Bulletin
2005 / 5 – 21 September 2005
The Financial Reporting Council (FRC) met in Melbourne on 16 September 2005. A list of the current FRC membership is attached.
The meeting considered the following main issues:
- International Financial Reporting Standards (IFRS) implementation;
- Auditor independence;
- Annual reports and financial statements;
- FRC member survey;
- AASB and AUASB membership; and
- Reports from the Chairmen of the Australian Accounting Standards Board (AASB) and Auditing and Assurance Standards Board (AUASB).
International Financial Reporting Standards (IFRS) Implementation
The FRC considered issues raised by stakeholders on IFRS implementation. A number of common themes had emerged from the submissions, including the level of Australian influence over the development of IFRS, education and the skill level of those responsible for implementing IFRS, issues affecting small and medium enterprises, the stability of the accounting standards platform, and issues arising from the process by which standards are set by the AASB. Consequently, the FRC agreed to:
- write to the AASB seeking their response to the issues raised;
- review the strategic direction to the AASB at its meeting in December, as flagged previously;
- write to the ASX seeking a review of IFRS issues raised in financial statements for the year ending on 30 June 2005 prior to the preparation of the statements for the half-year ending on 31 December 2005;
- consider, through the work of the Trans-Tasman Accounting Standards Advisory Group, the different reporting regimes which apply in Australia and New Zealand with a view to bringing these into line; and
- brief the Treasurer on the issues raised.
Auditor Independence
The FRC approved a draft FRC Auditor Independence Report for 2004-05, subject to minor additional amendments. The report will be submitted to the Minister in conjunction with the combined annual report of the FRC, AASB and AUASB.
The FRC approved the engagement of consultants to undertake the following tasks forming part of the FRC’s 2005-06 auditor independence work programme:
(i) examine the teaching of professional and business ethics by, or on behalf of, the professional accounting bodies (to the extent to which the teaching of those subjects relates to auditor independence) and prepare a report to the FRC on the adequacy of that teaching;
(ii) examine the quality review programmes of Australia’s professional accounting bodies (to the extent that those reviews relate to auditor independence requirements), having regard to the programmes of equivalent overseas bodies, and prepare a report to the FRC on any measures that may be needed to enhance the Australian programmes;
(iii) examine the disciplinary procedures in place in Australia relating to auditor independence, having regard to the procedures of equivalent overseas bodies, and prepare a report to the FRC on any measures that may be needed to enhance the Australian procedures; and
(iv) examine auditor independence issues in respect of non-Corporations Act audits, such as superannuation funds.
The FRC noted that the Subcommittee had reviewed its Charter and concluded that no amendments are needed to the Charter at this time.
Annual Reports and Financial Statements
The FRC approved the draft 2004-05 FRC/AASB/AUASB annual report including the financial statements of the AASB and AUASB for the year ended 30 June 2005, subject to clarification of minor outstanding issues.
The FRC also approved the 2004-05 FRC stocktake of operations against its functions, and agreed to its publication on the FRC website.
The FRC noted the progress report on the implementation of the FRC’s decisions concerning a memorial for Ken Spencer.
FRC Member Survey
The FRC discussed the consolidated results of the survey of FRC members of the performance of the FRC and a report on the results. Consequently, the FRC agreed to:
- hold a meeting early in 2006 to consider the formalisation of an FRC business plan, including its forward strategy in relation to its oversight role of the standard setting bodies and the scope of its work on auditor independence;
- give consideration to a communication strategy for the FRC; and
- undertake a similar survey each year, which would include an assessment of individual FRC members.
AASB and AUASB Membership
The terms of three members of the AASB, Mr Bryce Denison, Ms Alice Williams and Mr Glenn Appleyard were extended to the end of 2005, to ensure continuity of membership on the AASB through the period in which the FRC will conduct a public selection process for the AASB and AUASB.
The FRC agreed to amend the selection criteria for appointments to the AASB and AUASB. The amended criteria will be available on the FRC website, and will apply in relation to the forthcoming public selection process for Board members. The FRC noted the timetable for this process, which would commence with advertisements in selected newspapers on 23 and 24 September 2005.
Reports from the Chairmen of the Australian Accounting Standards Board (AASB) and Auditing and Assurance Standards Board (AUASB)
The FRC noted an update on AASB issues, including an update on IFRS adoption, GAAP / GFS harmonisation, and the review of the future role and structure of the Urgent Issues Group.
It was noted that the AASB’s contacts with its New Zealand equivalent, the Financial Reporting Standards Board, were expanding significantly and that the two bodies had undertaken to facilitate the sharing of resources. A formal protocol of co-operation between the two boards has been drafted.
The FRC noted an update on matters concerning the AUASB, including progress in the redrafting of Auditing Standards, references to ethical and other professional pronouncements in Auditing Standards, and the AUASB’s communications plan.
Other matters
The FRC agreed on a preferred tenderer to be employed as a consultant to undertake research on sector neutral accounting standards. An announcement will be made following agreement to contractual terms between the tenderer and the Commonwealth Treasury.
The next FRC meeting will be held on Friday 16 December 2005.
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;
- Mr Richard Humphry, AO, Trustee, International Accounting Standards Committee Foundation;
- Mr Warwick Hunt, Chairman, Accounting Standards Review Board of New Zealand – nominated by the New Zealand Minister of Finance;
- 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 Phillip Prior, First Assistant Secretary, Financial Management Group, Department of Finance and Administration — nominated by the Commonwealth;
- Mr Brian Scullin, Company Director – nominated by Investment & Financial Services Association (IFSA);
- Ms Catherine Walter, AM, Company Director and Solicitor; Chair of the Business Regulation Advisory Group;
- Ms Jan West, Partner, Deloitte Touche Tohmatsu - nominated by The Institute of Chartered Accountants in Australia;
- Mr Klaus Zimmermann, Chief Executive Officer, Eldercare Incorporated and Director, 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 Ms Jan West — nominated by The Institute of Chartered Accountants in 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