Bulletin
2003/5 - December 2003
The Financial Reporting Council (FRC) met on 5 December 2003. A list of the current FRC membership is attached.
The meeting considered the following main issues.
AASB/FRC strategy for influencing the IASB
The meeting discussed issues in relation to maintaining an influence in international accounting standard setting. It was agreed that the emphasis should be placed on ensuring that the quality of Australian people involved in accounting standard setting both nationally and internationally remains high and that the AASB retain its links with the IFAC and the IASB – both through financial contributions and the appointment of Australian’s to these boards and their technical committees and taskforces.
The AASB Chairman drew attention to the fact that Australia has a high profile in the international accounting standard setting arena particularly considering the small size of Australia’s capital market relative to that of the EU and US.
The FRC Chairman advised the meeting that he would be meeting with a number of relevant persons overseas in late December, including the Chairman of the IASC Foundation Trustees and the Chairman of the IASB that he would raise Australia’s concerns at this time.
CLERP 9 Update
Ms Kerstin Wijeyewardene, manager of the Financial Reporting Unit in Treasury, informed the meeting that the Treasurer introduced the CLERP (Audit Reform and Corporate Disclosure) Bill into Parliament on 4 December 2003. The Bill is scheduled for debate early in 2004 with commencement on 1 July 2004.
Ms Wijeyewardene confirmed that the FRC oversight role will be effectively focused on auditor independence.
The FRC agreed that the already established CLERP 9 taskforce should continue to meet in the new year for discussion of CLERP 9 implementation issues and that their recommendations would be reported to full FRC meetings. All current members of the CLERP 9 taskforce agreed to continue with this work.
FRC role in providing advice to Government on the Policy Implications of IAS adoption
Timing issues related to the transition to the adoption of IASB standards
The FRC noted a secretariat paper on the issues of requests for relief in transition to 2005 and agreed that there was no need to change current arrangements unless the IASB fell behind schedule. However, the Council remains assured that the IASB is still on track in terms of its schedule, in which case the concerns raised will be alleviated. The FRC agreed that it would continue to monitor the delivery of the standards occurs as promised by the IASB and will evaluate progress at the March FRC meeting.
The AASB chairman offered that, in the meantime, the AASB should enquire about how the UK and EU are planning to proceed with their transitional arrangements particularly with regard to comparative accounts.
Availability of options in IASB standards
The meeting noted a draft paper on the AASB policy on optional treatments and scope exclusions in relation to the adoption of IASB standards for 2005.
Report by Audit Committee Chairman
Ms Elizabeth Alexander, AM, Chairman of the Audit Committee, reported upon the activities of the Committee.
The meeting approved the annual stock-take against FRC functions.
The FRC approved the Audit Committee Charter.
The FRC upheld the Audit Committee’s recommendation that it hold off contributing the outstanding $300, 000 to the IASB pending satisfactory resolution of the copyright issue. This amount would complete the $1 million the FRC originally agreed to contribute to the IASB in 2002-03.
Report by Nominations Committee Chairman
Mr Phillip Prior, Chairman of the Nominations Committee, reported on the activities of the Nominations Committee.
The FRC approved the proposed changes to the Nominations Committee Charter.
Change to FRC Rules of Procedure
The meeting agreed on changes to be made to the FRC Rules of Procedure.
Report by Chairman of the AASB
On behalf of the FRC, the FRC Chairman congratulated Mr Boymal on his appointment as AASB Chairman and welcomed him to his first FRC meeting in that role.
The meeting also expressed its gratitude to Ms Ruth Picker for her outstanding job as acting AASB Chairman in the period between Mr Keith Alfredson’s resignation and Mr Boymal’s appointment. It was agreed that the FRC Chairman would write a letter of thanks to Ms Picker on behalf of the FRC.
Report on recent AASB activities
Mr Boymal updated the FRC on the AASB’s position on options in standards, the IASB standard regarding intangible assets, the copyright issue, the branding issue, the insurance standard, the presentation currency issue and IFRS 1 including transitional arrangements and comparative requirements.
Mr Boymal advised the meeting that he intended to begin to formulate a more strategic long-term plan for the AASB’s future, including methods to develop a regional voice and to ensure that Australia is a major player in the international debate.
Options in Standards
Mr Boymal advised the FRC that the he had written to the IASB asking for clarification on whether the choice of options contained in some IAS’s and IFRS’s were intended to be left to the individual company or whether it was intended that this decision be made for all companies in any one country by the national standard setter. Mr Boymal also advised that New Zealand standard setters had been told explicitly that narrowing the options included in the international accounting standards is acceptable and companies will still be considered compliant with IAS.
Intangible Assets
Mr Boymal explained that the AASB was still in the process of articulating Australia’s concerns to the IASB with regard to the treatment of intangible assets. He advised that a new submission had been sent to the IASB.
Copyright
The meeting was informed of the progress with regard to the copyright issue. Although deliberations are still being carried out, the current agreement allows the standards themselves to be distributed in the same way as other legislative instruments – via the internet or in hardcopy form – without the payment of royalties to the IASB. The implementation guidance - including any guidance added by the AASB - is likely to be made available to interested parties via the AASB’s website after the payment of a small (around three Australian dollars per user) annual fee. The AASB has decided that it will not pursue an agreement with regard to the ‘Reasons for Decision’, as any individual wishing to have access to this information can purchase it directly from the IASB.
IFRS 1
Mr Boymal explained that companies could not declare that their accounts are compliant with IAS if the comparatives are not completed in the manner specified by IFRS 1. Therefore the AASB can not allow any exceptions other than those specified within IFRS 1 if it is to stay within the bounds of the strategic direction given to it by the FRC.
Mr Boymal advised the meeting that IFRS 1 gives the interpretations of international standards issued by IFRIC and its predecessor the same status as the standards themselves. The AASB is therefore considering options to give UIG guidance the same legal status as accounting standards in Australia. It is likely this will be achieved by making the UIG guidance disallowable instruments through incorporation by reference in the accounting standards. Members agreed that this issue should be brought to the FRC for consideration.
The FRC acknowledged that such a development would necessitate changes in the current processes for approving UIG guidance. The FRC will consider possible alterations the UIG’s charter at its first meeting in 2004.
Branding
The AASB Chairman noted that the AASB had been denied their request to retain the AASB logo and that the Board had to comply with Government direction on branding. Further representations on this issue are being made to the Prime Minister.
Insurance Standards
The AASB Chairman noted concerns regarding the IASB insurance standard and explained that the AASB had written to the IASB proposing ways to alleviate industry concerns.
Presentation Currency
The AASB Chairman advised of provisions in international standards which allow accounts to be prepared in any currency. The AASB is proposing to retain the provision of the international standards but require Australian corporations to justify their choice of currency adopted.
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 and investing communities, 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.
Mr Jorge del Busto
Ph: (02) 6263 3144
Fax: (02) 6263 2770
E-mail:
jdelbusto@frc.gov.au
or visit the FRC’s website at www.frc.gov.au.
ATTACHMENT
Members of the Financial Reporting Council
Members:
- Mr Charles Macek, Company Director — FRC Chairman (appointed as Chairman by the Treasurer and nominated as an FRC member by the Securities Institute of Australia);
- Ms Elizabeth Alexander, AM, Adviser to Blake Dawson Waldron — FRC Deputy Chairman (appointed as Deputy Chairman by the FRC and nominated as an FRC member by the Australian Institute of Company Directors);
- Mr Don Challen, Secretary, Tasmanian Department of Treasury and Finance — nominated by Heads of State and Territory Treasuries;
- Ms Karen Hamilton, Executive General Manager, Issuers & Market Integrity, Australian Stock Exchange — nominated by the Stock Exchange;
- Mr David Jackson, Director, Australian Shareholders’ Association — nominated by the ASA;
- Mr John Langoulant, Under Treasurer, WA Department of Treasury and Finance;
- Mr Graeme McGregor, AO, Company Director — nominated by CPA Australia;
- Mr Jim Murphy, Executive Director, Markets Group, Department of the Treasury — nominated by the Commonwealth;
- Mr Tom Pockett, Chief Financial Officer, Woolworths Limited — nominated by the Business Council of Australia;
- Mr Greg Pound, Chief Accountant, Australian Securities and Investments Commission — nominated by ASIC;
- Mr Phillip Prior, First Assistant Secretary, Budget Group, Department of Finance and Administration — nominated by the Commonwealth;
- Mr Brian Scullin, Special Adviser to Head of Deutsche Asset Management, Asia-Pacific – nominated by Investment & Financial Services Association (IFSA)
- Mr Ken Spencer, Company Director and Member, Board of Trustees, International Accounting Standards Committee Foundation;
- Mr Lewis Ting, Retired Ernst & Young Partner, Company Director — nominated by The Institute of Chartered Accountants in Australia;
- Ms Catherine Walter, AM, Company Director and Solicitor; Chair of the Business Regulation Advisory Group;
- Mr Klaus Zimmermann, Chief Executive Officer, Eldercare Incorporated and National President, National Institute of Accountants — nominated by the NIA.
Alternate members:
- Mr Roger Cotton, Chief Executive Officer, National Institute of Accountants; alternate member to Mr Klaus Zimmerman — nominated by the NIA;
- Mr Stephen Harrison, AO, Chief Executive Officer, The Institute of Chartered Accountants in Australia; alternate member to Mr Lewis Ting — nominated by ICAA;
- Mr Jim Kerwin, First Assistant Secretary, Commonwealth Financial Reporting Unit, Department of Finance and Administration; alternate member to Mr Phillip Prior — nominated by the Commonwealth;
- Mr Greg Larsen, Chief Executive Officer, CPA Australia; alternate member to Mr Graeme McGregor, AO — nominated by CPA Australia;
- Mr Michael Rawstron, General Manager, Corporations and Financial Services Division, Department of the Treasury; alternate member to Mr Jim Murphy — nominated by the Commonwealth.