of Accounting Regulation, Australian Prudential Regulation Authority
Mr William Jones, Head ADI Policy Development Team, APRA - Mr Lee White, General Manager, Leadership & Quality, ICAA
- Dinner hosted by the Institute of Chartered Accountants in Australia
Canberra, 16 September 2009 (including Mr Bruce Donald, Senior Adviser, CRAU, CFSD, MG, Australian Treasury)
- Mr Peter Anderson, Chief Executive, Australian Chamber of Commerce and Industry (ACCI)
Ms Rozanne Crawford, Director Corporate Services, ACCI
Mr Paul Gallagher, Executive Director Australia-Japan Business Cooperation Committee, ACCI - Mr Geoff Miller, General Manager CFSD, MG, Australian Treasury
Mr Bede Fraser, Manager, Corporate Reporting and Accountability Unit (CRAU), CFSD, MG, Australian Treasury
Mr Les Pascoe, Senior Adviser, CRAU, CFSD, MG, Australian Treasury [CFSD team] - Mr Tim Youngberry, Acting General Manager Financial Management Group, Department of Finance and Deregulation
Mr David Martine, Acting Executive Director, MG, Australian Treasury
CFSD team - Mr Roger Cobcroft, Senior Director, Professional Services Branch, Australian National Audit Office
Mr Bede Fraser, Manager, CRAU, CFSD, MG, Australian Treasury
Mr Les Pascoe, Senior Adviser, CRAU, CFSD, MG, Australian Treasury
Melbourne, 17 September 2009 (including Mr Bruce Donald, Senior Adviser, CRAU, CFSD, MG, Australian Treasury)
- Mr Bruce Porter, Deputy Chair Australian Accounting Standards Board (AASB)
Mr Angus Thomson, Technical Director AASB
Mr Robert Keys, Deputy Technical Director, AASB. - Mr Jan West* AM, Partner, Deloitte Touche Tohmatsu
Mr Michael Dwyer*, Commissioner, Australian Securities and Investments Commission (ASIC)
Ms Noelle Kelleher*, Partner, Deloitte Touche Tohmatsu - Ms Judith Downes, Chief Financial Officer, Alumina Limited; G100 Executive
- Mr Doug Bartley, Victorian Chairman and Partner, KPMG
Mr Peter Carlson, Partner, Department of Professional Practice Audit, KPMG
Mr Anthony Braden, Head Accounting Policy, National Australia Bank - Mr John Stanhope*, Chief Financial Officer and Group Managing Director Finance and Administration, Telstra; G100 Executive
- Drinks hosted by Australian Accounting Standards Board
Melbourne, 18 September 2009
- Mr Patrick Durkin, Reporter Australian Financial Review
Sydney, 18 September 2009
- Mr Doug Niven, Senior Executive Leader of the Accountants and Auditors team, ASIC
(*Names with asterisks are FRC members)
The impact of IFRS adoption in Australia
While no comprehensive assessment of the impact of IFRS adoption in Australia has been undertaken it was argued that adoption had had a number of beneficial effects, some of which would be hard to quantify. The most significant benefits had accrued to enterprises operating internationally, since there was the possibility of operating with a unified set of accounting principles, but that all entities had potentially gained – from an increase in transparency, a possible reduction in the cost of capital (or increased ease of raising funds offshore), and the adoption of what was generally a better and more comprehensive set of accounting standards. Because IFRS had also been adopted for the public sector and not-for-profit entities there was the benefit of having one set of accounting rules for Australia, which was interchangeable on an international basis, and which led to considerable workforce gains (one set of training and ease of finding qualified staff).
Most entities felt that there was no systematic increase in ongoing operating costs, but that there had been a significant one-off cost to transition to the new system. The changes to the treatment of brand names and other intangibles, and the introduction of the financial instruments standard were the areas where there had been the greatest adjustment costs arising from the transition to IFRS. The treatment of a number of financial instruments – such as life insurance – under the financial instruments standard, and the costs of adopting the standard for large financial institutions were possibly the hardest adjustments to make for preparing entities. It may be useful, therefore, in Japan, to have financial instruments accounting converging to IAS 39 as a priority. Given that the benefits of IFRS adoption come from reporting IFRS compliance it could be desirable to make reporting to the new IAS 39 standard compulsory in advance of the IASB date of 2012.
For Australia, the choice, given the need to enhance international comparability, had not been between continuing with the old AGAAP system and IFRS, but between a move to US-GAAP and IFRS. In this light it was clear that IFRS had the merit of being principles based, and not being a narrow, nationally focussed system, and one which Australia could influence through research and engagement.
For the Japanese delegation the shift to a principles-based system was a clear focus of interest, and a number of features of this were discussed: the general view was that while principles based systems allowed a degree of flexibility in the interpretation of accounting standards they did not lead to greater scope for fraud or opportunistic behaviour. Australian discussants felt that where the tax arrangements are integrated with the accounting standard, as they had been in Australia for superannuation, it would be essential to work with tax authorities and advisors – this situation applies quite generally in many overseas jurisdictions e.g. Japan, the US and UK.
Promotion of IFRS in the Asia-Pacific region
In addition to the desire to learn about the process of IFRS adoption in Australia, the Japanese delegation expressed a desire to increase Australian-Japanese cooperation in the accounting standards sphere, in particular with a desire to provide a counterpoint to the interests of the European Union and US in the IASB. They also thought that the development of a regional perspective on appropriate accounting standards issues and encouragement of greater regional harmonisation through convergence toward IFRS would be desirable for both parties and something to work towards. The establishment of the Asian Oceanian Standards Setters Group is a good step in this direction.
About the FRC
The FRC is the peak body responsible for the broad oversight of the accounting and auditing standard setting process for the private and public sectors, as well as monitoring the effectiveness of auditor independence requirements in Australia. It comprises key stakeholders from the business and investing communities, the professional accounting bodies, governments and regulatory agencies. A list of the current FRC membership is on the FRC's website.
The FRC advises the Government on the accounting and auditing standard setting process and on the development of international accounting and auditing standards. It determines the broad strategic direction of the standard setters, the Australian Accounting Standards Board and the Auditing and Assurance Standards Board.