ASIC CLASS ORDER [CO 06/50]
EXPLANATORY STATEMENT
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
Subsection 341(1) - Order
Subsections 341(1) of the Corporations Act 2001 (the Act) provides that the Australian Securities and Investments Commission (ASIC) may make an order in respect of a specified class of companies, registered schemes or disclosing entities that relieves the entities in question, their directors and/or auditors from specified requirements of Parts 2M.2, 2M.3 or 2M.4 (other than Division 4) of the Act.
1. Background
There are two separate sets of requirements for the disclosure of information on director and executive remuneration in annual reports of listed companies:
(a) section 300A of the Act requires disclosure of information in the directors’ report by listed companies; and
(b) accounting standards having the force of law under s.296(1) of the Act require disclosure of information in the financial report.
Regulation 2M.6.04 and Schedule 5B to the Corporations Regulations allowed the transfer of remuneration information required by accounting standard AASB 1046 “Director and Executive Disclosures by Disclosing Entities” (AASB 1046) from the financial report into the directors’ report.
On 20 December 2005, the Australian Accounting Standards Board (AASB) issued a new accounting standard dealing with disclosure of director and executive remuneration and transactions by disclosing entities. The new AASB 124 “Related Party Disclosures” (the new AASB 124) replaces AASB 1046. The new AASB 124 applies for years ending on or after 31 December 2005.
Because regulation 2M.6.04 and Schedule 5B specifically refer to AASB 1046 and use its terminology, the replacement of AASB 1046 with the new AASB 124 caused the regulations to cease to operate. However, the regulation could not be amended in sufficient time for listed companies with financial years ended 31 December 2005.
2. ASIC Class Order [CO 06/50] “Transfer of remuneration information into directors’ report”
For years ending 31 December 2005 to 31 March 2006 inclusive, ASIC Class Order [CO 06/50] “Transfer of remuneration information into directors’ report” allows listed companies to transfer remuneration information required to be disclosed in the financial report under the new AASB 124 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.
The relief replaces regulation 2M.6.04 and Schedule 5B to the Corporations Regulations and will enable companies to reduce duplication of remuneration information between the directors’ report and financial report, save costs and present the remuneration information in a manner that is more convenient to users of their annual reports.
The relief provided by ASIC Class Order [06/50] is on similar terms to the regulations that it replaces. In particular, the information 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 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.
3. Consultation
As [CO 06/0050] is minor and machinery in nature, ASIC did not undertake any consultation with stakeholders before that class order was made.