Bulletin
2004/2 – March 2004
The Financial Reporting Council (FRC) met in Melbourne on 31 March 2004. A list of the current FRC membership is attached.
Introduction
The Chairman of the FRC, Mr Charles Macek, welcomed members to the 23rd meeting of the FRC.
The minutes of the 22nd FRC meeting, held on 27 February 2004, were approved with the clarification that the agreement on appointment of the board of the AUASB is an in-principle decision, to be confirmed once CLERP 9 becomes effective.
Timing of transition to International Accounting Standards
The Council reiterated its support for the adoption by Australia of international accounting standards issued by the International Accounting Standards Board (IASB). By ensuring that accounting standards in Australia are comparable with international standards the Australian economy will be enhanced through a reduction in the cost of capital and increased investor confidence. While noting that Australia has been a world leader in accounting standards for some years, the FRC is aware that there are currently some significant gaps in Australia’s set of accounting standards that will be filled by the adoption of international accounting standards issued by the IASB.
The Council noted that despite the broad acknowledgement in Australia that the adoption of IASB standards is in Australia’s best interests, some stakeholders are concerned about the time pressures of adopting IASB standards for reporting periods beginning on or after 1 January 2005.
In considering the appropriate timing for adoption of international accounting standards in Australia, the Council received up-to-date information regarding the progress of IASB’s work program on international accounting standards. The Chairman of the IASB, Sir David Tweedie, IASB member Warren McGregor and Senior IASB project manager, Annette Kimmitt updated the meeting on recent IASB developments as well as on developments in the EU’s work program towards adoption of IASB standards by 2005. APRA Member, Mr Steve Somogyi also attended the meeting and advised on APRA’s views on the implication of adoption of international accounting standards for financial reporting by APRA regulated financial institutions, including potential impacts on APRA’s prudential requirements. In addition to these presentations, the Council was also updated by the Australian Accounting Standards Board (AASB) Chairman, Professor David Boymal, on progress on the AASB’s work program. Council members also had the opportunity to brief the meeting on the views of their respective stakeholders.
Following subsequent discussions, the Council came to unanimous in-principle agreement to proceed with the current Australian timetable for adoption of international accounting standards from 1 January 2005. However this is subject to receiving assurance from the AASB that the set of international accounting standards issued by the IASB is complete and meets the requirements of the Australian market place and that the AASB will be able to make available on its website the corresponding versions of Australian standards by 30 June 2004. This will provide a complete, robust and stable set of financial reporting standards in Australia, which are compliant with IASB standards. The Council has taken this decision conscious of the need to provide Australian companies with more certainty for their short term planning needs.
At the earliest, companies will be required to prepare their first half-year reports in compliance with international standards in mid-2005.
On the basis of the expected advice from the AASB, the Council will meet again on 23 April to consider confirmation of its in-principle decision. This will allow FRC members time to update their respective stakeholders on recent developments, including Sir David Tweedie’s assessment that agreement on the full set of international accounting standards is expected from Europe in 2004. In this respect John Stanhope, National President of the G100, who attended the meeting as an observer, also undertook to provide his constituents with an update of recent developments.
The IASB Chairman, Sir David Tweedie, informed the meeting that the bulk of IAS 39 was in its final form and that any changes in the short term will be minor. In the interests of providing certainty to the Australian banking and insurance sector, the AASB will adopt IAS 39 in its current form. After the adoption of the existing body of international accounting standards, the decision to adopt any further changes to IAS 39 or to any other IASB standard, and the decision on timing for implementation of such changes in Australia will be taken by the AASB in due course, in accordance with the strategic direction issued by the FRC. It is the understanding of the FRC that the AASB will provide an appropriate period between the completion of a new standard or amendment to an existing standard and its implementation date. In assessing any changes, consideration will be given to the effects on Australian companies and the practical issues involved with their preparation of financial reports.
The AASB Chairman advised the meeting that the AASB will continue with preparations for 2005 in accordance with the strategic direction issued by the FRC. In this respect, it will continue working towards adoption of the complete and stable set of IASB standards that have been issued by 31 March 2004 including the current, available version of IAS 39.
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 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.