Government to streamline financial reporting

Treasurer Jim Chalmers has announced the release of a consultation paper to gather insights and feedback on how to restructure Australia's financial reporting architecture with the aim to make it more efficient, effective, and fit for purpose.

Chalmers said the consultation is the next step in forming Australia's institutional arrangements with a new single entity for the setting of accounting, sustainability, auditing and assurance standards.

"The Albanese government is streamlining Australia's financial reporting bodies to help build a more competitive, dynamic and productive economy," Chalmers said.

"It complements our other efforts to better target regulation across the economy, including through the biggest overhaul to merger settings in 50 years and our changes to strengthen and streamline the foreign investment regime."

The consultation paper seeks feedback on the proposed structure and governance arrangements for a new body responsible for the combined functions of the Australian Accounting Standards Board (AABS), the Auditing and Assurance Standards Board (AUASB) and the Financial Reporting Council (FRC).

The consultation paper sets out that the new statutory body will be responsible for the functions currently performed by the FRC, AASB and AUASB - including formulating, issuing, and providing advice and reports to government relating to, accounting standards, auditing and assurance standards and sustainability standards.

The new body would be governed by a government-appointed board, constituted by members with experience and expertise appropriate to its functions as well as its strategic direction setting, general oversight and governance roles.

It is also proposed the board will be the accountable authority of the new body and collectively responsible for the relevant duties and powers.

The consultation paper said that while the new body will be vested with functions and powers currently performed and exercised by the FRC, AASB and AUASB, it is anticipated the board will initially establish three dedicated technical committees to perform its standard setting functions: an accounting standards committee, a sustainability reporting standards committee, and an auditing and assurance standards committee.

The technical committees, which will be constituted by professionals with relevant technical knowledge and expertise appointed by the board, will have delegated power to make and formulate standards directly. Additionally, the board will be able to set up other committees, such as advisory committees, and will have the power to delegate powers for administrative purposes comparable to other Commonwealth entities.

The board, chair and committees will be supported by a chief executive leading a team of permanent staff supplemented by external expertise where appropriate.

This differs from the current arrangements where the FRC is supported by a secretariat within Treasury, the new body will be fully resourced in-house.

Chalmers said in addition to accounting and auditing standards, the new integrated body will better support the ongoing development of climate-related financial disclosure standards.

"Our standard-setting institutions play an important role underpinning the integrity of markets and investor confidence," Chalmers said.

"A key focus of the proposed new architecture is ensuring the new body will have the flexibility to meet evolving priorities and issues.

"This reform will provide a one stop shop for the development and issuance of standards. It will help to increase regulatory consistency, reduce unnecessary costs, and avoid duplication when it comes to financial reporting."

CA ANZ assurance and reporting leader Amir Ghandar thanked the government for engaging with the sector, noting the initial announcement from the Treasurer in November 2023 was "met with some surprise" and called for greater consultation by the profession.

"We have been engaging with the government on this change since it was first announced by the Treasurer in 2023," Ghandar said.

"CA ANZ supports the overall objective of a more flexible arrangement for standards setting to deal with evolving market needs. However, a 30-day consultation period is not long enough to provide feedback on the most significant shake-up to the Australian standards setting bodies in decades.

"We are pleased to see some of our initial feedback has been taken into consideration, including preserving key strengths of the existing model and making sure there remains a high level and variety of skills within our oversight body."

However, Ghandar said there were still aspects that need further refinement to maintain confidence, such as clarifying the demarcation between oversight and standard setting activities, striking a balance between independence and current practical expertise, as well as clarity on how it fits and interacts with other ongoing Treasury consultation processes involving the profession.

Ghandar said CA ANZ will provide more detailed feedback through the consultation period which reflects members key concerns.

The consultation is available on the Treasury website and will be open until 21 February 2025.