Seventh Meeting
8 September 2000
Outcomes of meeting held on 8 September 2000 at the offices of the Australian Securities and Investments Commission, Level 13, 485 LaTrobe Street, Melbourne.
Attendance
Members:
Mr Michael Ullmer (Acting Chairman)
Ms Elizabeth Alexander, AM
Mr Don Challen (participating by phone)
Mr Leigh Hall, AM
Mr Stephen Harrison, AO (informal Alternate for Mr Lucy)
Ms Veronique Ingram (Alternate for Mr Potts)
Mr David Jackson
Mr Charles Macek
Ms Jan McCahey
Mr Robert Nottle, CBE
Dr Diana Wright
AASB:
Mr Keith Alfredson (Chairman)
FRC secretariat:
Mr Michael Kooymans
Apologies:
Mr Paul Rizzo
Mr Jeffrey Lucy
Mr Graeme McGregor, AO
Mr Gary Potts
Adoption of agenda
The proposed agenda was adopted.
It was agreed that, for future meetings, any secretariat briefing for FRC members on issues covered by the AASB Chairman's report would also be circulated to the AASB Chairman on an exception basis through the Chair.
Confirmation of minutes of 3 July 2000 meeting
The minutes of the meeting held on 3 July 2000 were confirmed.
Agenda item 1: Report by Chairman of AASB
The AASB Chairman's report was supported by papers he had circulated to the FRC on: general AASB and UIG activities; meetings with AASB constituents; a revised draft of the UIG charter; proposed procedures in relation to any material personal interests of AASB members; Board policies relating to voting; membership of the Board of the International Accounting Standards Committee; the AASB's proposed publications policy; standard setting for the not-for-profit sector; and a letter from the Australasian Council of Auditors-General concerning a possible appointment to the Board. Specific outcomes are recorded below.
Urgent Issues Group Charter
The FRC approved the draft UIG charter proposed by the AASB subject to the following change:
- Appointments to the UIG will be made by the AASB with the approval of the Chairman of the FRC or his delegate.
FRC members agreed that, subject to processes with the FRC Chairman, they had no difficulties with the names of those who had confirmed their willingness to continue as members of the UIG: Mr Abela, Ms Downes, Mr Greenall, Professor Leo, Mr McClintock, Dr McHugh, Mr Morris, Mr Porter, Mr Rix, Mr Rofe, and Mr West. (It was noted that Mr Abela had recently resigned and that Heads of Treasuries would be nominating a replacement.)
It was agreed that paragraph 13 of the charter, which specifies the kinds of bodies from which UIG members will be drawn or by whom they will be nominated, would be kept under review, in particular to ensure that good people are not excluded.
Paragraph 15 of the charter states that members of the FRC are precluded from being appointed as members of the UIG or acting as alternates. It was noted that this did not preclude participation by an FRC member as an observer on the UIG, with the privilege of the floor, where that member was also the Chief Accountant (or equivalent) of ASIC as provided for in sub-paragraph 13(i) of the charter.
It was agreed that the charter and operations of the UIG should be reviewed after a 12 month period.
Material personal interests
The FRC endorsed the AASB Chairman's proposal that the AASB staff prepare a draft policy statement on the disclosure of financial interests, advice and conflicts of AASB members. It was agreed that, in addition to the points recommended by the AASB in the Chairman's paper on the issue, the paper should:
- include rules for members to absent themselves from discussions or voting;
- discuss whether AASB members should be required to provide statements of pecuniary interests; and
- incorporate a procedure to bring a matter to the FRC in case of doubt.
It was agreed that the paper should also cover the position of UIG members and should be provided to the FRC for approval as a policy/procedure of the Board.
Board policies relating to voting
The AASB Chairman reported that the AASB had endorsed the FRC's decision that the approval or making of a standard should formally require the affirmative votes of 7 members. The FRC endorsed the AASB's view that the appropriateness of this majority should be reviewed in the light of experience over the next year.
Publications
The FRC approved the AASB's proposed policy on publications and subscription services as set out in an attachment to the AASB Chairman's paper on this issue. Under this policy the accounting components of the Australian Accounting Research Foundation's subscription services would be continued by the AASB. The FRC's approval is subject to finalisation of discussions on the issue between the AASB, CPA Australia and The Institute of Chartered Accountants in Australia.
Not-for-profit sector
The AASB Chairman advised that the Board had not yet discussed this issue in detail. It was suggested that the discussion also cover the basic question of whether special accounting standards are needed for the sector.
Membership of AASB - letter from the Australasian Council of Auditors-General
It was agreed that the FRC should respond to the Council referring to the public sector backgrounds of a number of existing AASB members and indicating that the Council's interest in having a public sector auditor appointed to the AASB would be kept in mind when the FRC next considered Board appointments.
Replacement for Ian Mackintosh on AASB
The AASB Chairman advised that Mr Mackintosh would shortly be resigning from the Board. It was agreed that the secretariat would circulate to FRC members the names and resumes of the two nominees chosen by the FRC in November 1999 as `reserves' to be appointed to the Board in the event that a primary appointee in the relevant category declined the FRC's offer of appointment.
It was also agreed that FRC members would consider, in consultation with stakeholder bodies, other possible nominations for the expected vacancy with a view to providing comments to the secretariat within a week and settling an appointment in 3-4 weeks.
- The importance of appointing someone with strong technical skills was emphasised, with the candidate desirably also bringing experience in as many of the following fields as possible: corporate, public sector, standard setting and international standard setting.
Agenda item 2: Remuneration of part-time members of AASB
In the light of concerns expressed by some AASB members about the adequacy of the remuneration arrangements decided by the FRC on 3 July 2000, the FRC reviewed the matter and:
- confirmed that part-time Board members would receive a daily fee of $600, to be reviewed after one year; and
- agreed that all travel of AASB members, irrespective of duration, may be business class (it was earlier decided that travel of less than three hours' duration would be at economy standard).
Mr Challen asked that his dissent from the decision not to increase remuneration above $600 a day be recorded.
Agenda item 3: Funding
The secretariat circulated a table (copy attached) showing funding commitments from stakeholders for the three years from 1 July 2000. The AASB Chairman considered that total revenue for 2000-01, including the Board's best estimates of revenue from publications and other sources, would slightly exceed estimated expenditure for that year.
The FRC approved the proposed AASB budget for 2000-01 incorporating costs of standard setting (including notional rent) of $2.963m. The FRC also approved the AASB Chairman's proposal (deferred from the previous meeting until the budget position was clearer) to advertise and fill two additional technical staff positions, funding for which is included in the approved budget.
The AASB Chairman noted that, without an increase in shareholder commitments, the Board would be severely constrained in the out years. It was agreed that the FRC would consider the question of revenue for the out years at its next meeting.
Agenda item 4: Directors of AASB
It was noted that legal advice from the Australian Government Solicitor that FRC members are directors of the AASB meant that FRC members will need to:
- prepare and sign the AASB annual report;
- comply with directors' duties as set out in the Commonwealth Authorities and Companies Act 1997 (CAC Act); and
- be covered by directors' and officers' insurance (already arranged as part of a Comcover comprehensive insurance policy taken out by the AASB).
It was further noted that the secretariat will develop for the FRC's consideration a draft policy paper on conflicts of interest for FRC members in light of the CAC Act requirements, and that the AASB will be advised of requirements to keep the FRC informed so that FRC members can fulfil certain requirements under the CAC Act.
The FRC agreed to the establishment of an audit committee of the FRC comprising Ms Alexander (Chair), Mr Lucy (subject to his agreement) and Ms McCahey. The Committee was asked to provide a summary report to the next FRC meeting.
It was also agreed that the secretariat would seek follow-up legal advice addressing the potential liabilities faced by AASB directors in the performance of their duties under the CAC Act and (if relevant) the Corporations Law. The request would also seek advice on whether audit committee members could legally be drawn from among members of the AASB.
The secretariat was also asked to advise the FRC on the Government's approach to requests for indemnities for directors of Commonwealth authorities and companies.
Agenda item 5: FRC/AASB draft annual report
The FRC considered a first draft of the 1999-2000 FRC/AASB annual report and provided the secretariat with initial comments. It was agreed that a second draft would be circulated out of session for more detailed comments by FRC members with the objective of providing the report to the Minister prior to the 15 October due date. It was also agreed that the FRC Audit Committee would review the draft report including AASB financial statements.
Dr Wright undertook to provide advice to the AASB Chairman on any requirement for detailed reporting on the activities of the former AASB, and its financial statements, to be included in the FRC/AASB annual report.
Agenda item 6: Stock-take of FRC's oversight role
The FRC considered a secretariat paper on this issue and noted the summary of actions taken over the period 11 April to 31 August 2000 in meeting its statutory obligation to provide broad oversight of the standard setting process. The FRC agreed there were no issues or developments in this period requiring the preparation of a report to the Minister.
- Prospectively, however, it was agreed that the Treasurer be advised of the funding arrangements for standard setting that have now been settled by the FRC.
It was further agreed that the secretariat would bring forward for the next FRC meeting specific recommendations on how the FRC can progress consultation with stakeholders and AASB members.
It was also agreed that the AASB Chairman would develop a calendar on how, from a strategic perspective, the Board proposes to carry out its function of participating in and contributing to the development of a single set of accounting standards for world-wide use. This would provide a basis for an early strategic discussion by the FRC of Australia's future role in standard setting, domestically and internationally, including implications for funding of Australian as against IASC activities and stakeholder funding overall.
Agenda item 7: International issues
The AASB Chairman reported that he had taken soundings in relation to potential Australian candidates for positions of the IASC Technical Standards Board. Those likely to respond to the IASC's advertisement calling for applications include: ***********1. Ms Alexander indicated that ***********2 was also considering applying.
It was agreed that FRC members would put stakeholder bodies on notice that they can expect to be consulted by the IASC on short-listed candidates. The AASB will come back to the FRC Chairman when approaches are made.
The AASB Chairman advised that the Board would consult the FRC in due course about the IASC's proposed Liaison position for Australia. The FRC welcomed the Liaison concept and it was agreed that the AASB Chairman would convey this to the IASC.
It was also agreed that the AASB Chairman would advise the secretariat of the timeframe for nominations of individuals and organisations for appointment to the IASC Standards Advisory Council.
The FRC also noted a paper prepared by the secretariat reporting on recent developments in international accounting standard setting.
Agenda item 5: Other business
It was agreed that the secretariat would consult with the Chairman on possible dates for the next meeting.