Bulletin
2006 / 9 – 18 December 2006
The 38th meeting of the Financial Reporting Council (FRC) was held in Sydney on 8 December 2006. A list of the current FRC membership is attached.
The main issues considered at the meeting were:
- a presentation by the Australian Accounting Standards Board (AASB) on its project to harmonise Generally Accepted Accounting Principles (GAAP) and Government Financial Statistics (GFS) reporting;
- the recognition of International Financial Reporting Standards (IFRS) adoption in Australia;
- small and medium-sized entities (SMEs) and differential reporting;
- the auditor independence function work programme;
- financial issues;
- 2007 appointments to the AASB and the Auditing and Assurance Standards Board (AUASB); and
- reports from standard setters and committees.
AASB presentation on GAAP/GFS
The AASB Chairman and the Board’s Technical Director gave a presentation to the FRC about the experience gained to date by the AASB from the development of AASB 1049 Financial Reporting of General Government Sectors by Governments and sought the FRC’s clarification of the broad strategic direction in terms of the extent to the GAAP/GFS harmonisation should now be pursued for other entities within the public sector.
The AASB proposed that, as a first stage, it would undertake a project on GAAP/GFS harmonisation for whole of government reporting (and for the Public Non Financial Corporation and Public Financial Corporation sectors) by the Australian Government and State and Territory Governments. As a second stage, the AASB would undertake a project on GAAP/GFS harmonisation for entities within the General Government Sector (GGS). The AASB envisaged that stages 1 and 2 would be completed by August 2008 and February 2010 respectively.
The FRC endorsed the Board’s proposal for additional work on GAAP/GFS harmonisation but suggested a stage 1 completion date of October 2007 which would allow the consistent preparation of financial statements for all sectors of government in the 2008-09 Budget and Outcome reporting. The Board noted the FRC’s views and indicated that it would endeavour to achieve the revised timetable.
In light of the views of stakeholders, the FRC agreed that, with the completion of stages 1 and 2 as described above, the requirements of the public sector strategic direction would be met.
Differential auditing standards
The FRC noted a paper from the AUASB on this topic and agreed that the AUASB should issue this paper for public consultation.
Recognition of IFRS adoption in Australia
The FRC considered issues associated with the possible inclusion in the auditor’s report of a statement of compliance of the financial reports with IFRS. The issue was raised because of concerns in some overseas jurisdictions about the extent to which Australian financial reports are IFRS-compliant.
The FRC Secretariat will prepare a discussion paper for the next FRC meeting which canvasses the options considered at the meeting for both auditor’s reports and directors’ declarations and proposes a means of asserting prominently the extent to which the financial reports of Australian for profit reporting entities are IFRS-compliant.
SMEs
The Council considered a paper on differential reporting in Australia prepared by Commonwealth Treasury in consultation with the AASB. It canvassed a range of issues that will need to be addressed when the AASB releases for comment in Australia an exposure draft on the IASB draft accounting standard for SMEs. The Council advised the AASB that it would be appropriate, in the first instance, for the Board to propose a scope of application as part of its consultation on the upcoming draft IASB standard for SMEs.
FRC members noted that a high priority was relieving the compliance burden on SMEs and undertook to consider further this issue over the next 12 months. Addressing this issue should enhance the support for IFRS in Australia.
Auditor independence function work programme
The FRC approved the engagement of a consultant to examine a range of issues associated with the findings and recommendations of the quality review and disciplinary procedures consultancies that were undertaken in 2005-06. In addition, the FRC agreed to invite tenders for a consultant to evaluate how ethics is applied in practice in the accounting firms.
A separate announcement concerning the successful tenderer to examine a range of issues associated with the findings and recommendations of the quality review and disciplinary procedures consultancies will be made at a later date.
Financial issues
The FRC considered a range of issues raised by the Finance Committee. Key decisions by the FRC included:
- approving revised 2006-07 Budgets for the AASB and AUASB;
- agreeing to the sitting fees for AASB and AUASB members being increased from $720 per day to $750 per day for meetings commencing after `1 January 2007;
- agreeing that funding of up to $25,000 should be provided to assist with the staging of the Ken Spencer Memorial Lecture in 2007; and
- noting that the ASX has agreed top provide annual funding of $100,000 to the FRC for a further three years.
Appointments to AASB and AUASB
The Nominations Committee’s recommendations on the appointments and re-appointments to be made to the AASB and AUASB during 2007 were considered and approved by the FRC.
A separate announcement about these appointments will be made as soon as the corresponding instruments of appointment are finalised.
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 Committee. A report was also received from the Chairman of the Trans-Tasman Accounting and Auditing Standards Advisory Group.
In addition to matters mentioned above, issues addressed in, or arising from, these reports included:
- approving revised charters for the Finance Committee, the AASB Audit Committee and the AUASB Audit Committee; and
- agreeing to make submissions on two consultative papers recently released by the Parliamentary Secretary to the Treasurer.
Other matters
Reports were provided on a number of recent meetings with stakeholders and other bodies, including:
- Mr Charles Macek’s attendance at the IASC Foundation Trustees’ meeting in Washington DC during October; and
- Ms Judith Downes’ report on the Standards Advisory Committee meeting held in November.
Consideration of public comments on the Simpkins report A review of the policy of sector-neutral accounting standard-setting in Australia was deferred until the next meeting of the FRC.
The FRC decided that in 2007 its regular meetings would be held on 6 March (Melbourne), 1 June (Sydney), 5 September (Melbourne) and 6 December (Sydney). In addition, it was agreed that an additional meeting should be held in Melbourne during the second half of February, primarily for the purpose of considering public comments on the Simpkins report (subsequently set for 19 February).
At the conclusion of the formal agenda, the FRC met with the Presidents and Chief Executives of CPA Australia, The Institute of Chartered Accountants in Australia and the National Institute of Accountants for a wide-ranging discussion on a range of issues of mutual interest to the FRC and the accounting profession.
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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.
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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 — nominated by the Commonwealth);
- Mr Bruce Brook, Company Director, Melbourne, Victoria — nominated by the Business Council of Australia;
- Ms Kathryn Campbell, Deputy Secretary, Financial Management Group, Department of Finance and Administration — nominated by the Commonwealth;
- Mr Don Challen, Secretary, Tasmanian Department of Treasury and Finance — nominated by Heads of State and Territory Treasuries;
- Mr Michael Coleman, Partner, KPMG — nominated by the Australian Institute of Company Directors;
- Mr Mark Coughlin, Development Manager, Origin Energy — nominated by CPA Australia;
- 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 Jim Murphy, Executive Director, Markets Group, Department of the Treasury — 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.