Business Reporting Leaders Forum At KPMG Sydney on 1 December 2014 - - PowerPoint PPT Presentation

Business Reporting Leaders Forum

At KPMG Sydney on 1 December 2014 and KPMG Melbourne 4 December 2014

Chief Financial Officers/ Finance Directors / Chief Executive Officers Accounting / Legal Firms Investor Relations Officers & Sustainability Officers Investors & Analysts Other Stakeholders Andrew Coles Oz Minerals Michael Bray Kylie Dumble Jenny Merkley Simone Schlitter Rachel Scully KPMG Matthew Bell Helen Adair Meg Fricke Ernst & Young Brad Pollock Deloitte Regina Fikkers PwC Michael Long Lend Lease Diana McEwan Stockland Timothy Nelson AGL Lauren Owens National Australia Bank Jason Robertson David Jones Jo Cain BECA/ AuASB Ian Matheson Australian Investor Relations Association Diana D’Ambra Australian Shareholders Association Alison George (M) Regnan Paul Murphy ACSI Pablo Berrutti Colonial First State Kerry Lee Business Council of Australia Paul Davies Banarra Alan Dayeh Netbalance Fisher Gethin Derryn Heilbuth BWD Creative Simon Longstaff St James Ethics Centre Joycelyn Morton IFAC Board Pamela Stark The Middleway Pty Ltd James Rohan, Africa Zanella, Michael Rich

Attendees – a broad cross-section of the reporting supply chain in Australia

John Stanhope

• Aus. Post, AGL

Tony Coleman Lonergan Edwards Peter Colley CFMEU Amanda Wilson Regnan Peter Wilson AHRI Peter Matthey Cabrini Health Australia Ken Morrison PCA Leah Watterson/ Nicola Steele Aust Instit of Company Directors Academia SKE/ IIRC Accounting Bodies Regulators / Exchanges / Standard Setters/ Government James Guthrie Nonna Martinov-Bennie Keith Reilly Macquarie University Roger Simnett Trish Strong University of NSW Rosemary Sainty University of Technology, Sydney Liz Prescott IIRC Nick Ridehalgh KPMG Steve Vamos SKE Nicholas Diss CPA Australia Marina Michaelides AASB Julie Hill Safe Work Australia Doug Niven ASIC

Slide 3

Agenda

Time Syd Time Melb Subject Presenter 3.30 7.30 Welcome Steve Vamos (S)/ John Stanhope (M) 3.40 7.40 Update on directors liability Leah Watterson, Nicci Steele (AICD)/ Michael Bray 3.55 7.55 Update on global <IR> developments Liz Prescott (IIRC) 4.10 8.10 Update on BRLF activities

• Federal Government
• Director Liability
• ‘Red tape’ review
• Accountants Report to

G20

• B20/ G20

Michael Bray/ John Stanhope 4.40 8.40 Assurance Nick Ridehalgh/ Marina Michaelides (AuASB) 4.50 8.50 BRLF plan for 2015 Nick Ridehalgh/ Michael Bray 5.00 9.00 Close Steve Vamos/ John Stanhope

Slide 4

Directors Liability

Leah Watterson, Nicci Steele (AICD)/ Michael Bray

Slide 5

Directors Liability

Honest & Reasonable Director Defence released in August 2014 by AICD

• Developed through the AICD Law, Reporting and Corporate Governance Committees.
• The defence impacts all directors – it is not just focused on listed company directors.
• Corporate reporting is only one component. The defence seeks to enhance corporate and director

performance – it ‘lets directors be directors’ by allowing them to focus on governance, oversight, harnessing new opportunities and strategic performance.

• Defence aims to support directors who act honestly and reasonably in carrying out their duties. It does

not alter their primary duty of care; just provides an additional defence.

• Paper identifies that the business judgment rule only applies to the duty of care and diligence. It does not

apply to financial reporting, continuous disclosure, insolvent trading, misleading or deceptive conduct provisions or any other provision in the Corporations Act.

• The paper also sets out stepping stone cases where director duties under s180 (1) are alleged to have

been contravened from a corporate obligation, and the BJR is not available.

• The defence should remove constraints on good directors and make them more effective, as it will change

the board mindset viz personal risk.

• AICD are aware of calls by some to extend the BJR rather than legislating a broad-based director defence

Slide 6

Global developments in <IR>

Liz Prescott (IIRC)

IIRC Strategy Delivery Overview

Finalisation of Pilot Programme

Benefits of <IR> - Pilot feedback

PAUL DRUCKMAN, CEO, IIRC

Global <IR> Momentum

Harvard Business School study hails <IR> as enabler of financial stability Brazil – BOVESPA Comply or Explain Requirement, growth

• f local network

Sth Africa – IRC endorsement of Framework JSE <IR> comply or explain <IR> promoted by B100 and major Superannuation Funds UK – FRC’s Strategic Review EU - Directive on disclosure of non- financial and diversity information by certain large companies and groups European Commission hails <IR> as “step ahead” Malaysian Prime Minister declares business take up of <IR> SINGAPORE – market-led network established. Director support for <IR> SEBI -: not ‘if’ but ‘when’ for <IR> JAPAN - <IR> a crucial part of “Revitalisation Strategy”

Global < I R> Mom entum

World Bank implements <IR> ICGN – 4th edition of the Principles recommends Boards provide an integrated report Recommendation to G20 on <IR> UNCTAD 2014 World Investment Report recognises “<IR> at the heart of Sustainable Stock Exchanges”

• Deliverables underway
• Landscape and stakeholder mappings
• Possible focus areas for 2015+ include;
• Materiality
• CRD-convened dialogue with regulators (conference(s))

(National and/or regional)

• CRD-convened dialogue on corporate reporting and

technology

• CRD-convened dialogue on assurance and reliability of

information

Corporate Reporting Dialogue CDP FASB GRI IPSASB International Org. for Standardization CDSB IASB IIRC SASB

• Public Sector Pioneer Network
• IR Banking Network
• IR Insurance Network
• IR Pension Fund Network
• <IR> Technology Initiative
• Other priority sectors
• Healthcare (Pharma)
• Energy

Industry Networks

Slide 14

Update on BRLF Activities

John Stanhope, Michael Bray

Slide 15

Update on BRLF Activities Federal Government

• Assisting in bringing directors and investors

together on director liability and ‘safe harbour’ for companies

• Form an independent task force reporting to

government on dismantling volume, complexity and red tape around specific aspects of disclosure to complement other aspects of corporate reporting reform (e.g. integrated reporting)

• Endorse and adopt the recommendations of

the ‘Big 6’ accounting firms regarding making corporate reporting more conducive to infrastructure and other long term investment, including finding the right implementation pathway for Australia (e.g. ‘if not, why not?’ ASX Corporate Governance Principle)

Slide 16

Update on BRLF Activities Big 6 Accounting Firms – 2013 G20

• 1. Estimate by McKinsey and Standard & Poor's

Encouraging infrastructure investment poses many challenges for governments and developers – Over the next 15 years, the gap between available funds and demand for infrastructure development around the world could be as much as $500 billion annually1

Our

recommendations

The Panel recommends that the 2014 B20 make the following actionable recommendations to the G20.

• Encourage corporate reporting innovations and initiatives that provide

investors with a longer-term and broader perspective on shareholder value creation to complement the historical financial performance and current financial position perspective provided by financial statements. The B20 notes the particular relevance of integrated reporting as an example in this respect.

• Each G20 Finance Minister should assess and address any practical, legal
• r statutory barriers to improved corporate reporting and work towards

removing such barriers in order to make corporate reporting more conducive to infrastructure and other long-term investment.

Longer-term focus

Slide 17

Update on BRLF Activities 2014 B20/ G20 - Australia

• In June, the B20’s Infrastructure and Investment working group

report made a number of recommendations for the G20 leaders to consider which will make a substantial contribution to increased employment and inclusive, sustainable growth, but notes that closing the infrastructure gap requires continued action on many fronts.

• The B20 references its support for certain initiatives that are

already underway (to assist in closing the infrastructure gap) including:

• A review by the (International) Integrated Reporting Council and

International Accounting Standards Board in relation to making corporate reporting more conducive to infrastructure and other long-term investment, and eliminating or addressing current barriers.

Slide 18

Update on BRLF Activities AuASB/ IIRC Assurance Workshops

Nick Ridehalgh/ Marina Michaelides (AuASB)

Slide 19

Update on BRLF Activities AuASB/ IIRC Assurance Workshops

• 3 Australian co-hosted Assurance on <IR> roundtables held in

October 2014 – BRLF (M), CPA Australia (M), CAANZ (S)

• Other IIRC roundtables in Belgium, Malaysia, Singapore, South

Africa, Spain, UK and US

• Chairman of the AUASB also attended New York roundtable and

the IIRC Annual Pilot Programme conference in September 2014 where multiple assurance panel discussions were held

• Feedback from the assurance roundtables have been used as the

basis for AUASB response to IIRC on Assurance on <IR> An Introduction to the Discussion due on 1 December 2014

Assurance and the IIRC ■ Discussion paper and Consultation Draft ■ Suitable criteria ■ Aims of <IR>

■ Quality of information ■ Corporate reporting ■ Broad base of capitals ■ Value creation over time

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■ “Investment grade” reports ■ Assurance = enhanced confidence ■ Other mechanisms, e.g.:

■ Leadership ■ Internal systems ■ Internal audit ■ Stakeholder involvement

Credibility and trust

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■ Start the debate ■ Roundtables ■ Responses – December ■ Summary early 2015 ■ Next steps Assurance on <IR>

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Overview ■ Introduction to the Discussion

■ About <IR> ■ Benefits of assurance ■ Practical and technical challenges

■ Exploration of Issues

■ Fundamental assurance concepts ■ Analysis of the Framework ■ Assurance standards for <IR> ■ Methodology issues

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• 1. The nature of assurance
• 2. Competent practitioners
• 3. Robust internal systems
• 4. The cost of assurance
• 1. The nature of assurance
• 2. Competent practitioners
• 3. Robust internal systems
• 4. The cost of assurance

Implementation challenges

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• 1. Methodology issues
• Materiality
• Reporting boundary
• Connectivity
• Completeness
• Narrative reporting and future-oriented information
• 2. Levels of assurance
• 3. Using existing assurance

Technical challenges

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Levels of assurance

“Reasonable” (audit) “In my opinion … “ Limited (review) “Based on the work I have done, nothing has come to my attention …” 0 % 100 % Absolute assurance (unattainable) No assurance CONSIDER: Types of disclosure

• Quantified measurements
• Factual narrative
• Soft narrative
• Quantified estimates
• Qualitative estimates
• Diagrams

Judgements, e.g.:

• Connectivity
• Quality of systems
• 3rd party evidence

Role of stakeholder engagement Completeness

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Slide 27

Update on BRLF Activities AuASB/ IIRC Assurance Workshops

Key themes raised by attendees at Australian roundtables:

• Acceptance that corporate reporting & <IR> is evolving and assurance will mature in line with market needs
• Willingness to explore and innovate with assurance e.g. form of report
• Uncertainty about what providers of financial capital want/need from assurance engagement on <IR>

therefore need for further consultation

• Strong support to consider the broader issues of credibility and trust and the role that TCWG and assurance

will play in the short, medium and long term

• Role of IAASB critical to maintain consistency and quality in assurance standards and guidance
• Technical issues still need to be worked through: scope, suitability of criteria, subject matter, materiality,

connectivity, reporting boundary and completeness and the cost benefit vis a vis the nature and scope of assurance engagement

• High level of competency and strong skill base of assurance practitioners/firms in Australia that will

continue to be enhanced in breadth and depth for <IR>

• Australian Company Director Liability issue coupled with the assurance practitioner view of opining on

forward looking information that extends to the ‘long term’ view

• Role of internal audit in assurance on <IR> and the overall assurance strategy

Slide 28

Update on BRLF Activities AuASB/ IIRC Assurance Workshops

Next Steps:

• IIRC will synthesise responses to Assurance on <IR> An Introduction to the Discussion submissions in early

2015 and provide a roadmap of next steps.

• IAASB has formed an Integrated Reporting Working Group which will report directly to IAASB and provide

recommendations for standard setting activity. Merran Kelsall chairs this Working Group which had its first meeting in November.

• The Integrated Reporting Working Group will provide an update to the IAASB at its December meeting on

market developments in <IR> and emerging assurance issues and proposed key milestones for the working group.

Wrap up

■ www.theiirc.org/assurance ■ Join the debate on the <IR> LinkedIn group ■ Submit a response to assurance@theiirc.org by 1 December 2014

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Slide 30

BRLF – 2015 Plan

Nick Ridehalgh/Michael Bray

Slide 31

BRLF 2015 Plan

• Brief discussion on:
• How to promote <IR> or Corporate Reporting Reform in Australia
• Areas of focus for BRLF in 2015

Slide 32

BRLF wrap up

Steve Vamos/ John Stanhope