Details of the Financial Framework (Supplementary Powers) Amendment 

(Treasury Measures No. 2) Regulations 2020

 

Section 1 - Name

 

This section provides that the title of the Regulations is the Financial Framework (Supplementary Powers) Amendment (Treasury Measures No. 2) Regulations 2020.

 

Section 2 - Commencement

 

This section provides that the Regulations commence on the day after the instrument is registered on the Federal Register of Legislation.

 

Section 3 - Authority

 

This section provides that the Regulations are made under the Financial Framework (Supplementary Powers) Act 1997.

 

Section 4 - Schedules

 

This section provides that the Financial Framework (Supplementary Powers) Regulations 1997 are amended as set out in the Schedule to the Regulations.

 

Schedule 1 - Amendments

 

Financial Framework (Supplementary Powers) Regulations 1997

 

Item 1 - In the appropriate position in Part 3 of Schedule 1AB (table)

 

This item adds a new table item to Part 3 of Schedule 1AB to establish legislative authority for government spending on an activity administered by the Department of the Treasury (the department).

 

New table item 44 establishes (and renews) legislative authority for the Government to make grant payments to the International Financial Reporting Standards (IFRS) Foundation to support the development and promotion of the International Financial Reporting Standards (IFRS Standards).

 

The IFRS Foundation, based in the United Kingdom, is a not-for-profit, public interest organisation responsible for the development of a single set of high-quality, understandable, enforceable and globally accepted accounting standards; and for the promotion and facilitation of the adoption of the standards.

 

Accounting standards are a common set of principles, standards and procedures that define the basis of financial accounting policies and practices. Companies are required to follow these standards when they prepare and publish their financial statements to ensure a standardised way of describing the company's financial performance. Publicly accountable companies (those listed on public stock exchanges) and financial institutions are legally required to publish their financial reports in accordance with agreed accounting standards.

 

The IFRS Foundation depends on contributions from its financial supporters to deliver on its mission to develop IFRS Standards that bring transparency, accountability and efficiency to financial markets around the world.

 

The IFRS Foundation oversees the International Accounting Standards Board (IASB), an independent group based in the United Kingdom, responsible for the development and publication of IFRS standards. The IASB has broad international representation in its membership, including representatives from Europe, Africa, Asia-Oceania and the Americas.

 

Australia's contribution to the IFRS Foundation flows directly to the IASB, who create the international accounting standards on which Australian standards are based. These standards have been adopted for use as the reporting requirements for companies in Australia since 2005.

 

The IFRS Foundation's work to develop accounting standards is continuous and ongoing, including the promotion process for more countries to adopt the standards and implement them accurately to ensure a uniform application of global accounting standards. Accounting standards are not updated annually, but as new and improved standards are developed, and it often takes many years of development and consultation to deliver a standard.

 

Australia is a trading nation and domestic businesses need to be compliant with the international accounting standards to remain competitive in the global environment. The ongoing support will strengthen the Government's effort to promote global accounting standards, and reduce the cost that the Office of the Australian Accounting Standards Board (Australian Accounting Standards Board) is charged by the IFRS Foundation for the copyright to issue standards in Australia.

 

Australia's contribution to the IFRS Foundation is in line with comparable countries when adjusted for Gross Domestic Product.

 

The department will make an annual payment to the IFRS Foundation as a targeted, non-competitive grant, in accordance with the requirements of the Commonwealth Grants Rules and Guidelines 2017. Australia's contribution to the IFRS Foundation is generally made following a recommendation by the Financial Reporting Council (FRC) at its meeting held in May/June each year. The FRC is the peak body responsible for overseeing the effectiveness of the financial reporting system in Australia. The FRC met on 22 May 2020 and has recommended to the department that the 2020 contribution be paid highlighting the IFRS Foundation's positive impact on Australia's influence in international standard setting.

 

The department will be responsible for the ongoing management of this grant arrangement and a delegate of the Secretary of the department will provide financial approval each year as required under the Public Governance, Performance and Accountability Act 2013 and the Financial Framework (Supplementary Powers) Act 1997. The delegate will ensure that value with relevant money is achieved as part of this decision making process and that appropriate grant terms are negotiated with the IFRS Foundation. The department will develop the grant opportunity guidelines and administer the payment of the grant. Details of this grant will be published each year, as required, on GrantConnect at www.grants.gov.au.

 

The payments to the IFRS Foundation will not be subject to independent merits review as there are no alternative providers and there is no effective remedy. The grant involves an annual payment to the IFRS Foundation. The Government provides this funding as part of its broader policy around international financial reporting standards and this is not a decision about the IFRS Foundation in particular. While the processes undertaken will be transparent and comprehensively documented, the characteristics of this grant do not warrant an independent review (outside the normal processes of the Australian National Audit Office).

 

The decision to make each annual payment, including the amount of such payment, is based on a recommendation by the FRC and consideration by the relevant delegate. The Administrative Review Council has recognised that it is justifiable to exclude merits review in relation to decisions of this nature (see paragraphs 4.11 to 4.19 of the guide, What decisions should be subject to merit review?).

 

The department undertakes ongoing consultations with the IFRS Foundation and the FRC as part of its annual decision on the payment amount.

 

Funding of $2 million in 2020-21 (covering payments to the IFRS Foundation for 2019-20 and 2020-21) will come from Program 1.1: Department of the Treasury, which is part of Outcome 1. Details are set out in the Portfolio Additional Estimates Statements 2019-20, Treasury Portfolio at page 20. Payments to the IFRS Foundation will be made on an ongoing annual basis following recommendations by the FRC.

 

Noting that it is not a comprehensive statement of relevant constitutional considerations, the purpose of the item references the external affairs power (section 51(xxix)) of the Constitution.

 

External affairs power

 

Section 51(xxix) of the Constitution empowers the Parliament to make laws with respect to 'external affairs'. The external affairs power supports legislation with respect to matters or things outside the geographical limits of Australia.

 

The funding will support the work of an international organisation, the IFRS Foundation based in London, in developing and promoting international financial reporting standards.

 

Statement of Compatibility with Human Rights

 

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

 

Financial Framework (Supplementary Powers) Amendment (Treasury Measures No. 2) Regulations 2020

 

This disallowable legislative instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

 

Overview of the legislative instrument

 

Section 32B of the Financial Framework (Supplementary Powers) Act 1997 (the FF(SP) Act) authorises the Commonwealth to make, vary and administer arrangements and grants specified in the Financial Framework (Supplementary Powers) Regulations 1997 (the FF(SP) Regulations) and to make, vary and administer arrangements and grants for the purposes of programs specified in the Regulations. Schedule 1AA and Schedule 1AB to the FF(SP) Regulations specify the arrangements, grants and programs. The powers in the FF(SP) Act to make, vary or administer arrangements or grants may be exercised on behalf of the Commonwealth by Ministers and the accountable authorities of non-corporate Commonwealth entities, as defined under section 12 of the Public Governance, Performance and Accountability Act 2013.

 

The Financial Framework (Supplementary Powers) Amendment (Treasury Measures No. 2) Regulations 2020 (the Regulations) amend Schedule 1AB to the FF(SP) Regulations to establish legislative authority for the Government to make grant payments to the International Financial Reporting Standards (IFRS) Foundation to support the ongoing development of the International Financial Reporting Standards (IFRS Standards). The Department of the Treasury has responsibility for the activity.

 

The IFRS Foundation, based in the United Kingdom, is a not-for-profit, public interest organisation responsible for the development of a single set of high-quality, understandable, enforceable and globally accepted accounting standards; and for the promotion and facilitation of the adoption of the standards.

 

The IFRS Foundation depends on contributions from its financial supporters to deliver on its mission to develop IFRS Standards that bring transparency, accountability and efficiency to financial markets around the world.

 

The IFRS Foundation oversees the International Accounting Standards Board (IASB), an independent group based in the United Kingdom, responsible for the development and publication of IFRS standards. The IASB has broad international representation in its membership, including representatives from Europe, Africa, Asia-Oceania and the Americas.

 

Australia's contribution to the IFRS Foundation flows directly to the IASB, who create the international accounting standards on which Australian standards are based. These standards have been adopted for use as the reporting requirements for companies in Australia since 2005.

 

Human rights implications

 

This disallowable legislative instrument does not engage any of the applicable rights or freedoms.

 

Conclusion

 

This disallowable legislative instrument is compatible with human rights as it does not raise any human rights issues.

 

 

 

 

 

Senator the Hon Mathias Cormann

Minister for Finance