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Labor Member's Supplementary Report
Inquiry into the Australian Accounting Standards tabled in compliance with the Corporations
Act 2001 on 30 August and 16
November 2004
Introduction
Labor members concur with the
recommendations of the Committee and are also of the view that the relevant
standards not be disallowed. However, we wish to make a number of additional
comments.
Labor's Position
There are four issues on which Labor members wish to add to
the Committee report. These include:
- Interpretation of the standards
- Consistency of the standards with regard to multiple treatments
within standards
- Requirements under s300A of the Corporations Act and AAS 1046 and
1046A
- Issues relating to the content of the standards, in terms of the
impact of the new Australian Accounting Standards (AAS) on co-operative
business structures
Interpretation of the standards
Labor members recommend that the AASB urgently prepare for
the likely increase in the volume of requests for interpretation and
clarification of standards.
While recognising that the onus for interpreting the
standards lies with the reporting company, it is important to provide avenues
of support for businesses as they interpret and implement the new standards. We
consider support for companies would be enhanced as result of the AASB
conferring with the International Accounting Standards Board to explore
efficiencies for future resolution of interpretation requests.
The role of the Urgent Issues Group was discussed by the
NIA, who said in their submission that the UIG could play a more consultative
role, assisting businesses with understanding of the new standards in addition
to providing interpretations where necessary.[1]
Labor members encourage consideration of a more consultative approach for the
UIG or the establishment of another nominated consultative group of the AASB.
Recommendation 1: That the AASB consider expanding the
role of the Urgent Issues Group to allow for more consultation with companies
requiring explanation of the new standards
Consistency of the standards with regard to multiple accounting
treatments
The committee noted strong concerns from BHP Billiton,[2]
The Group of 100[3]
and KPMG[4],
regarding the demands of reporting for Australian entities with
multi-jurisdiction reporting obligations. This arises from the need to use one
treatment of an accounting standard in Australia and a different standard
internationally, despite the implementation of international accounting
standards.
Labor members also noted the statements of AASB Chairman Boymal
with regard to the IASB's intention to remove alternate treatments as soon as
practicable in the future.
While recognising the burden that different accounting
treatments in different jurisdictions places on a number of Australian based
organisations in the short term, it is understood that this issue will be
resolved as the IASB eliminates alternative treatments and as the AASB consults
with the IASB and updates its standards over coming years.
Requirements under s300A of the Corporations Act and AAS 1046 and 1046A
A submission to the Inquiry from KPMG, identified the
potential overlap and inconsistency that exists between s300A of the
Corporations Act and AAS 1046 with regard to disclosure of executive
remuneration. The differences relate to the selection of executives whose
remuneration details are to be disclosed. Labor member's acknowledge and
welcome Professor Boymal's advice to the Inquiry that Treasury and the AASB to
working to resolve theses issues.[5]
We also note Professor Boymal's view that resolution of these differences is
possible without alteration of the s300A requirement.[6]
As Professor Boymal in his evidence to the Inquiry stated
'Apart from the differences in people, the parliament decided that 300A [of the
Corporations Act] information would be for publicly listed companies. There are
other entities who have to provide the 1046 information'[7]
In light of this advice, Labor members wish to note that AAS
1046 should be read as a supplement to the Corporations Law and be read in
conjunction with it. Accounting standards do not replace, and should not be
seen as a replacement of the executive remuneration disclosure requirements
contained in s300A.
Issues relating to the content of the standards, in terms of the impact of
the new Australian Accounting Standards (AAS) on co-operative business
structures
As identified in the committee report, the Inquiry received
submissions from co-operative entities regarding the impact of new standards on
the accounting treatment applied to a member's initial financial investment.[8]
While concurring with the position that technical matters of this nature are
outside the terms of reference of the committee, Labor members have noted the
significant concern among cooperatives on this issue and determined that
further comment was justified.
In reference to this issue, AASB Chairman David Boymal
stated to the committee, 'There's going to need to be an educational program so
that this [the impact on co-operatives] is understood by all.[9]
Labor member's support this view and suggest that the AASB and ASIC confer on
how best to provide support on this issue.
It was noted by Senator Burke, that in the case of
co-operative entities in the financial services industry, that APRA
requirements for capital reserves may be impacted by these changes. In
response, Professor Boymal stated;
'Yes, but APRA would be
understanding, APRA has already said to quite a number of companies that come
under its control that, until it, APRA, can come to grips with that, the old
rules will prevail whilst they work out how to deal with the issues.'[10]
Recommendation 2: That the AASB, ASIC and APRA consider a
means of delivering educational support for co-operatives in relation to the
impact of the new standards on the accounting treatment of a member's initial
financial investment.
For Labor Members
Ms ANNA BURKE MP
DEPUTY CHAIR
SENATOR KATE LUNDY
SENATOR PENNY WONG
MR CHRIS BOWEN
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