Bulletin
2001/4 - 18 June 2001
The Financial Reporting Council (FRC) met on 4 June 2001, its tenth meeting since it first convened in October 1999.
Consultation with stakeholders
The FRC normally meets in Melbourne. However, on this occasion the meeting was held in Sydney to extend the FRC's consultation with stakeholders in the accounting standard setting process. Three Sydney-based business stakeholder representatives joined the FRC and the Chairman of the Australian Accounting Standards Board (AASB), Mr Keith Alfredson, for a discussion over lunch.
- They were Mr Tom Pockett, National President, Group of 100, Mr Rob Dougall, General Manager, Risk Management, Goldfields Limited, and Mr Bob Farrell, Chief Accountant, Brambles Industries Limited. Also present was Mr Warren McGregor, Australian member of the International Accounting Standards Board (IASB) and Liaison member for Australia and New Zealand.
The discussion covered the FRC/AASB relationship, the AASB's consultative arrangements, standard setting priorities, AASB funding, stakeholder involvement with the IASB, and accounting for dual listed company structures.
The discussion provided a valuable opportunity for dialogue with business stakeholders and followed the attendance at the FRC meeting on 30 April 2001 of Mr Craig Drummond, Managing Director-Stockbroking, J B Were, and Mr Steve McClintock, Partner, Financial Advisory Services, PricewaterhouseCoopers. Mr Drummond and Mr McClintock, representing the Securities Institute of Australia, gave a presentation on a survey conducted by the Institute on accounting issues affecting financial reporting.
Contribution to funding of standard setting
The FRC welcomed a decision by the National Institute of Accountants to contribute $100,000 to the standard setting process in 2001-02.
International developments
The AASB Chairman reported on his attendance at a meeting of the IASB in London on 24 May 2001. The IASB met for the first time with the chairs of eight national standard setters - from Australia, Canada, France, Germany, Japan, New Zealand, the United States and the United Kingdom - as an initial step in reaching agreement on a common work program for accounting standard setting. Mr Alfredson said that the discussions were very constructive but that the meeting was necessarily introductory as the IASB was not in a position to finalise its work program until its advisory body, the Standards Advisory Council, had been appointed. This was expected to occur soon.
Mr Warren McGregor briefed the FRC on the initial operations of the IASB. He noted that the new IASB would very strongly pursue its convergence objective and would also put emphasis on improving the quality of standards. He outlined the IASB's tentative work program, as discussed with national standard setters on 24 May, and the likely timetables for the IASB to progress its initial work program and its broader convergence objective. The FRC welcomed Mr McGregor's preparedness to provide the FRC with regular briefings on IASB issues.
Australians are very well represented on the various forums of the restructured international body - with Mr Ken Spencer a Trustee of the International Accounting Standards Committee, Mr Warren McGregor a member of the IASB, a staff secondment from the AASB, and prospective Australian appointments to the Standards Advisory Council.
Determination of AASB's broad strategic direction for 2001-02
The FRC is responsible for determining the AASB's broad strategic direction. The strategic direction for 2001-02 is expected to be settled and released shortly following amendment of the present draft to place it more in the context of the longer term objective of international convergence of accounting standards, to which the FRC is strongly committed.
AASB Business Plan for 2001-02, including priorities, budget and staffing arrangements
The FRC approved the AASB's proposed standard setting priorities for 2001-02 without change. The proposed priorities are well supported by the results of the AASB's survey of its Consultative Group and other constituents, and by international developments. They will be published shortly on the AASB's website.
The FRC also considered the AASB's proposed budget and staffing arrangements for 2001-02 and will return to these issues in the light of additional costings to be provided by the AASB Chairman.
The FRC endorsed the broad shape of the AASB's proposed business plan for 2001-02 subject to further consideration of these issues.
Appointments to the AASB
As foreshadowed in its announcement on 5 June 2001 of the appointment of Mr Wayne Cameron to the AASB (Bulletin 2001/3), the FRC has now released information about the framework for appointments to the AASB. Attached are:
- a Charter governing the composition, objectives and future work of the FRC's Nominations Committee;
- an attachment to the Charter outlining criteria for appointment to the AASB, appointment processes, and arrangements for succession planning and assessment of the performance of AASB members; and
- a document to be provided to those interested in possible appointment to the AASB, also including the agreed appointment / performance assessment criteria.
As part of an on-going process, the FRC will shortly be advertising in the national press seeking expressions of interest from people wishing to be considered for future vacancies on the Board. A list of potential candidates will be maintained based on responses to these advertisements and from names periodically put forward by stakeholder groups.
Draft AASB Governance Guidelines
The FRC approved guidelines proposed by the AASB which collate and codify the Board's governance arrangements. The AASB Chairman will report periodically to the FRC on the operation of the guidelines which will shortly be published on the AASB's website.
Risk Management program
At its meeting on 30 April 2001, the FRC approved a Risk Management Program for the AASB as proposed by the Board. The Program responds to a Commonwealth requirement for the systematic identification, quantification, reporting and management of insurable risks across Commonwealth departments and agencies.
Observer status at AASB meetings
The FRC has agreed to observer status at AASB meetings being extended to the Australian representative on the International Federation of Accountants Public Sector Committee - currently Mr Ian Mackintosh who chairs the Committee. Observer status has previously been granted to the Australian representative on the IASB and a New Zealand standard setting representative.
The FRC is the peak body responsible for the broad oversight of the accounting standard setting process for the private and public sectors. It comprises key stakeholders from the business community, the professional accounting bodies, governments and regulatory agencies.
- Key functions of the FRC are to advise the Government on the accounting standard setting process and the development of international accounting standards, and to determine the broad strategic direction of the standard setter, the Australian Accounting Standards Board.
For further information, please contact the secretariat of the Financial Reporting Council, c/- The Treasury, Langton Crescent, Parkes ACT 2600.
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Mr Michael Kooymans |
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Ph: |
(02) 6263 3984 |
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Fax: |
(02) 6263 2770 |
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E–mail: |
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ATTACHMENT A
Financial Reporting Council
Nominations Committee Charter
1. Objective
To consider and make recommendations to the Financial Reporting Council (FRC) on the composition of, and criteria for appointment to, the Australian Accounting Standards Board (AASB).
2. Process
For AASB appointments other than the Chairman (which is the subject of a recommendation by the FRC Chairman to the Treasurer), the Committee will evaluate candidates and make recommendations to the FRC for decision.
3. Performance
At least annually, the Committee will consider the performance review undertaken of the AASB, and report to the FRC. The Committee will also facilitate a review of the performance of the FRC for discussion by the FRC.
4. Succession Planning
The Committee is to periodically review the succession needs of the AASB in discussion with the AASB Chairman. The Committee is to maintain a schedule of eligible nominees who meet the eligibility criteria for the AASB established by the FRC on the recommendation of the Committee.
5. Composition
The Committee is to be chaired by the FRC Deputy Chairman, with the balance of membership comprising two other Council members and the AASB Chairman.
6. Meetings
The Committee should meet at least semi-annually, and more frequently as required.
Refer attached framework for AASB appointments.
ATTACHMENT B
Framework for Appointments to the AASB
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1. Composition |
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2. Criteria for Appointment |
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3. Appointment Process |
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4. Performance Assessment |
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5. Succession Planning |
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ATTACHMENT C
Appointments to the Australian Accounting Standards Board
Legal framework for AASB appointments
The appointment of members of the Australian Accounting Standards Board (AASB) is governed by section 236B of the Australian Securities and Investments Commission Act 1989. Under these provisions:
- The Financial Reporting Council (FRC) is responsible for appointing members of the AASB (other than the Chair who is appointed by the Treasurer).
- A person must not be appointed as a member of the AASB unless their knowledge of, or experience in, business, accounting, law or government qualifies them for appointment.
- Appointments are to be made for a period not exceeding 5 years.
- Members (other than the Chair) hold office on terms and conditions determined by the FRC.
The position
The AASB's functions include making accounting standards for the private, public, and not-for-profit sectors, developing a conceptual framework for evaluating proposed Australian and international accounting standards, and participating in the formulation of international accounting standards.
- The AASB is subject to the broad oversight of the FRC - a body comprising representatives of the main stakeholders in the accounting standard setting process.
- The FRC sets the AASB's broad strategic direction and approves its priorities, business plan, budget and staffing arrangements, but has no power to direct the AASB in relation to the development or making of a particular standard.
The AASB normally has 10 members (including the Chair). A secretariat of around 20 provides it with high quality technical and administrative support.
Members of the AASB are appointed on a part-time basis (except the Chair who is full-time) for terms of either two or three years.
Members are appointed on merit, have a good technical knowledge of accounting and come from a variety of backgrounds to encompass `users' as well as `preparers' of financial reports. As well as technical expertise, members will usually have experience in business or government, a broad policy perspective, and a full understanding of the practical business or government environments in which accounting standards are applied. Members will also bring a keen public interest perspective to the Board. Appointments will aim to balance public and private sector expertise and also take gender considerations into account.
The position involves a significant time commitment. The AASB typically holds 8 two day meetings a year, plus very occasional meetings on a needs basis. The majority of meetings are held in Melbourne, although 2-3 each year could be held interstate.
The remuneration of members is determined by the FRC. Members currently receive a daily fee of $600 and reimbursement of travel expenses incurred up to the amounts applicable from time to time to Tier 1 public office holders under Remuneration Tribunal determinations. The rate for an overnight stay in Melbourne is currently $360. Members may travel business class.
More detailed criteria for appointment to the AASB, as agreed by the FRC, are set out in an attachment.
ATTACHMENT D
Australian Accounting Standards Board
Criteria for Appointment and Assessment of Performance
The following criteria will be used by the Financial Reporting Council (FRC) to assess candidates for appointment to the Australian Accounting Standards Board (AASB). AASB positions are subject to performance assessment and the FRC has also agreed to use the following criteria in assessing the performance of individual Board members.
- A standard setting culture that recognises the importance of accounting standard setting and accepts that, at times, standard setting requires leadership thinking on issues that may not necessarily be the popular view.
- An understanding of Part 12 of the Australian Securities and Investments Commission Act 1989 including the AASB's functions and powers as set out in section 227, one of which is to participate in and contribute to the development of a single set of accounting standards for world-wide use having regard to the interests of Australian corporations which raise or propose to raise capital in major international financial centres.
- A recognition that the AASB's main function is standard-making that requires detailed consideration and decision-making relating to technical accounting issues at Board meetings.
- Relevant accounting knowledge and experience, that may include academic and general management and business or public sector experience.
- A collegiate style that accepts the importance of a collective contribution to the standard setting process. Willingness to accept the existence of differing viewpoints and to work to a consensus viewpoint that may involve compromise while maintaining the highest standards of accounting standard setting.
- Willingness and capacity to commit time to study agenda papers in preparation for Board meetings.
- A strong desire to be output oriented.
- A willingness to accept that accounting standard setting includes working for the community good, and that remuneration received is less than commercially-based remuneration rates.