Bulletin
2004/7 – September 2004
The Financial Reporting Council (FRC) met in Melbourne on 20 September 2004. It was the first meeting of the Council since taking on its new responsibilities for oversight of auditing standard setting and auditor independence requirements under the CLERP 9 reforms. A list of the current FRC membership is attached.
The FRC Chairman informed the meeting that Mr John Langoulant and Mr Lewis Ting have resigned from the FRC since the last meeting and expressed his appreciation for their contribution to the work of the Council.
The meeting considered the following main issues:
International Financial Reporting Standards (IFRS) Implementation Issues
The FRC Chairman provided an update on the main issues that had been raised by various stakeholders regarding the transition to IFRS, including the preparedness of small and medium sized companies, the treatment of intangible assets and issues associated with the funds management industry. The Council is continuing to monitor implementation issues. The Council noted that many companies are well advanced in terms of the transition to IFRS and there is still adequate time for other companies to prepare for the transition to IFRS. It reaffirmed its endorsement of the 2005 timetable and its previous directives to the AASB that Australian equivalents of IFRS should fully apply to all reporting entities. However it also conveyed its support for any other appropriate initiatives that ASIC may provide such as facilitating the access by smaller companies to professional advice, to ensure a smooth transition in 2005.
Report from the Chairman of the AASB
The Council noted an update on AASB issues provided by the AASB Chairman including reference to issues such as the relocation of the AASB premises, copyright issues, IASB projects and work priorities.
Report from the Chairman of the AUASB
The Council noted that the inaugural meeting of the Auditing and Assurance Standards Board (AUASB) was held on 31 August 2004, and was mainly concerned with the ongoing work of the former AuASB and administrative matters required to support the work of the Board.
The AUASB Chairman also submitted a revised version of the proposed AUASB strategic directions paper. A key theme of the paper, as discussed by the FRC-AUASB strategic direction taskforce, is that the objective of having the highest quality auditing standards should take precedence over the objective of having minimal divergence from international standards due to the role of auditing standards in the broader governance framework and the need to take account of the public interest. The FRC decided that the current version of the paper, with a covering introduction to be prepared by the Secretariat in consultation with the AUASB Chairman, should be placed on the FRC website for public comment, and that further discussion should take place at the next FRC meeting in December 2004. It is expected that this should occur by 1 October 2004 with public comment invited by 15 November 2004 enabling further discussion to take place at the next FRC meeting on 6 December 2004.
Report from the Chairman of the Nominations Committee
The FRC agreed to a revised criteria and process for the appointment and performance assessment of AASB and AUASB members, including the Chairmen.
Report from the Chairman of the Audit Committee
On the recommendation of the Audit Committee, the Council approved the 2003-04 stocktake of FRC operations against its functions, the draft 2003-04 FRC / AASB Annual Report, the updated 2004-05 AASB Budget, the terms and conditions of the remuneration for the members of the AASB and AUASB (other than their Chairmen) and agreed to a contribution of an additional $1 million to the IASC Foundation, subject to further consultations by the FRC Chairman with the incoming Government. Following the receipt of legal advice, the FRC agreed to the establishment of separate Audit Committees for each of the AASB and AUASB and to the establishment of a FRC Finance Committee, with the same FRC members comprising the membership for these three Committees and approved their corresponding Charters. It also agreed to the proposed 2004-05 draft Budgets for the AUASB and the FRC’s own operations, subject to review by the AUASB Audit Committee and the FRC Finance Committee respectively.
Report from the Chairman of the Audit Independence Subcommittee
The FRC approved the charter of the Audit Independence Subcommittee. The FRC noted that the Subcommittee is still considering the selection of a part-time consultant to assist the FRC with its responsibilities for monitoring the effectiveness of auditor independence requirements in Australia.
Other matters
The FRC agreed that the FRC Chairman should deal with issues concerning the use by outside parties of material from the FRC website, subject to adequate protection of copyright issues.
The FRC noted a background paper prepared by the FRC Secretariat dealing with three issues: the opening of FRC meetings to the public, the composition of the Council and the structure of its Secretariat. A further detailed paper, incorporating information regarding the framework adopted in other jurisdictions will be prepared following the bi-annual visit to the US and Europe by the FRC Secretariat and Chairman in November. This will enable the FRC to deal with this issue at its meeting in December.
The FRC is the peak body responsible for the broad oversight of the accounting and auditing standard setting process for the private and public sectors, as well as monitoring the effectiveness of auditor independence requirements in Australia. It comprises key stakeholders from the business and investing communities, the professional accounting bodies, governments and regulatory agencies. The FRC advises the Government on the accounting and auditing standard setting process and on the development of international accounting and auditing standards. It determines the broad strategic direction of the standard setters, the Australian Accounting Standards Board and the Auditing and Assurance 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 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);
- Ms Catherine Walter, AM, Company Director and Solicitor; Chairman 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 (no longer a member) — nominated by ICAA;
- 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.