Accounting standards are front of mind as a new discussion paper addresses the intricacies of disclosure.
With AGM season upon us, the topic of financial reports and disclosure is high on many directors’ minds. So it’s timely that both the Australian (AASB) and International Accounting Standards (IASB) Boards have been consulting on a discussion paper covering the principles of disclosure. AICD members have often complained about disclosure overload and our submissions over the years have emphasised this.
This consultation is part of a broader initiative aimed at addressing perceived problems around disclosure in financial reports. These include ineffective communication and lack of relevant information. The Standards Boards want to develop overarching principles and then apply these principles on a standard-by-standard basis to bring a more consistent approach to developing and applying disclosures in the financial report.
Other initiatives are running concurrently with this project — including the development of more application notes on materiality; and a project looking at the presentation in the primary financial statements.
The discussion paper is broad and covers the role of the financial statements versus the role of the notes; effective communication principles; the provision of information outside of the financial statements; the inclusion of non-IFRS (International Financial Reporting Standards) information; how performance measures can be fairly presented in financialstatements; when accounting policies are required; and the form and location of centralised disclosure objectives.
Of particular note is the focus on non-IFRS information and performance measures. The discussion paper wants to clarify that EBIT (earnings before interest and tax) and EBITDA (earnings before interest, tax, depreciation and amortisation) are valid performance measures. The AICD supports this. The paper also wants to include requirements for the presentation of non-IFRS financial information (like underlying proft) within the report. Such proposals are similar to current ASIC guidance, but including them in the standards will allow a consistent international approach and improve the relevance of the financial report.
Modernising business registries
Businesses and government agencies interact with ASIC registry services every day, with more than 90 million searches annually. There are 2.2 million companies on the Companies Register and over seven million active ABNs. The Australian Government is consulting on modernising 31 of these business registry services, looking at options to streamline their functions and upgrade their infrastructure to provide a modern, user-friendly registry service. The main registers being considered are the Australian Business Register, the Companies Register and the Business Names Register. The discussion paper envisages that legislative change will be required to support modernisation of technology neutrality, platform support and government administration.
We will continue to advocate for changes to legislation in regard to publication of directors’ personal information due to safety concerns and the growing risk of identity theft.
The AICD fully supports this. Bringing different registers into one platform will improve accessibility by business, and the timeliness and accuracy of information provided to business.
We will continue to advocate for changes to legislation concerning publication of directors’ personal information because of safety concerns and the growing risk of identity theft.
AASB turns eye to NFP sector
The AASB has recently embarked on work regarding the financial reporting framework for charities. They are in the process of preparing a research report identifying current legislation and accounting requirements in Australia, NZ and other overseas jurisdictions. They are also preparing a draft consultation paper on charities, which will provide options for improving the financial reporting framework (including possible reporting thresholds) applicable to charities registered with the Australian Charities and Not-For-Profts Commission (ACNC). It is intended that the paper will be issued in time to enable adequate input into the legislative review of the ACNC commencing in December. The AASB expects to review the draft consultation paper at its public meeting in Melbourne on 10–11 October.
The 2017 Federal Budget dedicated $5.6 million over three years to fund the Department of Treasury to undertake a series of rolling reviews of regulatory frameworks to ensure they remain ft for purpose.
After consulting with our policy committees, the AICD Advocacy team met with Treasury to suggest aspects of the legislative framework needing review, including reforms to make laws technologically neutral, support electronic signatures and remove duplication of requirements across legislation.
As Treasury’s work in this area will continue over the coming two years, members with ideas for reform initiatives to improve regulation without significantly changing substantive policy settings are encouraged to contact the Advocacy team.
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