Bulletin
2004/5 – June 2004
The Financial Reporting Council (FRC) met in Melbourne on 18 June 2004. A list of the current FRC membership is attached.
The meeting considered the following main issues:
Report from AASB Chair
The AASB Chairman noted that pending Australian versions of all international accounting standards will be posted on the AASB website by 30 June 2004, and indicated that the entire suite of pending standards would be formally made at the July 2004 meeting of the AASB. The AASB Chairman noted that at its recent board meeting from 16 to 17 June 2004, the AASB agreed to provide optional relief from certain disclosure requirements contained in IAS 30 and IAS 32 to parent company accounts presented with consolidated financial institution accounts. He noted that as a result of this decision, parent company accounts that make use of this relief will not be in compliance with international accounting standards, which will be noted in their financial statements. However, the consolidated accounts will be in compliance with international accounting standards.
The AASB Chairman noted that the international extractive industries accounting standard is not expected to be issued before the fourth quarter of 2004, and may not be applicable until 2006. In the absence of an international extractive industries standard for 2005, exploration costs would not be able to be capitalised on adoption of international accounting standards and would need to be removed from the balance sheet of all extractive industry companies. The AASB Chairman noted his intention to write to the IASB expressing the Board’s concerns and the need to give the issue urgent attention.
With respect to small and medium sized entities, the AASB Chairman noted that they have less complex financial reporting issues and therefore the 2005 set of international accounting standards will impact on them to a lesser extent than larger entities.
The meeting also noted recent developments in Europe regarding their consideration of the international accounting standard on financial instruments, IAS 39 and the possibility of it, in a worst case scenario, not being mandatory within Europe from 2005. The AASB Chairman noted that this standard was still subject to further changes. The meeting confirmed the appropriateness of its decision to adopt in 2005 the full set of international accounting standards as issued by the IASB by 31 March 2004, including IAS 39, as this filled an important gap in Australian accounting standards and provided certainty to the business community.
Report from FRC Audit Committee Chair
Following a report from the FRC Audit Committee Chair in regard to the Audit Committee meeting held on 7 June 2004, the FRC agreed to: (a) note the indicative 2004-05 AUASB budget and business plan, (b) approve in principle the 2004-05 AASB budget and business plan, subject to confirmation of the requested contribution from the professional accounting bodies, (c) approve the 2004-05 FRC budget, and (d) agree on the proposed allocation of 2004-05 funds between the FRC and its constituent bodies, subject to confirmation that the professional accounting bodies will be contributing the requested amounts as indicated in the FRC Chairman’s letters of 28 May 2004. It was also agreed that further contributions to the IASC Foundation would be considered at the next FRC meeting on 20 September 2004.
FRC’s Auditor Independence functions under CLERP 9
The meeting had the opportunity to hear comments from Mr Robert Lynn and Professor Keith Houghton on aspects related to the FRC’s expanded functions with respect to auditor independence. Both guests concurred that the auditing profession was in need of a more robust and transparent oversight system. Mr Robert Lynn also provided comments on the rationale of the proposals in his consultancy report to the FRC in regard to its auditor independence functions. The meeting agreed with the proposed scope of work for the FRC as outlined in the background paper prepared by Treasury, whereby the FRC would obtain high level information from the parties with which it has entered into MOU’s and would conduct tests through selective contacts with individual audit firms. It also agreed with the proposed establishment of an FRC subcommittee on auditor independence to supersede the CLERP 9 taskforce and to engage an advisor on auditor independence matters. The engagement of the consultant will occur following preliminary discussions with ASIC, once CLERP 9 becomes operational.
Update on MOU’s
The meeting approved individual MOU’s, as agreed by the corresponding parties, and agreed that the MOU’s should be signed by the FRC Chairman and other relevant parties following the commencement of CLERP 9 legislation. As a matter of transparency, it was also agreed that the MOU’s should be posted on the FRC website, subject to the agreement of the corresponding parties.
FRC Internal Review
The meeting agreed that it was appropriate to begin reviewing aspects of the FRC structure and functions at its September 2004 meeting. At this meeting the FRC will consider how to conduct the review, including issues to be addressed. The appropriateness of opening the FRC’s meetings to the public will also be considered at the September 2004 meeting. It was agreed that as part of the review process the FRC would invite key stakeholders to provide comments on areas of the review.
Other business
The Council noted a paper dealing with the strategic direction of the AUASB, which had been considered by a subcommittee, and which will be revisited once CLERP 9 becomes operational.
The Chairman urged FRC members to consult with their stakeholder groups to seek nominations for members to the International Accounting Standards Board (IASB)/ Financial Accounting Standards Board (FASB)/ UK Accounting Standards Board (ASB) international advisory group on reporting financial performance/comprehensive income. The Chairman indicated that Australian nominations would receive the support of the FRC.
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, Chief Integrity Officer, 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.