Focus: Executive Remuneration – July 2005
Registered schemes: disclosure of executive remuneration
In brief: Following the lapse of ASIC relief from the AASB 1046 requirements, directors' and executives' remuneration must now be disclosed in financial reports of listed schemes or unlisted schemes that have 100 or more retail investors, as Lawyer Janna Vynokur reports.
Background
The Corporations Act requires all disclosing entities and registered schemes to prepare a financial report and a director's report for each financial year (section 292(1)). It also requires that the financial report for a financial year and a half-year must comply with the accounting standards (sections 296(1) and 304).
The Accounting Standard AASB 1046 applies to annual reporting periods ending on or after 30 June 2004 and requires disclosing entities (as defined in the Corporations Act) to disclose in the reports the remuneration of the directors and at least five executives with the greatest authority. Each director and executive must be individually named and each component of their remuneration (ie primary, post-employment, equity compensation and other benefits), as well as the aggregate amount, must be disclosed in the financial report.
A registered scheme is a disclosing entity if:
- units of the scheme are listed on the stock exchange (s111AE); or
- 100 or more retail investors hold units in the scheme (s111AFA).
This means that the financial reports of listed schemes or unlisted schemes that have 100 or more retail investors must disclose amounts relating to the remuneration of the directors and executives of the scheme's responsible entity.
ASIC's relief
In August 2004, the Australian Securities and Investments Commission (ASIC) issued Class Order [CO 04/967], which relieved registered schemes that are disclosing entities, from the AASB 1046 requirement to disclose remuneration of the directors and executives of the scheme's responsible entity in the financial reports for financial years and half-years ending 30 June 2004 to 29 September 2004. As a result, such registered schemes were not required to disclose relevant remuneration amounts in their financial reports.
Current position and recent developments
ASIC has not extended its relief under CO 04/967 to the financial years and half-years ending on or after 30 June 2005. Therefore, for these periods, disclosure is required to be made in accordance with AASB 1046.
The Australian Financial Review reported on 12 July 2005 that the funds management industry was lobbying to have the relief extended. The Investment & Financial Services Association (IFSA) has been pursuing an extension of the relief under CO 04/967 and made submissions to ASIC, which has referred this issue to the Australian Accounting Standards Board (AASB).
The AASB has issued the AASB June Action Alert in which it indicated that it will be issuing a draft consultation paper that will include additional guidance on how the disclosure requirement applies to disclosing entities that are managed investment schemes. The AASB will seek specific comments on whether managed investment schemes should be subject to the same disclosure regime as other disclosing entities.
However, for the financial years and half-years ending 30 June 2005 to 29 September 2005, registered schemes that are disclosing entities will be required to comply with the executive remuneration disclosure requirements under AASB 1046.
For further information, please contact:
- Derek HeathConsultant,
Sydney
Ph: +61 2 9230 4233
Derek.Heath@aar.com.au - John BeckinsalePartner,
Brisbane
Ph: +61 7 3334 3520
John.Beckinsale@aar.com.au
