“It’s having an impact right across the region,” Teer says. “Just the level of regulatory oversight and regulatory-driven transformation in terms of what organisations are being asked to comply with is showing a significant increase.”

Within the realm of financial reporting compliance, he cites IFRS 17 Insurance Contracts, which stretches the boundaries of financial reporting to also encompass actuarial valuation, asset liability management and risk management, as having a big impact as organisations ready themselves for its introduction in 2021.

Teer believes the changes are both a threat and an opportunity, as clients deal with the compliance burden. To date, many have taken a “reactive approach”, allocating extra resources and investment in people to address the issue.

“That’s now turning around into a more proactive investment in not just people but technological capability and external assistance,” he says. “We’ll see in response much more of an approach from large organisations saying ‘we can’t actually continue to deal with this by ourselves – we’re going to need to seek help from organisations like KPMG and the other big professional services firms to help us provide a more sustainable and fit-for-purpose regulatory framework’.”

For example, Teer envisages opportunities for firms to provide platform-style services to help clients with processes such as their customer onboarding processes.

“It provides a much more stable framework for those organisations,” he says.

Geoff Lamont, who leads Deloitte Australia’s assurance and advisory practice in Sydney, agrees that the complexity around compliance will only grow as new accounting standards are introduced and the focus switches to corporate and social conduct in the aftermath of inquiries such as the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in Australia.

“The regulatory landscape will continue to be difficult to navigate, but it will be interesting to see how the debate evolves with this increased focus on conduct.”

Lamont expects a shift whereby the nature of reporting will be far broader than mere financial reporting. “It’s a really exciting growth area,” he says.

Australia: who reports and on what?

Debate on reforming Australia’s financial reporting regime will continue in 2019, with a focus on what should be reported and who should report. The Australian Accounting Standards Board (AASB) is currently reviewing the financial reporting framework, and CPA Australia and Chartered Accountants Australia and New Zealand (CAANZ) want Treasury to get involved in the project and work with the AASB to ensure the right outcomes are achieved.

CPA Australia and CAANZ have jointly asked Treasury to prioritise and review the financial reporting thresholds for proprietary companies under the Corporations Act. The thresholds have not been reviewed since they were introduced more than 10 years ago, the industry bodies say.

CPA Australia policy adviser, reporting, Ram Subramanian, says the thresholds could potentially be reset at a level that works for users, without putting unreasonable reporting burden on smaller large proprietary companies.

Reform in Malaysia

A significant reform process is underway following the change of government in Malaysia in 2018. The Malaysian Government is considering how to improve transparency and accountability in the public sector, Subramanian explains. This could take the form of moving the public sector from reporting on a cash basis to an accruals-based accounting framework.

Accruals-based reporting is considered best practice and used by public sectors worldwide, but he notes there are complexities around systems and processes that capture relevant information.

“There are challenges around some of the estimates and calculations needed, particularly in the public sector [where] you have calculations around retirement benefits, unemployment benefits, and pension payments. All these are more of a public sector problem.”

The accounting might be more challenging, but Subramanian argues it provides a better picture of a government’s obligations. It can also tell a government how to better manage its own performance and fiscal needs in a budgeting and expenditure context. The Malaysian Government is also looking at implementing improved performance management frameworks within the public sector.

Subramanian says governance is a recurring theme in emerging and developing economies in the region, as governments grapple with the debate around what is best practice and how it can be implemented in their financial reporting.

Slavery and bribery top regulatory list

Slavery and bribery are likely to be top of the agenda for financial regulators in 2019.

A Modern Slavery Bill passed by Australia’s Senate will require large businesses and some other entities to make annual reports on their actions to address modern slavery risks in their operations and supply chains. The reports would be published on an online central register.

This is not just an issue for Australian organisations, says Dr John Purcell FCPA, CPA Australia policy adviser, environmental, social and governance (ESG). The UK, European Union and US have similar legislation, so companies will be seeking information from trading partners in the rest of the world, as they seek to assure governments and the public that they don’t exploit workers abroad.

The Australian legislation will apply to businesses and other organisations with consolidated revenue of A$100 million. CPA Australia itself will have to submit an annual statement to the Department of Home Affairs.

Purcell says the legislation establishes a reporting regime that organisations will have to implement and maintain.

“Company directors will need to turn their minds to the accuracy of the report,” he emphasises.“Directors need to understand the quality of the due diligence and that, of itself, has implications for the quality of accounting advice in these organisations in terms of systems and controls and the verification of such systems.”

The United Nations estimates that up to 25 million slavery victims work in global supply chains, including around 4000 in Australia “estimated to be enduring slavery or slave-like conditions”, according to a report to federal parliament in 2018. Modern slavery includes people trafficking, forced labour, forced marriage and child labour.

Purcell says risk increases with the number of tiers in a supply chain. The more complicated the chain, “the less confidence you can have as to what exactly happens on the shop floor”. He says monitoring supply chains can be outsourced but responsibility comes back to directors of the organisation.

“They have to be satisfied they have appropriately identified risks and have processes to mitigate those risks.”

The reputational damage of being caught up in a slavery scandal could be huge, Purcell warns. Although there are no financial penalties associated with the legislation, community groups will be reading the reports.

Purcell sees it as part of a bigger trend that increases the onus on organisations to prevent bad behaviour rather than punishing it afterwards.

“The onus is increasingly sharp around the quality of governance and oversight to mitigate risk,” Purcell says.