The External Reporting Working Group (ERWG) had its first check in for 2019 on Tuesday 19 February.
A summary of discussion topics is as follows:
- Large Proprietary Company Thresholds:
Treasury initiated a consultation process in November around “Reducing the financial reporting burden by increasing the thresholds for large proprietary companies”
The proposal is for the thresholds used to determine whether a proprietary company is “large”, are doubled as follows:
- increasing the annual consolidated revenue threshold to $50 million or more;
- increasing the value of gross assets to $25 million or more; and
- increasing the maximum employee size to 100 employees or more.
The objective of the increased thresholds is to ensure financial reporting obligations are targeted at economically significant companies, while reducing costs for smaller sized companies that would no longer be required to lodged audited financial reports with ASIC. While this seems to be a sensible initiative that the G100 would support on the grounds of red tape reduction, the working group has queried the basis for doubling the thresholds. While the group fully supports any increase we wonder whether the revised thresholds could still be too low to adequately balance economic significance with red tape.
- ASIC user pays model:
The charge out of ASIC costs to users, which was passed in legislation in 2017
(see https://www.acuitymag.com/finance/auditors-advisers-hit-by-new-asic-fees), has been discussed. Members are seeing that the costs being charged to audit firms are being directly passed onto clients. The working group has queried whether this was the intent of ASIC’s model and whether this is something the G100 should have a collective view on.
- AASB Disclosure Initiative / Management Commentary Practice Statement:
This relates to the IFRS Management Commentary Consultative Group. The AASB is looking at adoption of the IFRS practice statement relating to management commentary in Australia.
There is the potential for conflict with the guidance on operating and financial reviews provided by ASIC in RG247, albeit that the IFRS document is intended to be a guide rather than a standard.
- Revised Conceptual Framework:
The AASB is continuing to work on the introduction of the IASB’s revised Conceptual Framework for Financial Reporting into Australia, as well as its impact on financial reporting requirements (in particular, on the concept of special purpose financial reports). The ERWG is monitoring developments however, due to the diversity of opinion amongst G100 members regarding the AASB’s proposal, there is no consensus response for the G100 to provide.
- Sustainability/climate risk reporting:
I have continued to participate in the separate working group established to deal with sustainability and climate risk reporting matters chaired by Terence Jeyaretnam (EY).
Particular focus at the moment is on the AASB and AUASB’s guidance: Climate-related and other emerging risk disclosures: assessing financial statement materiality using AASB Practice Statement 2 (Making Materiality Judgements) released in December 2018.
20 February 2019
The Group of 100 (G100) represents CFOs in Australia with the mission of leading the national debate on key financial and business issues which impact on business performance, regulatory oversight and the nation’s competitiveness.
The External Reporting Working Group supports this mission by providing thought leadership on external reporting matters of importance to G100 members.
Current membership is as follows:
- Leanne Chandler – Aurizon
- Simon Cammell – Australia Post
- Andrew Pruys – Australia Post
- Anne Battilana – Bendigo & Adelaide Bank
- Wayne Armour – BlueScope Steel
- Russell Oborne – BlueScope Steel
- Rob Ramsay – Brambles
- Shaun Steenkamp – NAB
- Russell Macfarlane – Qantas
- Adam Sofoulis – Wesfarmers