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.
in regard to
due to safety
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