Australian Accounting Standards Board
AASB Chairman's report
The year to 30 June 2000 was a year of significant change in the structural arrangements for accounting standard setting in Australia. As a consequence of these changed arrangements there was something of a pause in standard-setting activities in the half-year to 30 June 2000. An initial 1 day meeting was held to deal with operating and administrative matters and the second, a 2 day meeting, dealt principally with the AASB's interim business plan and a number of proposed new and revised accounting standards under the Board's international harmonisation program.
I would like to give due recognition to the work of the former AASB and the PSASB during the half-year to 31 December 1999. These Boards were ably chaired by Ken Spencer and Ian Mackintosh respectively. Much of the immediate work of the reconstituted AASB relates to proposed new and revised standards that had reached the final stage of the due process under the international harmonisation program. The former Boards are to be commended for the considerable progress achieved under this program. The former Boards issued a number of new and revised Accounting Standards in the 6 months to 31 December 1999. Subsequently in February 2000 the Senate disallowed 2 paragraphs of Accounting Standard AASB 1015 Acquisitions of Assets.
I would like also to give recognition to the work performed by the employees of AARF who provided invaluable technical and administrative support to the standard-setting process throughout the year. This support extended beyond domestic standard setting to providing technical support to Australia's 2 members on the International Accounting Standards Committee, its representative on the Public Sector Committee of the International Federation of Accountants, as well as to the Joint Working Group on Financial Instruments and to the IASC steering committees on insurance, extractive industries and agriculture. The competence of this staff is well recognised by the G4+1 group of standard setters. I am delighted that from 1 July 2000, the AARF technical accounting and administrative staff transferred to the AASB.
Work program
An interim business plan setting forth the AASB's standard-setting priorities for the year to 30 June 2001 has been approved by the FRC. These priorities are detailed in Appendix E.
International activities
The business plan also places a strong emphasis on the AASB's continued participation in international standard-setting. New challenges lay ahead for the AASB to be effective in the international arena given the announced restructuring of the IASC with Sir David Tweedie as the initial full-time chairman and the planned appointment of a further 11 full-time members and 2 part-time members by 31 December 2000. In order to influence the outcome of future IASC debate, it will be important for the AASB to build strong lines of communication with the new IASC board. An Australian-based appointment would undoubtedly greatly facilitate the AASB's future liaison with the IASC. It is my hope that at least 1 Australian will become an IASC board member.
It is my intention to continue Australia's past extensive participation in the activities of the G4+1 group of standard-setters. This participation provides the AASB with an excellent opportunity to meet with the other major standard-setting bodies as well as assisting in finding ways to achieve convergence of accounting standards in the major jurisdictions. I intend also to re-establish the staff exchange program of earlier years with the other major standard-setters.
The development of a high standard set of global accounting standards, given the ever-increasing internationalisation of business, is extremely important. The decision by the President's Committee of the International Organisation of Securities Commissions (IOSCO) in May 2000 recommending that IOSCO members permit incoming multinational issuers to use the 30 'IASC 2000 standards` to prepare their financial statements for cross-border offerings and listings, (as supplemented by reconciliation, disclosure and interpretation where necessary to address outstanding substantive issues at a national or regional level) is a significant step in this direction. I believe it is essential that Australia continues to play a key role in this process and for the AASB to place a high priority on its statutory function to participate and contribute to the development of a single set of accounting standards for world-wide use.
I also believe that it is essential that standard-setting be based on adequate research, public consultation and careful deliberation about the reliability and relevance of the resulting information, having due regard to the related costs and benefits involved. The success of the standard-setting activities of the AASB is, therefore, in part dependent on receiving constructive input from constituents, including users and preparers and other interested parties. I urge all constituents to participate fully in the due processes of standard-setting, including the submission of comments on both domestic and international discussion papers and exposure drafts, the field-testing of new proposals and, where relevant, participation through project steering committees and our consultative group.
SIGNED
Keith Alfredson
Chairman of AASB
AASB Directors' report of operations
The members of the FRC, who are the directors of the AASB for the purposes of the CAC Act, have prepared this report under section 9 of the CAC Act in accordance with the requirements contained in Commonwealth Authorities and Companies Orders 1998 made by the Minister for Finance and Administration on 17 August 1998.
This report does not deal with the activities of the previous AASB during the period prior to 1 January 2000. Information about the membership and technical activities of that Board during the 6 months from 1 July 1999 to 31 December 1999 is contained in Appendix G.
Establishment, functions and powers
The AASB is a body corporate with perpetual succession established under section 226 of the ASIC Act. Under subsection 227(1) of that Act, its functions are:
- to develop a conceptual framework, not having the force of an accounting standard, for the purpose of evaluating proposed accounting standards and international standards;
- to make accounting standards under section 334 of the Corporations Law for the purposes of the national scheme laws;
- to formulate accounting standards for other purposes;
- to participate in and contribute to the development of a single set of accounting standards for world-wide use; and
- to advance and promote the facilitation of the development of accounting standards that require the provision of financial information that is relevant and reliable, facilitates comparability and is readily understandable to allow users to make and evaluate decisions about allocating scarce resources, and assessing the performance and financial position of entities.
Subsection 227(3) provides the AASB with the following powers:
- to engage staff and consultants;
- to establish committees, advisory panels and consultative groups;
- to receive money contributed towards its operating costs; and
- to do anything else that is necessary for, or reasonably incidental to, the performance of its functions.
Consistent with the functions and powers conferred on it by section 227 of the ASIC Act, the reconstituted AASB seeks to meet its objectives by developing and issuing Accounting Standards and Statements of Accounting Concepts.
Directors
The Australian Government Solicitor has advised that the members of the FRC are the directors of the AASB for the purposes of the CAC Act.
The names of FRC members during the period covered by this report, and their qualifications, are listed in Appendix A. Details of their attendance at FRC meetings is contained in Appendix D. All FRC members are non-executive directors of the AASB.
Technical activities of AASB during 1999-2000
Membership and meetings of AASB
Under the revised standard setting arrangements, the Chairman and members of the AASB are appointed under section 236B of the ASIC Act. The Chairman is appointed by the Treasurer while other members are appointed by the FRC. To be eligible for appointment, a person must have knowledge of, or experience in, business, accounting, law or government. The Chairman and members hold office on the terms and conditions that are determined by the Treasurer and FRC respectively. Appointments may be made for a period of up to 5 years and retiring members are eligible for reappointment.
The members of the reconstituted AASB are listed in Appendix B. The Board held 2 meetings for a total of 3 meeting days during May and June, and attendance of members at these meetings is set out in Appendix D.
Standard setting
The reconstituted AASB is responsible for the accounting standard setting activities previously performed by the old AASB and the PSASB.
During the first 6 months of 1999-2000, the previous AASB, in conjunction with the PSASB, made significant progress towards finalising Accounting Standards on Segment Reporting, Discontinuing Operations, Earnings per Share, Interim Financial Reporting, and Foreign Currency Translation and on developing Exposure Drafts on Director and Executive Remuneration and Related Party Disclosures.
The reconstituted AASB, which met for the first time in May 2000, has given a high priority to the completion of these projects. Since I July 2000, the AASB has approved new or revised accounting standards on Segment Reporting, Discontinuing Operations, Earnings per Share and Interim Financial Reporting.
In February 2000, the Senate disallowed 2 paragraphs of Accounting Standard AASB 1015 Acquisitions of Assets. This is the first occasion on which an accounting standard or part thereof has been disallowed.
Urgent issues group
The UIG was established in late 1994 with the purpose to review on a timely basis in the context of existing Accounting Standards and Statements of Accounting Concepts accounting issues that are likely to receive divergent or unacceptable treatment in the absence of authoritative guidance, with a view to reaching a consensus as to the appropriate accounting treatment. The operations of the UIG are carried out in accordance with its Charter. Meetings of the UIG are held in public and issue proposals, issue summaries, minutes of meetings and draft Abstracts are available to constituents. The UIG comprises 16 members drawn from a wide range of constituent groups in the public and private sectors and 2 observers. Membership of the UIG and nominating organisations are set out in Appendix C.
A consensus of the UIG requires that 11 or more members vote in favour of, and no more than 3 members vote against, the proposed treatment for the issue in question. The AASB has a reserve power of veto over UIG consensus views. A UIG consensus view is published in an Abstract. UIG Abstracts and their issue dates are listed in Appendix H.
Since 1 January 2000 the UIG has continued to meet and deal with issues under its old Charter. Under the restructured arrangements the UIG has been re-established as a committee of the AASB and revisions to its Charter and the appointment of new members have been undertaken in consultation with the FRC.
Abstracts issued in the period from 1 January 2000 - 30 June 2000 are listed in Appendix F.
Due process
The AASB adopts a comprehensive 'due process` (outlined in PS 1 The Development of Statements of Accounting Concepts and Accounting Standards) when developing its pronouncements, and encourages the preparers and users of financial reports to participate actively in the standard-setting process by:
- communicating its views and policies to a broad range of interested parties via Discussion Papers, Accounting Theory Monographs, Invitations to Comment and Exposure Drafts;
- meeting with representatives of interested parties and organisations;
- inviting public comment on its policies, procedures, priorities and standards under consideration;
- issuing media releases related to its activities; and
- maintaining a website (www.aasb.com.au).
In addition, the AASB publishes an AASB Action Alert to keep interested parties informed of the AASB's deliberations at each of its meetings. The AASB Action Alert is available as a separate subscription service.
Consultative group
The reconstituted AASB has decided to establish a Consultative Group which brings together the interest groups represented on the consultative groups of the previous AASB and former PSASB.
The first meeting of the new Consultative Group is expected to be held before the end of 2000.
Liaison with constituents
The AASB meets with a wide range of people to discuss matters of interest both generally and in relation to specific projects.
Use of website
The AASB maintains a website (www.aasb.com.au). The website is used to provide information about the AASB, its activities and work program to its constituents and other interested parties. The AASB has indicated its intention to put brief summaries of key projects on the Board's website outlining the background to each project and recent progress and Board decisions and to investigate using its website to seek comments and feedback from constituents via electronic means. The AASB also includes selected agenda papers on its website.
Seminars
Members of the AASB and its staff are available to present papers on matters relating to the AASB's work program at seminars, congresses and conferences held throughout Australia.
International activities
Standard-setting must keep pace with the constant changes in the reporting environment and a `once-off' program to harmonise is unlikely to remove all of the incompatibilities between Australian standards and those of other major standard-setters. For this reason, the AASB has an ongoing broader element to its International Harmonisation Program which is designed to ensure that Australian standards keep pace with world's best practice and continue to enhance the credibility and efficiency of the Australian capital markets and assist Australian business' participation in overseas capital markets. This broader element of the AASB's International Harmonisation Program involves closely monitoring the activities of other relevant national accounting standard-setting bodies, particularly those in the United States of America, Canada, New Zealand, and the United Kingdom, in addition to those of the IASC. The AASB uses the work of these standard-setting bodies in the development of Australian pronouncements and endeavours to ensure that, where possible, the pronouncements are consistent with those of its international counterparts.
The primary group of national standards-setters with which the AASB is involved is informally known as the 'G4+1` group of standard-setters, comprising Australia, Canada, New Zealand, the United States of America, and the United Kingdom, with an observer from the IASC. The G4+1 group met once during the period covered by this report. Through close working relationships with other national standard-setters, the AASB is able to contribute directly to the international development of accounting standards and to work towards the harmonisation of Australian and other national financial reporting requirements.
Under arrangements applying to the end of 2000 the Australian members of the IASC Board represent, and are appointed by, both the CPAA and the ICAA. Both Australian members of the IASC to 30 June 2000 were members of the AASB until 31 December 1999 and, together with a staff member, attended meetings of the IASC. During the year, Australia was also represented by an AASB member on the International Joint Working Group on Financial Instruments; by a former UIG member on the IASC's Standing Interpretations Committee; by a former AARF staff member who is Chairman of the IASC Steering Committee on Insurance; and by a former AASB member who is Chairman of the IASC's Steering Committee on Extractive Industries.
The IASC is presently being restructured. The new organisation is to have 2 main bodies, a Board of Trustees and a Standards Board, as well as a Standards Interpretation Committee and Standards Advisory Council. The Trustees are to appoint the Board members, exercise oversight and raise funds needed, whereas the Board will have sole responsibility for setting accounting standards. The Board will comprise 12 full-time members including a full-time Chairman and 2 part-time members appointed by the Trustees. On 19 May 2000, the initial 19 Trustees of the restructured IASC were announced, including Ken Spencer the Chairman of the out-going AASB. IASC Board members are to be appointed by the Trustees on the basis of their personal integrity, technical competence, analytical and interpretation skills and judicial temperament. On 29 June 2000, the Trustees announced the appointment of Sir David Tweedie, Chairman of the United Kingdom Accounting Standards Board, as Chairman of the IASC Board.
Australia is also a member the International Federation of Accountants Public Sector Committee (IFAC-PSC). Australia's representative on the IFAC-PSC is appointed by the ICAA and CPAA. Australia's current representative and Chairman of the IFAC-PSC is also a member of the AASB. AASB staff provide technical support for Australia's involvement in this committee as part of the AASB's commitment to international activities that impact on public sector reporting in Australia.
Other bodies
During the year, the AASB provided input into the work of a number of other bodies, including:
- the IASC and the New Zealand standard-setting bodies on various proposed accounting standards;
- the Life Insurance Actuarial Standards Board; and
- the Commonwealth Treasury on Government proposals for reforms of the Corporations Law, including proposed reforms to standard-setting.
In addition, a former member of the AASB and a member of the staff are members of the Australian Property Institute's Australian Valuation and Property Standards Board.
Indemnities and insurance premiums for officers
No indemnities have been given or agreements made in respect of any current or former officer of the AASB. The AASB has arranged professional indemnity insurance with COMCOVER for officers but the amount of the premium is yet to be determined.
Audit committee
The members of the AASB's audit committee are Ms E. Alexander, AM (Chair), Mr J. Lucy and Ms J. McCahey.
No meetings of the audit committee were held prior to 30 June.
Ministerial responsibility
The Treasurer, the Hon. Peter Costello MP, and, in matters determined by him, the Minister for Financial Services and Regulation, the Hon. Joe Hockey MP, are the Ministers responsible for the AASB under the ASIC Act.
Preparation of report
The report is made in accordance with a resolution of the directors passed on 13 October 2000 and is signed in accordance with that resolution.
SIGNED
Paul J Rizzo
Chairman
16 October 2000
AASB publications
All authoritative pronoucements issued by the AASB and UIG, including Statements of Accounting Concepts, Policy Statements, Accounting Standards (AASB and AAS series), Accounting Interpretations and UIG Abstracts, are available for purchase from the AASB. A full list of pronouncements currently on issue is at Appendix H.
The AASB also publishes a range of other documents, including:
- an AASB Action Alert to keep interested parties informed of the AASB's deliberations at each of its meetings;
- exposure drafts of proposed new and revised accounting standards;
- invitations to comment (often concerning significant revisions to proposals previously issued as exposure drafts);
- Accounting Theory Monographs; and
- consultative and discussion papers issued in conjunction with the G4+1 or other national accounting standard setters.
The AASB provides subscription services in respect of most of these documents. In addition, individual copies are available for sale. Further information can be obtained from the AASB using the contact details set out below.
Freedom of information
The AASB maintains possession of the following documents:
- copies of Accounting Standards;
- copies of Exposure Drafts and Invitations to Comment;
- copies of Media Releases;
- AASB and UIG meeting agenda papers;
- correspondence with constituents, including responses to Exposure Drafts and Invitations to Comment; and
- internal technical and administrative papers, including project proposals, key decisions questionnaires, issues papers, draft Exposure Drafts and draft Accounting Standards.
Requests under the Freedom of Information Act 1982 for access to other documents in the possession of the AASB can be directed to the AASB Secretary using the contact details set out below.
The AASB received 1 application under the Freedom of Information Act 1982 during the year.
Contacting the AASB
The AASB can be contacted as follows:
Post: The Secretary
Australian Accounting Standards Board
Level 3, 530 Collins Street
MELBOURNE VIC 3000
Telephone:
(03) 9617 7600
Facsimile:
(03) 9617 7608
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