Bulletin
2006/4– 27 June 2006
The 36th meeting of the Financial Reporting Council (FRC) was held in Sydney on 22 June 2006. A list of the current FRC membership is attached.
The main issues considered at the meeting were:
- the report by the FRC’s sector neutral consultant;
- the 2006-07 budgets and business plans for the Australian Accounting Standards Board (AASB) and the Auditing and Assurance Standards Board (AUASB);
- an appointment to the AASB;
- a progress report on the implementation of decisions taken at the strategy meeting held by the FRC in February 2006; and
- reports from standard setters and committees.
Membership changes
The Chairman welcomed Mr John Gethin-Jones to his first Council meeting.
The Chairman also expressed his appreciation for the contribution to the work of the Council made by Mr Brian Scullin, who recently retired from the Council.
FRC project on sector neutral accounting standards
Mr Kevin Simpkins, a consultant engaged by the FRC to undertake research on the extent to which accounting standards should be ‘sector neutral’, presented his final report A review of the policy of sector-neutral accounting standard-setting in Australia to the FRC.
The FRC agreed to publish Mr Simpkins’s report on its website. It also agreed to issue a consultation paper seeking public comments on a number of matters raised in the report.
Financial matters
2006-07 budgets and business plans
The FRC considered and approved the 2006-07 budgets and business plans for the AASB and the AUASB. It also considered and approved the FRC’s own 2006-07 budget.
The AASB’s accrual budget provides for total income of $4.189 million, with total expenses of $4.155 million. The AUASB’s budget provides for total income of $1.947 million and total expenses of $2.141 million. The FRC’s own expenditures are budgeted at $2.650 million. This figure includes a budgeted contribution of $800,000 to the International Accounting Standards Committee Foundation that the FRC makes on behalf of Australia.
The FRC agreed to authorise payments:
- to AASB members who participate at Committee meetings and panels; and
- for attendance at part-day Board meetings of the AASB and AUASB.
These payments are to be made in accordance with guidelines approved by the FRC.
The FRC also agreed that an amount of $180,000 be transferred from the FRC to the AASB in 2005-06 in order to bring the results for the AASB closer to balance.
The FRC noted that on the basis of funding commitments and projected expenditures, the AASB and AUASB are expected to record a combined deficit in each of 2006-07, 2007-08 and 2008-09 and that these may require the Boards and the FRC to find expenditure savings and draw upon cash reserves.
Contributions to IASCF
The FRC agreed that there should be a further contribution of $200,000 to the IASCF in 2005-06, bringing the total for the year to $1 million.
Appointment to AASB
The FRC approved a recommendation from the Nominations Committee to appoint a new member to the AASB, subject to completion of referee checks. A separate Bulletin announcing the appointment will be issued.
Reports from standard setters and committees
The FRC received reports from the Chairmen of the AASB, AUASB, FRC Finance Committee, FRC Nominations Committee and FRC Audit Independence Subcommittee. In addition to matters mentioned above, issues addressed in these reports included:
- the leasing of new accommodation for the AASB and AUASB;
- progress with the GAAP/GFS project;
- successful completion of the AUASB’s programme to issue the auditing standards having force of law for the purposes of the Corporations Act;
- arrangements for the annual peer review of the performance of FRC members; and
- progress with the performance of the auditor independence function, including the work of the three short-term consultants engaged to consider issues associated with the teaching of professional and business ethics, disciplinary procedures of the professional accounting bodies and the quality review programmes of those bodies, recent meetings with stakeholder bodies, and the timetable for the preparation of the 2005-06 auditor independence report.
The FRC considered a document prepared by the AASB outlining the initiatives underpinning the AASB’s business plan. Subject to consultation with the FRC Chairman on a number of changes to the document to better reflect the AASB’s relationship with the FRC and the latter’s strategic directions, the document will be published on the AASB’s website.
The FRC also agreed that the 2005-06 auditor independence report should be published as a separate report to the annual reports of the FRC, AASB and AUASB.
Other matters
Reports were provided on a number of recent meetings with stakeholders and other bodies, including a National Institute of Accountants (NIA) conference in Malaysia on challenges facing the professional accountant, AUASB meetings on the new accounting standards and a NIA forum on FASB/IASB convergence. Mr Macek also reported on his appearance before the Senate Estimates Committee and on a visit to Japan, China and Singapore as a follow-up to the IFRS Regional Forum held in Australia in October 2005. Finally, Ms Judith Downes, a member of the IASB’s Standards Advisory Council (SAC), briefed FRC members on the February 2006 meeting of the SAC.
The FRC reviewed progress in implementing decisions taken at the strategy meeting held in February 2006, including issues such as the FRC’s relationship with the standard setters, enhanced liaison with stakeholder bodies and raising the FRC’s public profile. As part of the ongoing implementation of these decisions, members of the AUASB joined the Council for consideration of the report by the Chair of the AUASB, followed by a wide-ranging discussion of issues associated with operations of the AUASB and its standard setting role. A similar meeting is being arranged with members of the AASB. The FRC also agreed to prepare a document for consultation with the AASB and AUASB which sets out the agreed process for developing and issuing strategic directions to the Boards under section 225 of the Australian Securities and Investments Commission Act 2001.
The FRC decided that information about the interests of FRC members should be published on the FRC’s website.
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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 Secretary 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 Bruce Brook, Company Director, Melbourne, Victoria - nominated by the Business Council of Australia;
- Mr Don Challen, Secretary, Tasmanian Department of Treasury and Finance — nominated by Heads of State and Territory Treasuries;
- Mr John Gethin-Jones, General Manager, Queensland Investment Corporation – nominated by Investment & Financial Services Association;
- 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 Australian Shareholders’ Association;
- Mr Eric Mayne, Group Executive, Market Supervision, Australian Stock Exchange - nominated by the Australian Stock Exchange
- 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 Phillip Prior, Chief Finance Officer, Department of Defence — nominated by the Commonwealth;
- Mr John Stanhope, Chief Financial Officer and Group Managing Director, Finance and Administration, Telstra Corporation Limited - nominated by the Group of 100 Inc.
- Ms Catherine Walter, AM, Company Director and Solicitor; Chair of the Business Regulation Advisory Group – nominated by the Commonwealth;
- Ms Jan West, Partner, Deloitte Touche Tohmatsu - nominated by The Institute of Chartered Accountants in Australia;
- Mr Lee White, Chief Accountant, Australian Securities and Investments Commission - nominated by ASIC.
- Mr Klaus Zimmermann, Chief Executive Officer, Eldercare Incorporated and Director, National Institute of Accountants — nominated by the NIA.