Archived News for Finance Sector Professionals - June, 2012

The Australian Securities and Investments Commission has announced the next phase of its consultation with the financial advice industry regarding its proposal to implement a national examination for financial advisors is now open.

The Federal Government has passed tax reform legislation through Parliament that will  strengthen the director penalty regime and protects workers' superannuation entitlements and amendments to the taxation of financial arrangements and consolidation regimes.

Investment group Perpetual has announced plans to significantly cut its executive remuneration deals, significantly restructure the company and to put a halt to ongoing losses.

The Australian Institute of Company Directors has announced a partnership with the Federal Government to deliver a second round of its Board Diversity Scholarship program, which is aimed at increasing the representation of women on Australian boards.

Overall customer satisfaction with the country’s big four banks has declined in May, down to an average 76.2 per cent.

The Australian Securities and Investments Commission (ASIC) has released guidelines to support bank account switching reforms. This guidance updates industry codes to reflect the new rules so that financial institutions and consumers can have confidence in their rights and responsibilities when switching accounts from 1 July 2012. 

The Federal Government has passed amendments to the Consumer Credit and Corporations Legislation Amendment Bill 2011  through the Federal lower house that will aim to better protect those who use payday loans.

The Federal Government has passed the Clean Energy Finance Corporation Bill 2012, paving the way for the establishment of the Clean Energy Finance Corporation (CEFC).

The Federal Government has successfully passed its Future of Financial Advice (FOFA) bills through Parliament; with Minister for Financial Services Bill Shorten saying the reforms will pave the way for better quality services in the industry and ensure future growth in the area.

The Federal Government has announced a new form of financial advice licence that will ‘significantly increase the availability for financial advice for all Australians’ according to Minister for Financial Services Mr Shorten said.

The Western Australian Government has passed legislation that aims to secure and strengthen Bankwest’s financial and operational commitments to Western Australia.

Accountants and auditors should recognise that a company's culture and 'tone at the top' can have a profound impact on operational safety, risk-taking, and ultimately, financial position, according to Professor Russell Craig, Head of Victoria University's School of Accounting and Finance, and his co-researchers.

In a paper published in the New York State Society of CPAs in the CPA Journal, Professor Craig, Professor Joel Amernic (University of Toronto), and Professor Dennis Tourish (Royal Holloway, University of London), argue that a company's corporate culture – and its impact on safety operations – must be assessed and given due acknowledgement if audited financial statements are to be fair and accurate.

Using BP's 2010 Deepwater Horizon oil spill as a case in point, the researchers say that auditors should broaden the notion of what an audit is, so that operational risks generated from a company's culture and management tone are factored into potential liabilities.

The researchers present evidence to suggest that BP's 'tone at the top' and corporate culture (and consequently its management and operational systems) were dysfunctional. Not only did the company have a poor safety record, but another disaster appeared almost inevitable.

"A close examination of BP's tone at the top and consequent culture reveals a h­igh likelihood that a major man-made safety-related disaster would befall BP every few years...[Yet] no acknowledgement of the company's susceptibility to disaster was included in the company's financial reports or was identified by conventional auditing procedures," the paper notes.

"In such circumstances, in the interests of fairness of presentation, we submit that a provision for disaster should have in fact been made in the accounts."

The absence of a "provision for disaster" in BP's financial statements – one that would take into account the array of environmental and legal costs that would follow a future major disaster – meant that BP's audited financial statements did not comply with the  "fairness of "presentation" objective outlined in International Financial Reporting Standards (IFRS), the researchers argue.

Professor Craig said that while it would have been impossible for BP to predict which of its operations would be the site of a future disaster, "there was a strong case that a liability existed and was growing by the year".

If financial statements are to be the fair presentations that they claim to be, he said, auditors needed to take a more holistic approach and scrutinise more than just the numbers.

"These things have an impact -- a corporate culture that over-values cost-cutting to the detriment of safety will more than likely have financial consequences down the line -- so they should be taken into account by auditors if the provision of fair and accurate financial statements is the goal," Professor Craig said.

The Federal Government has introduced legislation before parliament that will amend the income tax law which contain the first two elements of the Investment Manager Regime (IMR).

The Federal Government has passed legislation containing key tax measures through Parliament, including the Tax Laws Amendment (2012 Measures No. 1) Bill 2012, Tax Laws Amendment (2012 Measures No. 3) Bill 2012 and Tax Laws Amendment (Medicare Levy and Medicare Levy Surcharge) Bill 2012.

Westpac banking group has announced that Carolyn Hewson will be stepping down from the Board at the end of the month following an eight-year tenure with the bank.

The Federal Government has announced changes to the proposed tax of managed investment fund, with the alteration being considered in Parliament in the coming days.

Australians are developing ‘healthier savings habits’ in response to increasing global uncertainty according to the fourth Bankwest Taxing Times Report.

The numbers of mortgage brokers expelled from the Mortgage & Finance Association of Australia (MFAA), rising from four to eight during the 2011/12 financial year.

The Commonwealth Bank has tracked an ongoing lift in consumer spending, sparking hope for a return to retail growth. The bank tracked a 1.9 per cent increase in spending in May, the third increase in sales in the past four months.

Some of the country’s major credit card providers have been ratcheting up efforts to offset the impact of the federal Government’s credit reforms, which come into effect at the start of July, according to financial comparison specialist RateCity.