ASIC has announced relief to assist listed companies in reporting director and executive remuneration disclosures.

Transfer of remuneration disclosures

ASIC Class Order [CO 06/50] Transfer of remuneration information into directors’ report will apply to listed companies preparing financial reports under Chapter 2M of the Corporations Act (the Act).

The class order will allow listed companies to transfer remuneration information required to be disclosed in the financial report under accounting standard AASB 124 Related Party Disclosures into the directors’ report. This will enable listed companies to combine the remuneration disclosures required by accounting standards with those already required to be included in the directors’ report under s.300A of the Act.

Companies will be able to reduce the duplication of remuneration information between the directors’ report and the financial report, and present the information in a manner that is more convenient to users of their annual reports.

The class order will replace regulations that provided similar relief up to, but not including, years ended 31 December 2005.

Regulation 2M.6.04 and Schedule 5B to the Corporations Regulations allowed the transfer of remuneration information required by AASB 1046 Director and Executive Disclosures by Disclosing Entities into the directors’ report. When AASB 1046 was replaced by a new version of AASB 124 on 20 December 2005, the regulations ceased to have effect.

The relief provided by ASIC Class Order [06/50] will be on similar terms to the regulations that it replaces. In particular, the information required under AASB 124 transferred into the director’s report will still be required to be audited and a separate statement of the auditor’s opinion on this information must be given in the auditor’s report.

The ASIC relief is of an interim nature. The Government is considering the operation of the regulations following the withdrawal of AASB 1046.

Class Order [06/50] will apply for financial years ending from 31 December 2005 to 31 March 2006 inclusive.

Basis of calculation

Regulation 2M.3.03 requires remuneration under s.300A to continue to be calculated in accordance with AASB 1046. ASIC does not intend to provide class order relief to allow remuneration under s.300A to be calculated in accordance with AASB 124 rather than AASB 1046.

The basis of calculation under AASB 1046 is consistent with AASB 124 however AASB 124 contains substantially reduced requirements and guidance on calculating remuneration. Any ASIC relief could be inconsistent with the intent of Regulation 2M.3.03 in the absence of a new source of requirements or guidance on calculating remuneration.

Rounding of amounts

ASIC Class Order [98/100] Rounding in financial reports and directors’ reports has been varied by ASIC Class Order [CO 06/51] Variation and revocation of financial reporting class orders to continue the required level of rounding for director and executive related disclosures, despite the replacement of AASB 1046 requirements with the remuneration requirements in the new AASB 124.

The rounding of amounts relief has also been extended to apply to the financial reports of Australian Financial Services licensees under Chapter 7 of the Act. Previously, the relief applied to financial reports prepared under Chapter 2M of the Act. In particular, this will benefit entities wishing to lodge the same financial report for the purposes of both Chapter 2M and Chapter 7.

Other matters

Class Order 05/0640 ADIs – related party transactions and balances provided relief to Approved Deposit Institutions (banks, building societies and credit unions), their parent entities and controlled entities from disclosing in their financial reports information on arms length transactions and balances with certain related entities and related persons of directors and executives of the bank under AASB 1046. CO [05/0640] has ceased to have effect and won’t be replaced as the disclosures to which it applied are not required under AASB 124.

Class Order [06/51] includes some minor changes to Class Order [98/1417] Audit relief for proprietary companies, Class Order 98/1418 Wholly-owned entities and Class Order [CO 05/637] Additional month for first financial reports under AIFRS.

Class Orders [06/50] and [06/51] commence on the date they are registered under the Legislative Instruments Act 2003, which is expected to occur within the next few working days of publication of this information release.