Holding off any final blessings Accounting

Priorities of regulators and legislators are always influenced by multiple factors - some of them under their control and others, more global in nature, suck them into an orbit from which it is hard to break.

Priorities of regulators and legislators are always influenced by multiple factors - some of them under their control and others, more global in nature, suck them into an orbit from which it is hard to break. Accounting standard setters are no different to securities regulators and legislators when it comes to dealing with contentious issues. There is a wide congregation representing various interests that it must bear in mind along with some predetermined directions on issues such as international harmonisation. Members of the new AASB kicked off recently with a review of the harmonisation material left by the former tenants. This housekeeping is more complex than some imagined and there are minor issues in each standard the new board wants fixed before looking at the big ticket agenda issues. Standards that were almost ready for issue include one on accounting for foreign currency translation, another on discontinued operations and an accounting rule on the disclosure of the performance of company segments.

Two views have been expressed by constituents in the business community about what the board should do in the case of those standards. One perspective would have required the board to not look at those standards in detail and just push them through because they were documents readied for publication by the old board awaiting the final blessing. This approach would have meant the new board gave its imprimatur to accounting rules without thinking about the contents of the documents in any detail. The second approach, taken by the new board, is to review the documents before final approval. Most of the outstanding standards had some amendments that were requested by the old board. Some amendments were also suggested through the 30-day comment period that is a final review mechanism before the board concludes its part of the standard setting process by promulgating the accounting rule. The former approach would have seen a rubber stamping of the previous board's work-in-progress. It is arguable whether ticking off those documents without posing some questions would have enabled the board to announce that it had made a sound decision to issue the standards.

New board members have reviewed the documents in order to inform themselves before making a final decision on those standards. Expect at least five revised or new accounting standards to be issued before the end of the year. Once it has completed the "scraps and leftovers" phase there are interesting issues for it to examine more closely. Old chestnuts facing the new board include the development of accounting standards on intangible assets and director and executive remuneration. Accounting for intangible assets must be examined, because it is one of the key harmonisation issues the previous incumbents failed to address as a full-blown project. The last time it was formally addressed by Australian standard-setters was 1989 - a project that ended without any standard being issued because the then board did not feel there was a concrete direction emerging from submissions to it. Director and executive remuneration has generated excitement in forums outside of the standard-setting arena, bubbling over into parliamentary committee.

During a recent committee hearing, AASB chairman Keith Alfredson was questioned by Senator Stephen Conroy, the shadow minister for financial services and regulation, on the likelihood of getting a standard in the area of director remuneration soon. Alfredson said the new board had the issue on its agenda, but an early determination on the issue is unlikely. He told the committee the board intended to continue the project the old board started late last year. "There are two issues here," he said. "One is disclosure of whether it is in the directors' reports or notes to the accounts; that is what this directors and executives disclosure document is about. Presently, the accounting standard requires just banded disclosures. "This is saying, 'Let's have something different from that,' but the new board has not turned its mind to that at all." Alfredson also told the recent Senate hearing that the G4+1 document on share based payment would be critical to the debate in Australia. "The AASB has undertaken to distribute this document," he said. "Then the board will receive input from that and the board will decide what it will do with it. In terms of that the board does not at this stage have a definite program as to what it will do."

He noted that a letter on director remuneration, written long before he even thought of participating in standard setting as chairman of the AASB, might come back to haunt him. "Six months ago, before I ever contemplated taking the job - so it will come back to bite me - I am on record as saying that the AASB ought to consider the US position as an absolute minimum position," he said, "that is, supplementary reporting with costs in the profit and loss account. That is only my personal view - it may never be the view of the board - but it is a view I hold strongly."

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The purpose of this database is to provide a full-text record of all articles that have appeared in the CDJ since February 1997. It is aimed to assist in the research and reference process. The database has a full-text index and will enable articles to be easily retrieved.It should be noted that information contained in this database is in pre-publication format only - IT IS NOT THE FINAL PRINTED VERSION OF THE CDJ - therefore there might be slight discrepancies between the contents of this database and the printed CDJ.