I welcome the opportunity to speak on the Corporations Legislation Amendment (Financial Reporting Panel) Bill 2012 introduced by my colleague the Parliamentary Secretary to the Treasurer. I would like to echo the words of the member for Blair in congratulating him for his promotion, long overdue. He is doing a wonderful job. I am very much looking forward to hosting my second financial literacy seminar tomorrow with the parliamentary secretary. It is going to be held in the Griffith neighbourhood centre. I am looking forward to getting a number of people from the community, from the multicultural community as well as the seniors community and the general community in to learn about scams and how to avoid them, and also to learn about the fabulous MoneySmart website and the range of skills that you can gain from accessing that website to find out how much super you need, how to manage a budget, and if you are pregnant how to manage the transition in terms of pay. I am a strong advocate of MoneySmart. I am constantly sending it out to people on my Facebook site and also when it is released every month I give notification through my Twitter as well. It is a wonderful way of getting free information to improve your financial literacy and free information you would probably need to pay quite a bit for, and I have paid for it in the past, through a financial adviser. So I am very much looking forward to my second financial literacy seminar and hosting many more for Canberrans in coming years.
The main function of this bill is to close down the Treasury-administered Financial Reporting Panel by repealing its functions and its powers. The panel is an independent third-party review mechanism consisting of nine parttime panel members from the business and accounting community. At the time it was established in 2006 under the Howard government its aim was to examine and resolve contested issues between the Australian Securities and Investments Commission, ASIC, and reporting bodies in relation to the accounting standards of financial reporting. Over recent years there have been a number of significant changes in financial reporting stemming from the global financial crisis and other reviews and it is important that people keep up-to-date with what is going on and their accountants, most importantly, keep up with what is going on.
It has been almost six years since the panel was established and in that time only five cases have been referred to the panel. Of these four were only introduced because the government in 2010 decided to close down the panel. Not only is this significantly lower than the expected number of referrals but it is also an inefficient use of our resources. After the four extra cases had been brought before the panel in late 2010, the government deferred the panel's closing and issued a discussion paper for review. It contained various options, including retaining the panel in its current state, making modifications to the tedious referral process or closing it down altogether. The 11 submissions received in the consultation process have been made available publicly through the Treasury website. The submissions generally supported the retention of the panel with some amendments, because it can be an incentive for companies to meet their financial reporting requirements and because it can facilitate cooperation and agreement where there is dispute. However, it became clear that any changes made to the way the panel operates would not necessarily increase the number of referrals, which is the main reason its closure was initiated.
It is simply unsustainable for a panel which has reviewed just five cases in six years to continue operating. It adds pressure to our budget, makes it increasingly difficult to find high-quality panel members and reduces its effectiveness as an intermediary review board between ASIC and reporting entities. Closing it down by enacting this legislation would save $1.2 million over four years. However, doing so would not leave ASIC and reporting companies without any dispute resolution process, and it would not have a significant impact on the standards of financial reporting. As my colleague the member for Blair mentioned, the International Financial Reporting Standards Interpretations Committee can still provide advice where issues with accounting standards are identified. Furthermore, companies have always had access to, and in many cases have preferred, legal action though the courts for disputes that cannot be resolved between ASIC and reporting companies.
Though the panel was initially viewed as a way of bypassing court proceedings—that is admirable, because it cuts down on costs—its findings are not legally binding, unlike a court's. In fact, the industry's use of other more certain and effective methods of dispute resolution such as the courts has contributed to the lack of use of this panel. As we all know, from someone who has been in business herself, time is money in business. If you are investing significant time in getting a case together you would like to know that it will end in a resolution you are going to be happy with—hence, the preference of some to go through the courts, and get a legally binding decision, rather than to use other mechanisms.
I note from my own experience that most companies are keen to resolve issues internally, particularly on financial matters. I know from being on a number of boards and on a number of audit committees of those boards that when it comes to financial and accounting issues you do everything in your power to ensure that you are abiding by the appropriate standards. You go out and get your own professional education on it through the AICD or other bodies and you ensure that you have an annual audit, of course. But throughout the year you conduct a number of internal audits in a range of different areas to ensure that you are abiding by the appropriate accounting standards and that you are keeping an eye on what is going on in the company. It is by doing those more forensic dips through internal audits that you get the opportunity to focus on specific areas that you would not necessarily get the chance to with a more general audit. I know that most companies are very keen to ensure that they abide by those standards and set up a number of mechanisms—internal mechanisms as well as external audits—to ensure that they do. Organisations can now go to an external committee as well to get decisions on matters of accounting.
Clearly, a review of the Financial Reporting Panel has been long overdue and its lack of use by companies and ASIC allows for its immediate closure through the enactment of this bill. With the inclusion of a transitional provision in this bill, courts can continue to refer to reports previously issued by the panel, even after its closure, as a point of reference.
Enacting this bill will save money. It will also ensure that other methods of upholding financial accounting standards are available to ASIC. That is particularly important, because, as I mentioned, there is a range of mechanisms that companies use, including internal and external audits, and they will be able to ensure that they can uphold accounting standards through access to ASIC and reporting companies. For this reason, I commend the bill to the House.