The AASB's letter puts forward the view that the improved governance and oversight arrangements should "instil confidence that financial reporting standards result from informed and expert consideration of users' needs by an independent standard-setting body". However, the AASB also believes "there is a need for good governance and oversight of standard-setting to encourage an appropriate degree of integration of standard-setting effort between sectors". The letter also questions the view that slow adoption of International Public Sector Accounting Standards (IPSAS) by governments is primarily due to a lack of appropriate governance, and instead "a fear of the consequences of adopting certain IPSASs, a perception that sovereignty may be eroded and a lack of capacity are among the factors that are more likely to influence non-adoption".

The AASB notes that it has had responsibility for setting accounting standards for all sectors - private sector, public sector and not-for-profits - for more than 30 years. Australia's accounting standards for all sectors are based on International Financial Reporting Standards (IFRSs), which in the case of for-profit entities, allows those entities to make an explicit and unreserved statement of compliance with IFRSs. Additional requirements are contained in Australian Accounting Standards for the public sector and not-for-profit entities, which in some cases departs from the requirements of IFRSs, and also achieve a good level of convergence with IPSAS. However, the AASB adheres as much as possible to a policy of the same transactions and other events being subject to the same accounting requirements to the extent feasible ("transaction neutrality"), for all entities preparing general purpose financial statements (a theme also recently put forward by the AASB to the IASB in response to its review of the IFRS for SMEs).

In this context, the AASB notes the following in its submission to the IPSASB review:

The AASB strongly believes that it is artificial to divide reporting issues between those seemingly relevant to (the private sector part of) the global capital markets and those seemingly only affecting the public sector (which is also part of the global capital markets). Thirty years of experience tells the AASB that there are only a few circumstances confined to any one sector and that the economic analyses needed when dealing with such circumstances are not unique.

Consistent with this analysis, the AASB notes that in its view, existing governance and oversight arrangements do not currently "encourage the IASB and IPSASB to come to timely and consistent answers, despite the fact that to do so would be logical given the commonality of their fundamental raison d'etre". The submission goes on to say the AASB "does not wish to see the seeds sown for future costly convergence programmes simply because the two organisations take a view of the role of financial reporting that is insufficiently broad".

In this light, the AASB strongly recommends 'Option 1' (i.e. bringing the IPSASB within the ambit of the IFRS Foundation Monitoring Board and Trustees) in the consultation paper is the right way forward. However, the AASB notes that an interim step of establishing separate monitoring and oversight bodies within the auspices of the International Federation of Accountants (IFAC) (called 'Option 2') may be necessary "if the judgement is made that the IFRS governance and oversight arrangements cannot be accessed in less than two to three years".  The third option (re-establishing the IPSASB outside IFAC) is not supported on the basis it is "very likely to engender unnecessary sector specific, uncoordinated financial reporting regimes".

The AASB's letter also makes specific mention that funding should not be the primary driver of the decision on the appropriate governance and oversight arrangements for the IPSASB, noting the following:

The task of funding Options 1 and 2 is quite small compared with the funding of the establishment of the entire IFRS arrangements. If even a relatively small number of governments supported leveraging those arrangements, the cost per government would be relatively small.

Click for access to the AASB's letter (link to the AASB website).