Dana Wortley (SA, Australian Labor Party) Share this | Link to this | Hansard source

Following the receipt of a satisfactory response, on behalf of the Standing Committee of Regulations and Ordinances, I give notice that on the next day of sitting I shall withdraw business of the Senate notice of motion No. 1, standing in my name for 14 days after today, for the disallowance of Accounting Standards AASB 2008-10, made under section 334 of the Corporations Act 2001. I seek leave to incorporate in Hansard the committee’s correspondence concerning this instrument.

Leave granted.

The document read as follows—

Accounting Standard AASB 2008-10

27 November 2008

Senator the Hon Nick Sherry

Minister for Superannuation and Corporate Law

Suite M1.46

Parliament House

CANBERRA ACT 2600

Dear Minister

I refer to following Accounting Standards made under section 334 of the Corporations Act 2001 .

Accounting Standard AASB 2007-10

This instrument makes amendments to a number of Accounting Standards as a consequence of the revision of Accounting Standard AASB 101. This Accounting Standard appears to have been made in December 2007 but was not registered on the Federal Register of Legislative Instruments until October 2008. The Committee would appreciate your advice as to the reasons for the delay in registering this instrument.

Accounting Standard AASB 2008-10: Amendments to Australian Accounting Standards – Reclassification of Financial Standards [AASB 139 and AASB 7]

Amongst other things, this instrument adds a new paragraph 50B to Accounting Standard AASB 139. That paragraph states that a financial asset (as defined) may be reclassified out of the fair value through profit or loss category only in rare circumstances. The phrase ‘in rare circumstances’ is not precise. The Committee therefore seeks your advice as to whether this term has a generally understood meaning in the accounting profession, or whether it requires more precise definition.

The Committee would appreciate your advice on the above matters as soon as possible, but before 23 January 2009, to enable it to finalise its consideration of these Standards. Correspondence should be directed to the Chair, Senate Standing Committee on Regulations and Ordinances, Room SG49, Parliament House, Canberra.

Yours sincerely

Senator Dana Wortley

Chair

14 January 2009

Senator Dana Wortley

Chair

Standing Committee on Regulations and Ordinances

Parliament House

CANBERRA ACT 2600

Dear Senor Wortley

Thank you for your letter of 27 November 2008 concerning Accounting Standards 2007-10 and 2008-10.

You sought an explanation of the reason for the delay in registering Accounting Standard 2007-10 and the use of the phrase ‘in rare circumstances’ in Accounting Standard 2008-10.

AASB 2007-10 affects the terminology in most accounting standards as they apply from 1 January 2009, but has no substantive impact on the meaning of those standards. The Australian Accounting Standard Board (AASB) has advised that the delay between making and lodging the standard was an administrative oversight and that measures are in place to prevent a re-occurrence of this oversight.

In relation to AASB 2008-10, the term ‘in rare circumstances’ was introduced by the International Accounting Standards Board (IASB) in its October 2008 amendments to International Accounting Standard (lAS) 39 and International Financial Reporting Standard (IFRS) 7.

The AASB adopted the same wording as the IASB in accordance with its policy of adopting IFRSs in their entirety. Entities and auditors applying the standards will need to decide when rare circumstances arise. The impetus for the amendments were the conditions arising from the financial crisis, and the media release issued by the IASB accompanying the amendments implies that the crisis itself can be regarded as having given rise to rare circumstances.

Thank you for bringing these matters to my attention.

I trust this information will be of assistance to you.

You sincerely

Nick Sherry

Minister for Superannuation and Corporate Law

5 February 2009

Senator the Hon Nick Sherry

Minister for Superannuation and Corporate Law

Suite M1.46

Parliament House

CANBERRA ACT 2600

Dear Minister

Thank you for your letter of 14 January 2009 responding to the Committee’s concerns with the Accounting Standards AASB 2007-10 and AASB 2008-10. The Committee considered your advice at its meeting today and agreed that it had addressed its concerns with regard to Accounting Standard AASB 2007-10.

In your response you advise that Accounting Standard AASB 2008-10 adopted the term ‘in rare circumstances’ following its introduction in October 2008 into the international standards. Notwithstanding that the phrase appears to have some common meaning in the auditing and accounting professions, the Committee would appreciate further information on this matter. You advise that entities and auditors will need to decide when rare circumstances arise. It is not clear how such decisions are to be monitored and checked and what liability will ensue if the decision that the circumstances are ‘rare’ is incorrect.

Given the recent changes to the Senate sitting pattern, the last day on which the Committee may give a notice of motion to disallow Accounting Standard AASB 2008-10 falls on 11 February 2008. The Committee proposes to give a notice on that day to preserve its position while it awaits your advice on the above matter.

The Committee would appreciate your advice as soon as possible to enable it to finalise its consideration of this Accounting Standard. Correspondence should be directed to the Chair, Senate Standing Committee on Regulations and Ordinances, Room SG49, Parliament House, Canberra.

Yours sincerely

Senator Dana Wortley

Chair

11 February 2009

Senator Dana Wortley

Chair

Standing Committee on Regulations and Ordinances

Parliament House

CANBERRA ACT 2600

Dear Senator Wortley

Thank you for your letter of 5 February 2009 seeking further advice on the use of the phrase ‘in rare circumstances’ in Accounting Standards 2008-10.

As noted in my letter of 14 January 2009, the term ‘in rare circumstances’ was introduced by the International Accounting Standards Board (IASB) in its October 2008 amendments to International Accounting Standard (lAS) 39 and International Financial Reporting Standard (IFRS) 7 and this was adopted in its entirety by the Australian Accounting Standards Board (AASB) in accordance with its policy of fully adopting IFRSs.

The phrase is not defined within the accounting standard as IFRSs are principles based standards and have a high degree of reliance on the professional judgment of preparers, auditors and regulators.

In response to your query regarding the monitoring and checking of the use of the phrase ‘in rare circumstances’, it would be treated in a similar manner to any other accounting judgement employed in preparing the financial statements. It would involve the preparers of the financial statements justifying the application of the standard, external scrutiny by an auditor and surveillance by the corporate regulator, the Australian Securities and Investments Commission. As such, any disagreement over the use of the phrase would be treated in a manner similar to any disagreement about an interpretation of other accounting standards.

Any reclassifications that an entity makes on the basis of there being rare circumstances must be disclosed in accordance with amendments made to IFRS 7 (AASB 7) and would therefore be clearly evident to regulators and analysts using the financial statements.

I trust this information will be of assistance to the Committee in consideration of this instrument. However, please do not hesitate to contact me if you need any further clarification.

Yours sincerely

NICK SHERRY

Minister for Superannuation and Corporate Law