Insights

24/06/19

Boardroom Brief: Week commencing 24 June 2019

YOUR KEY BOARDROOM BRIEF

Major financial reporting changes. On 17 June 2019, ASIC confirmed its focus areas for 30 June 2019 financial reports of listed entities and other entities of public interest with many stakeholders, calling on companies to focus on new requirements that can materially affect reported assets, liabilities and profits. Major new accounting standards (primarily relating to revenue recognition and financial instrument values) are expected to have the greatest impact. Directors should ensure that their companies are prepared for the new standards and inform the market of the impact on reported results, including confirming instances of no material impact. Directors are primarily responsible for the quality of the financial report and should ensure appropriate processes and records support the financial information provided. See ASIC’s media release for more detail on ASIC’s review focus of selected full-year reports. See also ASIC’s INFO 183 and large proprietary company financial reporting checklist.

Open Banking. Directors of financial services companies should be paying close attention to moves towards development of a “Consumer Data Right”, which has the potential to significantly shake up the sector and facilitate the entry of new and disruptive business models. Prime Minister Scott Morrison is seeking to regain lost momentum in the Government’s innovation agenda by focussing on reforms in this area. The Government recently released for public consultation the second version of a draft designation instrument for the application of the Consumer Data Right to the banking sector (so-called “Open Banking”). This second stage of consultation responds to concerns raised in the first stage (held from 23 September 2018 to 12 October 2018) regarding the scope of information about the use of a product that meets the test of having been materially enhanced. The Designation Instrument contains an example list of banking data sets which are not materially enhanced, while the explanatory statement includes an example list of ones that are materially enhanced. Treasury is specifically seeking examples to add to each list.

ASX200 hits 30% female director target. According to the Australian Council of Superannuation Investors (ACSI), the ASX200 has broken through the 30% barrier for women on boards. More than 40 ASX200 companies now have 40% women directors, and 20 companies have 50% or more women on their boards. The release emphasises though “the job is not done”, with more than 50% of ASX200 companies yet to reach this target. The ACSI has also recently released a policy proposal calling for listed companies to set a timeframe for achieving gender balanced boards with a 40:40:20 mix that allows flexibility for appropriate renewal. ACSI acknowledged that 90% of chair roles are currently held by men. See ACSI media release. Directors are reminded that conversations about diversity go beyond female board appointments and there is a growing consensus that diverse boards make for better governed companies which is intriniscally linked to long-term shareholder value.

US Federal Reserve rate decision. Interest rates were held steady on Thursday in the 2.25% - 2.5% range – but Federal Reserve Chairman flagged a possible rate cut in the coming months if uncertainty over trade policy continues. Investors around the world are closely watching the US bond yield curve – the yield on the benchmark 10-year US Treasury note fell 2.023% following the decision. History shows that an inverted yield curve (where shorter term bonds yield more than longer term ones) typically signals recessionary conditions.

THE WEEK AHEAD

EOFY. The last business day of the financial year is next Friday 28 June 2019. ASIC pays close attention in the lead up to the EOFY for unusual trading that may be “window dressing” in order to affect the price of securities or EOFY performance figures.

New ASX fees apply from 1 July 2019. Click here for ASX’s 2019/20 financial year fees.