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PARADISE POSTPONED

PARADISE POSTPONED. LESSONS AND OPPORTUNITIES FROM XBRL ADOPTION IN AUSTRALIA Paul Phenix Senior Adviser. Overview. The Regulatory Framework - Who does what 2. Financial Reporting in Au - Continuous vs. Periodic 3. Stepping Stones 4. Adoption Progress 5. Lessons 6. New Dawn?.

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PARADISE POSTPONED

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  1. PARADISE POSTPONED LESSONS AND OPPORTUNITIES FROM XBRL ADOPTION IN AUSTRALIA Paul Phenix Senior Adviser

  2. Overview • The Regulatory Framework - Who does what 2. Financial Reporting in Au - Continuous vs. Periodic 3. Stepping Stones 4. Adoption Progress 5. Lessons 6. New Dawn?

  3. THE REGULATORY FRAMEWORK[XBRL-Au focus has been on regulatory adoption] Organizational Equivalents USAAu SEC ASIC FIDC APRA FASB AASB NYSE/NASD et al ASX DTC (securities clearing) ASX EDGAR ASX (“CAP”) AICPA ICAA;CPAA;NIA

  4. THE REGULATORY FRAMEWORK 2 • Enforcement: Corps Act and Accounting Standards - Australian Securities & Investments Commission [ASIC] [Stds are issued by Au. Accounting Stds. Board; part of Fin. Rep. Council. “AASBs” is generic name for all Au standards]

  5. THE REGULATORY FRAMEWORK 3 2. Prudential Regulation • Financial Institutions : APRA • Other Corps : ASIC 3. Market Provider : ASX - ASX Supervises its Rules: Listing; Market; Clearing

  6. THE REGULATORY FRAMEWORK 4 • Stock brokers; traders etc - licensed and regulated by ASIC • Prudential Regulation “participants” in ASX market supervised by ASX re. Capital Adequacy (risk to market); internal controls; fair dealing

  7. CONTINUOUS DISCLOSURE ASX Supervision: Primary Driver - Supplemented by Periodic Reports

  8. CONTINUOUS DISCLOSURE Provides what the market wants: i.e. - the full story; - immediately.

  9. Financial Reporting in Au • Informed Market : Give all announcements to ASX as Proxy for the Market; • Informed When? - Immediately : Continuous Disclosure “Becomes Aware”: Listing Rules 3.1 & 19.2 - Periodically : Chap.4: But LR 3.1 principles still apply: “immediately...becomes available” • Inform What? - LR 3.1 & 19.2 again

  10. CD: Listing Rule 3.1 Once an entity is or becomes +aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity’s +securities, the entity must immediately tell ASX that information.

  11. CD: Listing Rule 19.2 Entity must comply with spirit, intention and purpose etc of rules 19.2 An entity must comply with the listing rules as interpreted: • in accordance with their spirit, intention and purpose; • by looking beyond form to substance; and • in a way that best promotes the principles on which the listing rules are based Introduced 1/7/96. Origin: Foreword. Note: The principles on which the listing rules are based embody their intention and purpose. See the Introduction.

  12. Financial Reporting in Au ASX ELECTRONICALLY PROCESSES AND PUBLISHES OVER 100,000 COMPANY ANNOUNCEMENTS EACH YEAR GROWING AT>12% pa PEAK DAYS RUN AT >1000 ANNOUNCEMENTS SEE WHY WE LIKE XBRL?

  13. PERIODIC REPORTS TO ASX • Half Year : Appendix 4D - Highlights - Embedded S.320 Statutory Accounts (auditor reviewed) - Supplementary ASX Info. - 2 months deadline

  14. PERIODIC REPORTS TO ASX • Full Year : Appendix 4E: - Preliminary Final Report - Highlights - Condensed Accounts - Commentary on Results - Supplementary ASX Info. - Un-audited but normally reviewed - 2 months deadline

  15. PERIODIC REPORTS TO ASX Full year:continued: 1. • Section 319 : 3 months deadline • Full set of accounts • Full compliance with Corps Act & AASBs • Audited

  16. PERIODIC REPORTS TO ASX Full Year: continued: 2. - Section 314 “Glossy”: 17 weeks deadline - “Annual Report” and “Concise Annual” - ASX LR 4.10 Info (inc. Corp Gov) - Audited

  17. PERIODIC REPORTS TO ASX Quarterly Reports: Cash Flow Statements - Appendix 4C: “CTEs”; “start ups”; or if ASX requires - Appendix 5B: mining explorers Monthly reports - Mining explorers - Investment entities

  18. ACCOUNTING STANDARDS • ASX Listing Rules:Presumption: All Financial Info. and reports: - comply with Accounting Standards; and - show True and Fair View 2. Aussie Companies • Must use AASB (CA Ss. 296 &304) • No TFV over-ride • Can now use other $$ (AASB 121)

  19. ACCOUNTING STANDARDS • Foreign Companies (GN4) -Can use AASB or one of 7 Acceptable Stds. - IAS : UK : NZ : CAN : SG : HK : USA - If use other Stds. must provide: -reconciliation to AASB or IAS. - can use any currency.

  20. PERIODIC REPORTS AND ASX • Review all Offer Docs • Review all Fin Reports under LRs • ASX Appendices 4C;4D;4E;4F;5B • Stat Accounts: S319; 314 (full and concise)

  21. PERIODIC REPORTS AND ASX What do we do with Reviews? • Looking for compliance with LRs; esp. 3.1 • Report AASB/Corps Act issues to ASIC • Report all “non-std” Audit Reports to ASIC (diced and sliced by auditor and office) • Report all odd Auditor Independence Declarations to ASIC; generic report to FRC. See why we like XBRL?

  22. THE 13 STEPS Organize • Form Jurisdiction • Join XBRL-International 3. Get funds Involve; get buy-in; membership from/by: 4. Professional Bodies 5. Stock Exchanges 6. Securities Regulator 7. Banks (promise of credit control) 8. Banking Regulator 9. Tax Authority 10. Govt. IT Agency/authority 11 Other Listeds (if you can) 12. Get more Funds 13. Use IASB Extension approach (if possible)

  23. AU ADOPTION PROGRESS 1 - First meetings 2000 - Jurisdiction formed 2001 - 3rd XBRL International Meeting: Sydney 2001 - Promoted IASB based approach - First draft Au taxonomy 2003

  24. Au ADOPTION PROGRESS 2 Early Supporters and Members -Prof Accounting Bodies; - ¾ Big Four - ASX - APRA -- BANKS - Few LISTED COMPANIES Government: indirectly with funds only

  25. Au ADOPTION PROGRESS 2 Later Supporters and Members - ATO (tax) - ASIC - AASB - Main Local SOFTWARE (Listed) COMPANIES (>75% write-up mkt.)

  26. TICK THE BOXES We hit all the Stepping Stones and roughly in the right order. So we should not have got our feet wet.

  27. S0, WHAT WENT WRONG? Nothing really. Conclusion: Milestones are; -- NECESSARY: -- NOT SUFFICIENT.

  28. S0, WHAT DID NOT GO RIGHT? ALSO NEED: -- LUCK -- TIMING -- A GUN TO THE HEAD

  29. S0, WHAT DID NOT GO RIGHT? LUCK -- SHD BE A NON-ENGLISH SPEAKING JURISDICTION; SO THAT --NO OTHER JURSIDICTION WILL POACH EXPERTS. --NOT RUN OUT OF RESIDENT EXPERTS (XBRL-Au experts too busy on XBRL projects to spare time for XBRL-Au) -- THAT TIMING IS RIGHT

  30. S0, WHAT DID NOT GO RIGHT? TIMING -- IFRS 2005ADOPTION - (swamping accounting and IT resources for 2-3 years ) -- ASX CAP RE-ENGINEERING: URGENT -- Consolidation of domestic Software Vendors -- BASEL II - (major distraction for banks: which are the natural XBRL champions)

  31. S0, WHAT DID NOT GO RIGHT? GUN Late active involvement of: -- Tax Authority; -- Securities/Companies Regulator -- Accounting Standards Board. Early but passive involvement is not sufficient. Compulsion from one or more is necessary.

  32. A NEW DAWN? -- More funds soon?: -- so 2nd Au-Extension TAXONOMY and training -- Active support from Regulators [esp. ATO] -- Task Force formed inc. users -- Software vendors active

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