Bulletin
2009 / 04 – 10 June 2009
The Financial Reporting Council (FRC) held its 52nd meeting in Canberra on 10 June 2009. The principal issues considered by the meeting were:
- The FRC Report to the Minister;
- Stakeholder reports;
- Possible Australian responses to the forthcoming IFRS for SMEs;
- A report on XBRL developments from Mr Paul Madden of the Treasury; and
- Public sector accounting issues raised in a presentation by Mr Tim Youngberry of the Department of Finance and Deregulation (DoFD);
FRC Report to the Minister
The FRC noted the content of a draft Report for the Minister on the recent activities of the FRC, and endorsed an amended version to go to the new Minister as soon as possible. The report highlights a variety of international activities of the FRC and work with the AASB and AUASB, including the finalisation of the Clarity auditing standards.
Stakeholder reports
FRC Chairman, Mr Jeffery Lucy AM, highlighted the likely visit in September by Japanese business representatives organised by the Japanese (IASCF) Trustees and the Chamber of Commerce and Industry to see how IFRS adoption worked in Australia. There is also the prospect of a similar visit from Chinese representatives. Work by the G100 and ICAA was discussed, and revised reports would be presented at the next FRC meeting. The ASRB is reviewing the accounting standards framework in New Zealand and expects to publish a discussion document in the third quarter.
International Financial Reporting Standards for Small and Medium-sized Entities (IFRS for SMEs)
The objective of this project is to develop an IFRS expressly designed to meet the financial reporting needs of entities that (a) do not have public accountability and (b) publish general purpose financial statements for external users. Examples of such external users include owners who are not involved in managing the business, existing and potential creditors, and credit rating agencies. The IFRS for SMEs will be derived from full IFRSs with appropriate modifications based on the needs of users of SME financial statements and cost-benefit considerations.
The project to develop this IFRS began with an IASB working group meeting in April 2003. The current IASB due process step is Board re-deliberation of the proposals in the Exposure Draft (ED) of an International Financial Reporting Standards for Small and Medium-sized Entities (IFRS for SMEs) that was issued in February 2007. Staff submitted a ballot draft of a final IFRS for SMEs to the Board on 1 June 2009. The final standard is expected to be published around the first week of July 2009.
Australian accounting standards setters need to consider how Australia should adapt to this development. After discussing a number of possible options and outcomes the FRC decided that the issue was of considerable importance, and might have unintended consequences in Australia (i.e. to increase the regulatory burden for certain entities). The FRC therefore decided that a special meeting on the topic should be organised as soon as practicable so that the main issues and stakeholders could be canvassed.
XBRL Developments
Standard Business Reporting (SBR) is a multi-agency initiative that will simplify business-to-government reporting by:
- making forms easier to understand
- using accounting/record keeping software to automatically pre-fill government forms and
- introducing a single secure way to interact on-line with participating agencies
XBRL — eXtensible Business Reporting Language — a language for the electronic communication of business and financial data is revolutionising financial reporting around the world. XBRL provides major benefits in the aggregation, preparation, analysis and communication of financial information including cost savings, greater efficiency, improved accuracy and reliability to all those involved in supplying or using financial data. Instead of treating financial information as a block of text - as in a standard internet page or a printed document - XBRL provides an identifying tag for each individual item of data which is computer readable, and then useable for a range of purposes (including market comparison, benchmarking and performance).
Mr Paul Madden (Treasury) briefed the FRC on progress towards implementing SBR in Australia with the headline that the SBR deliverables are on track for delivery for March 2010, with the SBR Taxonomy publicly available. He also outlined possible steps that could be taken to ensure that IFRS, a key element in the taxonomy, retains its usability in that role. This will entail discussions with the IASB's technical team in June 2009 to consider the issues including: the development of an appropriate non-technical oversight structure for the IASCF Trustees; a modification of the existing disclaimer; and the need to ensure that version changes are able to be implemented readily in new software, where the current processes preclude backwards compatibility. Australia will coordinate with other countries with advanced XBRL projects, such as the Netherlands, US and UK.
Public Sector Accounting Issues
Mr Tim Youngberry (DoFD) gave a presentation on some of the current financial reporting issues facing the public sector. In particular, he discussed the benefits of applying IFRS, noting that the current AASB approach of including "AUS" paragraphs in Australian standards allowed issues that are specific to the public sector to be addressed. In addition, Mr Youngberry spoke about the current work by the IASB and the International Public Sector Accounting Standards Board in developing their respective conceptual frameworks, noting that any inconsistency between the frameworks may affect financial reporting standards for the public sector in Australia. Mr Youngberry also noted the importance of maintaining alignment between the Government Finance Statistics (GFS) framework and AEIFRS as well as the importance of the proposed standard being developed by the AASB on GFS/GAAP harmonisation at the entity level.
Other matters
Mr Michael Coleman was chosen as Deputy Chairman of the FRC.
The FRC's 2009-10 business plan was approved, and the plans for the AUASB and AASB were noted.
A number of FRC members have recently been appointed: Mr Michael Dwyer from June 2009 to December 2011; Ms Noelle Kelleher for three years from June 2009; Mr Kevin Simpkins from June 2009 to February 2014; and Mr Kevin Stevenson from July 2009 to June 2014. The following members were re-appointed by the Minister to June 2012: Mr Bruce Brook, Mr Eric Mayne, Mr Jim Murphy, Mr John Stanhope, Mr Klaus Zimmermann, and Mr John Gethin‑Jones.
The next scheduled meeting for the FRC will be on 21 September in Melbourne. However it is expected that a special meeting of the FRC to discuss differential reporting for SMEs will be held in Melbourne on a date in August yet to be finalised.
About the FRC
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. A list of the current FRC membership is on the FRC's website.
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.