Bulletin
2010 / 01 – 16 March 2010
The Financial Reporting Council (FRC) held its first meeting for 2010 in Melbourne on 3 March 2010.
The FRC Chairman welcomed Dr Stein Helgeby to his first meeting of the Council. Dr Helgeby was appointed to the FRC during February on the nomination of the Department of Finance and Deregulation. Dr Helgeby has replaced Ms Kathryn Campbell as a member of the Council and the FRC Chairman expressed his appreciation of Ms Campbell's contribution to the work of the Council during her term of appointment.
The FRC Chairman also welcomed Messrs Djonieri, Eko Butsiono and M Mukhtar, representatives of Indonesia's Bapepam‑LK, to the FRC meeting. Messrs Djonieri, Eko Butsiono and M Mukhtar were in Melbourne to attend ASIC's 2010 Summer School and the opportunity was taken for them to observe a meeting of the FRC and the issues that it is currently addressing.
The principal matters dealt with at the meeting were consideration of: reports from stakeholder bodies; briefings on recent international developments and examination of a range of strategic issues concerning Australia's financial reporting framework.
Engagement with stakeholder bodies
The Chairs of the AASB and AUASB reported to the Council on the work of their respective Boards during the period since the last FRC meeting.
In his report to the Council, Mr Stevenson identified a number of themes associated with the AASB's work, including: global financial crisis-related matters such as amendments to Australian accounting standards to reflect changes made by the IASB; consideration of public sector-related projects that have been raised for the Board's consideration and the continuation of work on GAAP/GFS harmonisation; a project on disclosures by private sector not‑for‑profit entities; and continuing work on differential financial reporting, with an exposure draft on a reduced disclosure regime for non-publicly accountable entities being released at the end of February.
Ms Kelsall's report canvassed a number of issues being progressed by the AUASB, including: the commencement of training sessions about the 'clarity' standards; planning of the AUASB's work program; preparations for the visit by Professor Schilder of the IAASB during May; involvement with New Zealand's Professional Standards Board, including consideration of measures that might streamline the operations of the two Boards; and input into various international projects being undertaken by the IAASB.
Other Council members raised a wide range of issues that were of interest to their respective nominating bodies, including: the importance of the progression of the proposals in the Government's corporate reporting reform Bill; the AASB's differential financial reporting proposals; other financial reporting issues, such as the reporting of underlying earnings; the outcome of current Government reviews into taxation (the Henry Review) and superannuation (the Cooper Review) and possible changes to executive remuneration regulatory requirements.
International developments
Mr Simpkins, Chair of the NZ ASRB, provided FRC members with an update on proposals by the Ministry of Economic Development (MED) and the Accounting Standards Review Board (ASRB) for revising New Zealand's financial reporting framework. He indicated that comments had been raised about MED's proposals for auditor registration and oversight and that refinements are being considered to enable the regime to meet international expectations. In addition, he indicated that the timetable for MED's proposed structural changes, including the reconstitution of the ASRB as the External Reporting Board, is likely to be accelerated. Finally, it was noted that Minister Simon Power had announced that the Government had decided that large non-issuer companies would not be required to file their financial statements with the Registrar of Companies.
Mr Simpkins informed the meeting that the ASRB had received approximately 80 submissions on its proposals concerning the application of accounting and assurance standards under the new financial reporting framework. The ASRB is currently preparing a phased transition plan for making decisions on and then implementing the new arrangements, having regard to MED's accelerated timeline.
Reports on recent activities of the IASB's International Financial Reporting Interpretations Committee and Standards Advisory Council were provided to Council members. In addition, a report on the 8‑11 December 2009 meeting of the International Public Sector Accounting Standards Board was circulated to Council members prior to the meeting.
The Secretariat also briefed Council members on action currently being taken by the IASC Foundation to identify a preferred candidate to succeed Sir David Tweedie as Chairman of the IASB when his term ends in June 2011.
Strategic issues
The meeting considered a series of papers prepared by the Secretariat and stakeholders concerning issues that are under on-going consideration or monitoring by the FRC. An overview of these issues is set out below.
- GAAP/GFS harmonisation: The FRC was briefed on recent work by the AASB on this matter. At the AASB's February meeting, it was agreed that the AASB's staff would further develop their recommendations for the content of a standard focusing explicitly on improving the usefulness of general purpose financial statements of entities within the general government sector. The FRC was informed that such a standard would go significantly beyond the proposals in the previous exposure draft and would more likely require further due process through an exposure draft.
- Differential financial reporting: At the end of February, the AASB released for comment an exposure draft proposing lower disclosure requirements for entities that are not public interest entities. The proposal envisages entities being subject to the recognition and measurement contained in full IFRS, but with reduced disclosure requirements generally based on the IASB's IFRS for SMEs standard.
- Corporate Reporting Reform Bill: FRC members were provided with a status report on the Government's Corporations Amendment (Corporate Reporting Reform) Bill 2010. Some 50 submissions had been received, with stakeholders being broadly supportive of the proposed reforms and most comments focussing on technical aspects of the Bill. The meeting noted that it is hoped the Bill will be introduced and passed during the Australian Parliament's Winter sittings (subject to Parliamentary and other resourcing requirements), thus enabling most of the Bill's reforms to apply to the financial year ending on 30 June 2010.
- Audit Independence Function: The FRC approved its Audit Independence Function Work Program for the period to 30 June 2010. The work program provides for meetings with stakeholder bodies to obtain the information needed to perform the FRC's statutory functions. In addition, it is proposed that there be a detailed examination of Australian and international developments on ethics, auditor rotation and non-audit services and consideration of audit related lessons from the global financial crisis.
- Audit Quality: Council members were provided with a status report on Treasury's consultation paper Audit Quality in Australia: A Strategic Review. The meeting was informed that the Minister for Financial Services, Superannuation and Corporate Law had approved the public exposure of the paper for a two month consultation period. The FRC Chairman had been invited to release the paper and this occurred on 5 March 2010.
- Review of superannuation fund compliance with financial reporting requirements: The FRC considered a report about regulator review of compliance by superannuation funds with accounting standards. Messrs Trowbridge and Dwyer informed the FRC about the respective responsibilities of APRA and ASIC in relation to superannuation funds' compliance with financial reporting requirements. It was decided that further consideration should be given to this issue following the receipt of additional information from APRA.
- Revision of APES 110: The FRC was briefed on the Accounting and Professional Ethics Standards Board's consultation paper about a proposed revision of APES 110 Code of Ethics for Professional Accountants was noted by the Council.
- Audit oversight mutual recognition arrangements: The FRC noted information about Australia's mutual recognition arrangements with audit regulators in the United States of America, member states of the European Union, Japan and Canada.
Ken Spencer Memorial Lecture
The Ken Spencer Memorial Lecture for 2010 was held in Melbourne on the evening before the Council meeting. The Lecture, which was attended by about 90 people, was delivered by Mr Tim Flynn, Chairman of KPMG International and Chairman of KPMG LLP, its US member firm. The text of Mr Flynn's presentation, Restoring Trust and Building Confidence, can be viewed on the FRC website. The FRC would like to acknowledge the roles played by KPMG and the three professional accounting bodies in arranging the Lecture.
Other matters
As part of the recent ASIC Summer School, the FRC Chairman facilitated a workshop entitled ‘The role of accounting standards in the [global financial] crisis: exacerbating the cycle?' The commentators for the workshop were FRC members Michael Dwyer and Kevin Stevenson and former FRC Chairman Charles Macek.
Reflecting a recent determination of the Remuneration Tribunal, the FRC approved an increase in sitting fees for AASB and AUASB members (other than the Chairs) from $810 per day to $835 per day, for meetings commencing on or after 1 January 2010.
The FRC approved an amendment to its Rules of Procedure to establish a protocol for communications between members of the Council and members of the standards setting boards.
The next regular meeting of the FRC is scheduled be held in Melbourne on 18 May 2010.
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.