Thursday, 21 June 2012
Corporations Legislation Amendment (Financial Reporting Panel) Bill 2012; Second Reading
That this bill be now read a second time.
Today I introduce a bill that will close the Financial Reporting Panel because of lower than expected referral rates. In 2006, the panel was established to resolve contested issues between the Australian Securities and Investments Commission, ASIC, and reporting entities over the application of accounting standards to financial reports. The panel was designed to represent a less expensive model of resolving these disputes and allow matters to be heard by persons with particular expertise.
The establishment of the panel formed part of wider reforms to improve the operation of the market by promoting transparency and accountability. However, only five cases have been referred to the panel since its establishment in 2006, and none has been referred since August 2010. One of these cases was resolved before the matter was heard by the panel. Under these circumstances, the costs of maintaining and reporting on the panel simply cannot be justified, while it would become increasingly difficult to find high-quality members for the panel, which would reduce its effectiveness as an arbitrator and a deterrent.
It is important to note that the panel's finding were not intended to be legally binding on either ASIC or the company. Companies have always had recourse to the courts where there is disagreement with ASIC over the application of accounting standards to financial reports. Companies will continue to be able to challenge the application of accounting standards to financial reports through the system after the passage of this bill. To give companies greater certainty, I note that the bill contains a transitional provision to allow courts and tribunals to continue to have regard to any past report by the panel despite its closure.
Finally, I can inform the House that the appropriate approval of the Ministerial Council for Corporations has been obtained as required under the corporation's agreement.