Ninth Meeting
30 April 2001
Outcomes of meeting held on 30 April 2001 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
Mr Leigh Hall, AM
Mr David Jackson
Mr John Jarrett (Alternate member for Mr Macek)
Mr Jeff Lucy, AM
Mr Graeme McGregor, AO
Mr Doug Niven (informally representing ASIC)
Mr Robert Nottle, CBE
Mr Gary Potts
Dr Diana Wright
AASB:
Mr Keith Alfredson (Chairman)
FRC secretariat:
Mr Michael Kooymans
Apologies:
Mr Charles Macek
Adoption of agenda
The proposed agenda was adopted.
Confirmation of minutes of 19 December 2000 meeting
The minutes of the meeting held on 19 December 2000 were confirmed without change.
Agenda item 1: Report by Chairman of AASB
The AASB Chairman's report was supported by papers he had circulated to the FRC on: the AASB's work program - comparison of business plan with status at March 2001; financial reports to 31 December 2000 and revised budget to 30 June 2001; Board governance guidelines; draft revised policy statements on `The AASB Consultative Group', `Project Advisory Panels', and `International Convergence and Harmonisation Policy'; and the AASB's Risk Management Program. Specific outcomes are recorded below.
AASB work program
The AASB Chairman noted that, despite the large number of new and revised standards issued, the original work program for 2000-01 had proved optimistic. More time had been spent on projects inherited from the previous Board than had been anticipated. The Board recently agreed on measures to streamline its procedures, including allocating more time to agreeing issues prior to the draft exposure draft stage. It was noted that the Board will need to align its future work program with that being developed by the International Accounting Standards Board. The FRC noted the AASB Chairman's report and looked forward to a discussion of the Board's proposed work program for 2001-02 at the next FRC meeting.
Financial reports to 31 December 2000 and revised budget to 30 June 2001
The AASB Chairman reported that the Board was within budget for 2000-01, with a small cash surplus currently estimated. It was noted that the AASB's proposed budget for 2001-02 would be considered at the next FRC meeting.
AASB governance guidelines
The FRC considered draft guidelines proposed by the AASB which collate and codify the governance arrangements under which the Board operates. The FRC approved the proposed guidelines subject to the following points:
- in relation to material personal interests of Board members, inclusion of a provision that a matter be brought to the FRC in case of doubt; and
- inclusion of a summary of the provisions of the Commonwealth Authorities and Companies Act 1997 relating to the conduct of officers.
It was agreed that the AASB Chairman would report periodically to the FRC on the operation of the guidelines.
It was also agreed that rules relating to material personal interests of members of the Urgent Issues Group would be developed by the AASB for FRC consideration. These could be included in the UIG Charter or separate governance guidelines for the UIG.
AASB draft revised policy statements
The FRC approved two draft revised policy statements, `The AASB Consultative Group' and `Project Advisory Panels', for public release as final documents subject to any changes proposed following their consideration by the AASB Consultative Group on 16 May 2001. Minor drafting changes were suggested to the first document to improve clarity. It was noted that these policy statements are little changed from the existing AASB statements on these issues.
Subject to further AASB consideration of the current draft, the FRC also approved a revised policy statement on `International Convergence and Harmonisation Policy', for release by the AASB as an exposure draft. It was noted that the draft contains significant changes from present Board statements in this area, reflecting changes in the international accounting setting environment and related provisions of the Australian Securities and Investments Commission Act 1989.
Risk management program
The FRC approved the AASB Risk Management Program as proposed by the Board and recommended by the FRC Audit Committee. The Program responds to a Commonwealth Government requirement for the systematic identification, quantification, reporting and management of insurable risks across Commonwealth departments and agencies.
It was agreed that provisions referring to FRC members in their capacity as directors of the AASB for purposes of the Commonwealth Authorities and Companies Act 1997 would be expanded to cover risks faced by the FRC in its own right. This further drafting would be considered by the Audit Committee prior to consideration by the full FRC.
Agenda item 2: AASB Chairman's letter of 15 January 2001 to FRC Chairman
In response to a number of issues raised by the AASB Chairman in a letter dated 15 January 2001 to the then FRC Chairman, it was agreed that:
- the FRC Nominations Committee would develop performance criteria to assist the AASB Chairman in his periodic assessment of the performance of individual AASB members;
- peer assessment by AASB members, facilitated by the AASB Chairman, could form a useful part of the performance assessment process;
- the FRC Nominations Committee would facilitate an annual self-assessment by the FRC of its own overall performance;
- the FRC Nominations Committee would also consider the appropriate roles of the AASB Chairman and FRC in succession planning for the AASB;
- the AASB Chairman would bring forward proposals for the Board's 2001-02
priorities, business plan, budget and staffing arrangements for consideration
at the FRC meeting tentatively scheduled for 4 June 2001;
- these proposals would normally be provided to the FRC by the end of March. However, it was recognised that this timing was impractical in 2001 due to the timing of a meeting of the AASB Consultative Group which will provide important input on the Board's priorities, and of a meeting of the International Accounting Standards Board to discuss with national standard setters initial steps towards agreement on a common work program for standard setting;
- the Australian representative on the Public Sector Committee of the International Federation of Accountants (currently Mr Ian Mackintosh who chairs the Committee) have (non-voting) observer status at AASB meetings.
Agenda item 3: Determination of the AASB's broad strategic direction for 2001-02
The FRC gave initial consideration to a broad strategic direction for the AASB for 2001-02 and agreed to further consider the matter at its next meeting.
Agenda item 4: Revenue in the out-years, including anticipated revenue from publications
It was noted that future AASB funding needs would depend on developments in international standard setting and, in particular, the establishment of a common work program with the IASB. The FRC agreed that, in the light of these developments, it would continue to protect existing sources of funding for the AASB while considering supplementary sources as necessary. Any such consideration would be led by the FRC Chair in consultation with the AASB Chairman. It was noted that available funding was likely to be sufficient for 2001-02.
The AASB's publications policy was discussed in this context. The AASB Chairman advised the FRC of a legal issue relating to the ownership of copyright in AASB publications. It was agreed that the issue would be pursued with relevant Commonwealth agencies as a matter of urgency.
Agenda item 5: AASB vacancy
The FRC discussed the balance and skill requirements of the AASB following Dr Doug McTaggart's resignation from the Board in February 2001. A number of possible candidates for the Board vacancy were discussed. It was agreed that FRC members would provide any further names to the secretariat by 11 May 2001. The FRC Nominations Committee would then meet to prepare a short-list for consideration at the next FRC meeting.
Agenda item 6: Proposed indemnity for Directors of AASB - secretariat update
The secretariat provided an update on progress in developing, for the Treasurer's consideration, an indemnity for FRC members in view of the potential liability implications of legal advice that they may be held to be directors of the AASB for purposes of the Commonwealth Authorities and Companies Act 1997, while at the same time being (properly) precluded under the Australian Securities and Investments Commission Act 1989 from influencing the technical activities of the Board.
Agenda item 7: Amended conflict of interest guidelines for FRC members
The FRC gave further consideration to draft guidelines on the handling of any conflicts of interest that may arise for FRC members either in their FRC capacity or as directors of the AASB for purposes of the Commonwealth Authorities and Companies Act 1997. The FRC noted secretariat advice that the current draft represented the maximum scope of what may be required under the Act, but that legal advice had been sought on whether the Act could be construed more narrowly to avoid FRC members having to make unnecessary disclosures relating to AASB technical activities over which FRC members have no influence.
Agenda item 8: Report by Chair of AASB Audit Committee
The FRC noted a report by the Chair of the FRC Audit Committee, Ms Elizabeth Alexander, on the second meeting of the Committee held on 30 March 2001 to consider: the draft AASB Risk Management Program; the timetable for preparation of the FRC/AASB annual report for 2000-01 and audit of the AASB financial statements; and the Australian National Audit Office's audit engagement letter.
Agenda item 9: International issues - secretariat background paper
The FRC noted a paper prepared by the secretariat reporting on recent developments in international accounting standard setting.
Agenda item 10: FRC forward meeting dates
The FRC agreed to meet on the mornings of 4 June, 3 September and 3 December 2001, and to publish the agreed forward meeting schedule on the FRC website (when established) following the appointment by the Treasurer of a new FRC Chair.
It was agreed that the 4 June meeting would be held in Sydney and that the secretariat would liaise with the Deputy Chairman to arrange for a group of Sydney-based business stakeholders to meet with the FRC for a discussion and lunch. The secretariat was also asked to consider arrangements for a meeting, possibly in September, between FRC and AASB members.
Agenda item 11: Other business
It was agreed that the FRC's external communication would be assisted by the Deputy Chairman's attendance at a meeting of the Senate Economics Legislation Committee scheduled for early June.
The FRC recorded its appreciation for the work of its inaugural Chairman, Paul Rizzo, during the important start-up phase of the new accounting standard setting arrangements, and agreed that the Deputy Chairman would write to Mr Rizzo conveying its appreciation.
The secretariat reported on progress in establishing an FRC website.
Agenda item 12: SIA presentation on results of survey of analysts on accounting issues affecting financial reporting
Mr Craig Drummond, Managing Director - Stockbroking, J B Were, and Mr Steve McClintock, Partner, Financial Advisory Services, PricewaterhouseCoopers, gave a presentation to the FRC on the results of a survey conducted by the Securities Institute of Australia on accounting issues affecting financial reporting.