The members voice AICD Review

  • Date:01 Aug 2005
  • Type:CompanyDirectorMagazine
An outline of some of the issues addressed by AICD’s policy department, committees and taskforces over the past month follows:

The members' voice

An outline of some of the issues addressed by AICD's policy department, committees and taskforces over the past month follows:

Relationship between accounting standard setters

The IASB has released a paper setting out its and national standard setters' roles and responsibilities for International Financial Reporting Standards. The IASB paper covers: working with national regulators, communication, national standard setters' role in relation to IASB projects and international standards interpretation.

The AICD's submission to the IASB is broadly supportive of the proposals in the paper but emphasises the need for a clear and responsive process for issuing authoritative interpretations of the international standards.

The AICD also believes clarification is needed about whether the arrangements outlined in the IASB paper are to supersede the existing agreement between the IASB and the US Financial Accounting Standards Board about harmonisation of international standards and US GAAP.

Visit from IASB member

Australian IASB board member Warren McGregor attended the July meeting of the AICD Reporting Committee.

The committee meets with key stakeholders several times a year.

Issues discussed included: developments in bringing the US and international accounting standards setting processes closer together; succession planning for the IASB, Australian representation on international representative bodies and working groups; ways in which Australia can influence international standard setting; and the interpretation of international standards.

Small business and debt/equity

Small business and debt/equity rule changes announced recently will treat related party at-call loans made to small companies as debt interests, with effect from 1 July to coincide with the end of the transitional rule for related party at-call loans.

The Government now proposes that the changes will apply to companies with an annual turnover of less than $20 million. Private companies with related party at-call loans that cannot take advantage of the proposed changes because their turnover exceeds $20 million, will be allowed a further opportunity of reducing their compliance costs. This will apply where:

  • The terms of an at-call loan are changed so it will be treated as debt for income tax purposes, and
  • A change is made to the loan between the end of the income year in which the company failed the $20 million turnover test and the earlier of the company's due date for lodgement of its tax return and the actual lodgment date.
Companies may elect to have these loans treated as a debt interest from the start of the year of income in which they failed the turnover test. There will also be amendments to the material change provisions of the debt/equity rules to ensure that where an at-call loan was changed before 30 June 2005 so as to be treated as debt, it will continue to receive debt treatment after that date.

These changes represent a "win" for the AICD which made a submission to Treasury pointing out that the original proposals regarding these loans would have an adverse effect on the small and medium sized enterprise sector where these loans are an extremely common financing tool.

Corporate Responsibility

Two major initiatives have been announced in relation to corporate responsibility.

The Parliamentary Joint Committee on Corporations and Financial Services (PJC) has announced an inquiry into corporate responsibility and triple-bottom line reporting for Australian companies. The PJC will focus on whether companies currently have or should have regard for the interests of stakeholders other than shareholders, and the broader community.

The PJC will also look at whether the existing legal framework governing directors' duties encourages or discourages them from having regard to these broader interests and whether there need to be changes to the law in this area.

The inquiry will also examine the appropriateness of reporting requirements associated with these issues and whether regulatory, legislative or other policy approaches in other countries could be adopted or adapted for Australia. Submissions to the PJC are due on 15 September 2005.

In a parallel development the Corporations and Markets Advisory Committee (CAMAC) has been given the task of investigating the extent to which the duties of directors under the Corporations Act should include corporate social responsibilities or explicit obligations to take account of the interests of certain classes of stakeholders other than shareholders. CAMAC has not yet issued a discussion paper requesting comment.

The AICD will be making a submission to the PJC and will respond to the CAMAC Discussion Paper when it is released.

The AICD Law and Reporting Committees have both formed taskforces to work on these submissions.

Occupational Health & Safety

NSW Minister for Commerce John Della Bosca has announced a review of the Occupational Health & Safety Act.

This review is to determine whether the Act's objectives remain valid and whether its provisions continue to meet those objectives.

The AICD will take this opportunity to continue representation on its concerns regarding some of the underlying principles of the Act.

Feedback

All AICD policies and submissions can be found at www.companydirectors.com.au under Policy and Advocacy

If you wish to provide feedback, obtain further information or permission to reproduce this material please contact Rob Elliott, general counsel, manager policy and advocacy at relliott@companydirectors.com.au

FAQ of the month

I have been appointed to the executive committee of the owners corporation of my block of units in NSW. Is the executive committee of a strata scheme subject to directors' duties and responsibilities under the Corporations Act?

Owners' corporations or body corporates are governed by NSW legislation. Under section 11 of the NSW Strata Schemes Management Act 1996, an owners' corporation is an "excluded matter" for the purposes of section 5F of the Corporations Act 2001 and Part 3 of the ASIC Act 2001.

As an owners' corporation is not a company, directors' duties under the Corporations Act do not apply to its executive committee. The position in other states will depend on the legislation in that state.

Disclaimer

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.