Sad State of Affairs

ASIC's annual investigation of financial reports has uncovered the true state of corporate Australia in finding 161 companies to be at risk of becoming insolvent, another 52 in breach of accounting standards and a further 74 companies failing to give a value to options packages when disclosing a director's remuneration package. Meanwhile, the 'soft on reform' Howard government maintains that the sordid inner workings that led to the $5.3 billion HIH collapse were not an indication of a need for sweeping, hard-line corporate law reforms in Australia.

WEEK IN REVIEW

Corporate affairs

The financial reports of Australian listed companies are largely in line with regulations but some misrepresent corporate revenue, the value of goodwill and price tags for assets - and therefore misrepresent the true financial position of the company.

Full story: http://www.theage.com.au/articles/2003/12/17/1071337033118.html

HIH executive blows whistle on bribery

The flamboyant Sydney businessman Brad Cooper was arrested at his home after the paymaster from the failed HIH group admitted receiving $125,000 in bribes from him to cover up a loan write-off and payments worth millions.

Full story: http://www.smh.com.au/text/articles/2003/12/16/1071336962173.html

Plan to avoid new HIH

The insurance industry's peak body urged the Federal Government to introduce a scheme to give policyholders greater protection against another HIH Insurance-style collapse.

Full story: http://www.theage.com.au/articles/2003/12/17/1071337033043.html

Watchdog faulted in ad court

The consumer watchdog has suffered a setback in its campaign against advertising agencies for creating false and misleading advertising after the Federal Court upheld, in part, an appeal by health insurer MBF and its advertising agency John Bevins.

Full story: http://www.theaustralian.news.com.au/common/story_page/0,5744,8185906%255E643,00.html

Perks under fire as rules tighten

The nation's top securities regulator is keeping the heat on the billion-dollar financial services industry even as two leading professional bodies issued guidelines barring advisers from accepting potentially compromising "incentives".

Full story: http://www.theage.com.au/text/articles/2003/12/16/1071336960246.html

Court finds for 'inflexible workplace'

EMPLOYERS who have less flexible work environments have less responsibility to provide part-time arrangements for women returning from maternity leave, a court has found.

Full story: http://www.careerone.com.au/newsviews/story/0,8523,8179228-22554,00.html

Groups to appeal on payouts

Amcor and Gribbles have been granted leave to appeal to the High Court over redundancy cases that could cost them more than $60 million.

Full story: http://www.theage.com.au/text/articles/2003/12/14/1071336810904.html

Big four banks justify fat cat pay

DECIPHERING the pay of bank chief executives has become an art form after the key terms of National Australia Bank chief executive Frank Cicutto's three-year contract renewal in October extended to almost four A4 pages.

Full story: http://www.careerone.com.au/resources/story/0,8523,8110955-22547,00.html

ASA urges Aristocrat response on Creary

The Australian Shareholders Association has called on beleaguered poker machine maker Aristocrat to respond to allegations involving its chief operating officer, David Creary.

Full story: http://www.smh.com.au/text/articles/2003/12/15/1071336887136.html

Director of super trustee jailed

The director of a defrauded Queensland superannuation fund trustee company, John Kenneth Sheilds, has been sentenced to three years in prison after pleading guilty to 18 counts of breaching his duties as a director.

Full story: http://www.smh.com.au/text/articles/2003/12/14/1071336813588.html

New Tel liquidator's sights on former directors

A year has passed since failed telecom New Tel was put into receivership, and liquidator Phil Carter of PricewaterhouseCoopers is ready to start legal action against board members "early in the new year".

Full story: http://www.theage.com.au/text/articles/2003/12/14/1071336810913.html

Investors at a loss to decipher prospectuses: survey

Only about one in three investors think they get enough information from a prospectus, and most investment investors see it as little more than a legal formality, an application form or sales tool, a new study has found.

Full story: http://www.smh.com.au/text/articles/2003/12/07/1070732069073.html

Regulator gets set to axe duds

More than 500 superannuation funds will be wound up and a further 300 prosecuted for failing to lodge annual returns as the government regulator moves to clean up the industry.

Full story: http://www.theage.com.au/text/articles/2003/12/08/1070732143096.html

It'll be Latham versus Morgan

One of the more interesting questions about 2004 is whether Mark Latham will become the front man for Labour as well as for Labor.

Full story: http://www.smh.com.au/text/articles/2003/12/12/1071125656886.html

NEWS HIGHLIGHT

ASIC: 161 companies at risk

By Tim Blue, the Australian

Solvency concerns have been found in more than 160 listed companies by the corporate watchdog which has warned investors to look closely at their financial accounts.

The Australian Securities and Investments Commission has also threatened action against 25 listed companies and is weighing options for another 27 after finding possible breaches of their financial accounts for 2002-03.

ASIC says better disclosure, first called for a year ago under its financial surveillance project, remains an issue.

"The message doesn't seem to be getting through," said ASIC chief accountant Greg Pound.

"We are again finding instances where better disclosure by companies may have avoided ASIC raising its concerns."

ASIC looked at the audited financial statements of 1000 companies, to check compliance with reporting rules on director and executive options deals, and the reporting of funding deficits in corporate defined benefit superannuation funds.

It found 161 companies at risk as going concerns -- that is, of becoming insolvent. Another 35 companies had accounts qualified by auditors, of which 25 were in breach of an accounting standard.

ASIC has written to 74 companies to ask why they appear to have not given a value to options packages when disclosing a director's remuneration package. The surveillance also identified companies with "significant deficits" in their defined benefit corporate superannuation plans, that may be a liability to the company. ASIC also checked 400 companies for compliance with accounting standards, drawn from 1000 examined a year ago in moves to restore public confidence in accounting standards.

Mr Pound said this year's review had not found systemic non-compliance with reporting requirements generally or any trends in specific areas.

"Overall compliance with accounting standards appears to continue to be high," he said.

However, it has written to companies with qualified accounts, seeking reasons why they should be allowed to use so-called short form prospectuses for future fundraisings. It is also writing to the auditors to seek more details.

ASIC said it had not yet been able to form a view on another 27 companies. Inquiries are continuing and decisions on any action against the companies or their auditors are expected in the first quarter of 2004.

ASIC found 73 listed companies were late in lodging accounts. It has written to ask the companies why they should not be banned from capital raisings using short form prospectuses.

"The fact that a company is late in preparing and lodging its financial report suggests potential reporting problems and indicates that ASIC and investors should carefully scrutinise the company," Mr Pound said.

Following last year's survey, seven companies agreed to change their accounting policies (see the adjoining box).

Mr Pound said the issues included improper accounting of the value of assets acquired; the consideration involved; and the non-recognition or inappropriate valuation of goodwill.

In addition it was concerned about improper recognition of revenue, assets, and classifications within the statement of financial performance, for example incorrectly reporting expenses as extraordinary items.

"Clear and comprehensive disclosure is vital in a high quality financial report and helps to ensure that report readers can fully understand the accounting policies applied and the financial outcomes," Mr Pound said.

The accounts for four companies had audit qualifications relating to their continuation as going concerns (compared with six last financial year).

ASIC is making enquiries through its National Insolvency Co-ordination Unit about these companies.

SATIRE

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Howard copies Hanson again: seeks short prison term before next election

CANBERRA, Thursday: Prime Minister John Howard revealed his 2004 re-election strategy today, vowing once again to imitate anything which boosts Pauline Hanson's popularity. "Last election I got my border protection policy from Pauline and that worked a treat," Mr Howard told coalition officials. "Now she's winning votes because she was sent to jail, so that's exactly what I'll do too."

Mr Howard plans to spend "a month or so" in jail before the next election campaign with a view to securing a strong sympathy vote from total morons in the electorate. Liberal strategists are confident the PM will be successful in getting himself convicted. "With a track record like his, the case for electoral fraud is actually much stronger in John's case than it was for Pauline," said one Liberal insider.

Treasurer Peter Costello endorsed the plan yesterday, saying it gave him his most realistic chance of wresting the Prime Ministership from Mr Howard, at least for a short time. Health Minister Tony Abbott refused to publicly support the plan, but is expected to set up a dodgy trust fund to bankroll it.

Sources say the Prime Minister has selected the Queensland DPP to mount case again him, expressing confidence in their ability to secure a conviction that will fall apart on appeal. Mr Howard has also started seeing Rene Rivkin's doctors so he can use medical grounds to cut short his prison stay if a legal appeal is unsuccessful. The Prime Minister has only one concern about the plan, saying "Pauline's time inside does seem to have softened her views on mandatory sentencing. I'd hate that to happen to me."

For further information

Contact:   Chris Owen
Email:   c.owen@labor.org.au
WWW:   www.bosswatch.labor.net.au