PARADISE POSTPONED

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
• USA Au
• SEC ASIC
• FIDC APRA
• FASB AASB
• NYSE/NASD et al ASX
• DTC (securities clearing) ASX
• EDGAR ASX (CAP)
• AICPA ICAACPAANIA

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

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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 entitys securities,
  the entity must immediately tell ASX that
  information.

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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.
•  

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Financial Reporting in Au

• ASX ELECTRONICALLY PROCESSES AND PUBLISHES OVER
  100,000 COMPANY ANNOUNCEMENTS EACH YEAR
• GROWING ATgt12 pa
• PEAK DAYS RUN AT gt1000 ANNOUNCEMENTS
• SEE WHY WE LIKE XBRL?

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PERIODIC REPORTS TO ASX

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

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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

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PERIODIC REPORTS TO ASX

• Full year continued 1.
• Section 319 3 months deadline
• Full set of accounts
• Full compliance with Corps Act AASBs
• Audited

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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

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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

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ACCOUNTING STANDARDS

• ASX Listing RulesPresumption
• 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)

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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.

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PERIODIC REPORTS AND ASX

• Review all Offer Docs
• Review all Fin Reports under LRs
• ASX Appendices 4C4D4E4F5B
• Stat Accounts S319 314 (full and concise)

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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)

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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

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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

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Au ADOPTION PROGRESS 2

• Later Supporters and Members
• - ATO (tax)
• - ASIC
• - AASB
• - Main Local SOFTWARE (Listed) COMPANIES (gt75
  write-up mkt.)

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TICK THE BOXES

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

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S0, WHAT WENT WRONG?

• Nothing really.
• Conclusion
• Milestones are
• -- NECESSARY
• -- NOT SUFFICIENT.

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S0, WHAT DID NOT GO RIGHT?

• ALSO NEED
• -- LUCK
• -- TIMING
• -- A GUN TO THE HEAD

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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

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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)

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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.

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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