Tenth Meeting
4 June 2001
Outcomes of meeting held on 4 June 2001 at the offices of the Commonwealth Bank of Australia Limited, Level 2, 48 Martin Place, Sydney.
Attendance
Members:
Mr Michael Ullmer (Acting Chairman)
Ms Elizabeth Alexander, AM (participating by phone)
Ms Veronique Ingram (Alternate member for Mr Potts)
Mr David Jackson
Mr Jeff Lucy, AM
Mr Charles Macek
Mr Graeme McGregor, AO (participating by phone)
Mr Ian Mackintosh (informally representing ASIC)
Mr Robert Nottle, CBE (participating by phone)
Dr Diana Wright
AASB:
Mr Keith Alfredson (Chairman)
FRC secretariat:
Mr Michael Kooymans
Apologies:
Mr Don Challen
Mr Leigh Hall, AM
Mr Gary Potts
Adoption of agenda
The proposed agenda was adopted.
Confirmation of minutes of 30 April 2001 meeting
The minutes of the meeting held on 30 April 2001 were confirmed without change.
Agenda item 1: Report by Chairman of AASB
The AASB Chairman provided the FRC with an oral report covering three issues:
IASB liaison
The AASB Chairman reported on his attendance at a meeting of the International Accounting Standards Board (IASB) in London on 24 May 2001. The IASB met for the first time with the chairs of eight national standard setters - from Australia, Canada, France, Germany, Japan, New Zealand, the United States and the United Kingdom - as an initial step in reaching agreement on a common work program for accounting standard setting.
The AASB Chairman reported that the discussions were very constructive but that the meeting was necessarily introductory as the IASB was not in a position to finalise its work program until its advisory body, the Standards Advisory Council, had been appointed. This was expected to occur soon.
It was noted that Australians were very well represented on the various forums of the restructured international body - with Mr Ken Spencer a Trustee of the International Accounting Standards Committee, Mr Warren McGregor a member of the IASB, two staff secondments from the AASB, and prospective Australian appointments to the Standards Advisory Council and IASB senior staff.
NIA contribution to costs of standard setting
The AASB Chairman noted that the National Institute of Accountants had written to him advising that it had decided to contribute $100,000 for the formulation of accounting standards by the AASB in 2001-02. The FRC welcomed the contribution and noted that the AASB Chairman and FRC Deputy Chairman had written to thank the NIA on behalf of the AASB and FRC respectively.
Draft Board Governance Guidelines
The AASB Chairman noted that he had circulated to the FRC a revised draft of the Board Governance Guidelines accommodating the two points raised by the FRC at its meeting on 30 April 2001. The FRC confirmed its approval of the Guidelines with these changes.
Agenda item 2: Report by Chairman of FRC Nominations Committee
The FRC considered a report by the Chairman of the Nominations Committee, Mr Ullmer, on a meeting of the Committee held on 21 May 2001.
Proposed Charter of Committee
The Nominations Committee recommended for FRC approval a draft Charter for the Committee governing its composition, objectives and future work. The FRC approved the draft Charter and agreed to its public release.
Proposed framework for future AASB appointments
The Nominations Committee also recommended for FRC approval a draft document `Framework for Appointments to the AASB' setting out how future appointments to the AASB would be approached. The FRC approved the document for public release, with the following amendments:
- under 1. Composition, to refer to `balanced expertise from the perspective of preparers, users and auditors';
- under 2. Criteria for Appointment, to include as an additional criterion an understanding of Part 12 of the Australian Securities and Investments Commission Act 1989, including the AASB's functions and powers as set out in section 227, one of which is to participate in and contribute to the development of a single set of accounting standards for world-wide use having regard to the interests of Australian corporations which raise or propose to raise capital in major international financial centres; and
- under 3. Appointment Process, to note that the process would have regard to succession planning needs.
In addition, the FRC approved the document `Appointments to the Australian Accounting Standards Board' for use as a hand-out to those interested in possible appointment to the Board, with changes to refer, in the attachment to the document, to:
- the additional criterion relating to an understanding of the Australian Securities and Investments Commission Act 1989, noted above; and
- the fact that Board positions are subject to performance assessment.
It was agreed that the appointment criteria in the attachment to this document would also be used as the criteria for assessing the performance of AASB members.
The FRC agreed that advertising would be used to help build up a list of eligible candidates from which future Board appointments could be made, and that the secretariat would provide advice to the next FRC meeting on aspects of the ongoing management of this list.
Recommendations for appointment to AASB vacancy
The FRC considered a short-list of names recommended by the Nominations Committee for possible appointment to the Board vacancy created by the resignation of Dr Doug McTaggart. It was noted that the Nominations Committee had canvassed a wide body of stakeholders in the standard setting process for suitable candidates for the vacancy and had been able to consider a comprehensive list of names.
After careful consideration in light of the attributes of the short-listed candidates and present balance of the AASB, the FRC agreed to appoint Mr Wayne Cameron, Auditor-General of Victoria, to the position for a three year term.
The FRC also agreed that, for the future, it would endeavour to find a strong person from an investor / funds management background for the Board and that this should be a priority of the Nominations Committee. It was further agreed that this objective would be referred to in the FRC's announcement of Mr Cameron's appointment.
Agenda item 3: AASB Business Plan for 2001-02, including priorities, budget and staffing arrangements
The FRC approved the AASB's proposed standard setting priorities for 2001-02 without change, subject to confirmation that they meet the requirements of one of the key public sector stakeholders. It was noted that the proposed priorities were well supported by the results of the AASB's survey of its Consultative Group and other constituents, and by international developments.
It was agreed that the AASB's proposed budget for 2001-02 would be further considered in the light of costings to be provided by the AASB Chairman of a move from the existing publications policy based on deriving a commercial return from subscriptions, to one based on free website access plus cost recovery for residual hard copy orders and electronic access by accounting firms.
It was further noted that the FRC would need to address any funding gap arising from this policy change. Mr Jackson considered that any requirement for additional funding should be met from the surplus between corporations fee revenue collected by the Australian Securities and Investments Commission and the costs of administering the national companies and securities scheme.
The FRC agreed to further consider the AASB's proposed staffing arrangements in the light of these additional costings and the budget overall.
The FRC endorsed the broad shape of the AASB's proposed business plan for 2001-02 subject to further consideration of the above issues.
Agenda item 4: Determination of AASB's broad strategic direction for 2001-02
The FRC considered a proposed broad strategic direction for the AASB for 2001-02. It was agreed that the secretariat, in consultation with the AASB Chairman, would amend the present draft to place the strategic direction for 2001-02 more in the context of the longer term objective of international convergence of accounting standards. The draft would then be re-submitted to the FRC for approval.
Also discussed under this item were the legislative requirement for the AASB to conduct a cost-benefit analysis of the impact of proposed accounting standards, and the Government requirement that the AASB prepare a regulation impact statement for each standard. It was agreed that the matter would be included on the agenda for the next FRC meeting.
The FRC noted a letter sent to the AASB Chairman by Mr David Boymal of Ernst & Young concerning the timing of an objective to move from current reporting references to Australian Accounting Standards to both Australian and international standards. It was agreed that this issue would be put on the agenda for the next FRC meeting.
Agenda item 5: AASB / FRC Risk Management Program
Time did not permit discussion of this item and it was agreed that it would be considered by the FRC out of session.
Agenda item 6: Amended conflict of interest guidelines for FRC members
Time did not permit discussion of this item and it was agreed that it would be considered by the FRC out of session.
Agenda item 7: AASB copyright issue - status report
The FRC noted an oral report by the AASB Chairman and written advice from Dr Wright on legal issues relating to the ownership of copyright in AASB publications.
Agenda item 8: Arrangements for Deputy Chairman's attendance at Senate Economics Legislation Committee hearing, 6/7 June
It was noted that arrangements had been made for the FRC Deputy Chairman, Mr Ullmer, to appear before the Senate Economics Legislation Committee and that the hearing was now scheduled for the evening of 4 June 2001.
Agenda item 9: International issues
Mr Warren McGregor, Australian member of the IASB (and the Liaison member for Australia and New Zealand), briefed the FRC on the initial operations of the IASB. Among other things, he noted that the new IASB would very strongly pursue its convergence objective and would also put emphasis on improving the quality of standards. He outlined the IASB's tentative work program, as discussed at its 24 May meeting with the chairs of eight national standard setters, and the likely timetables for the IASB to progress its initial work program and its broader convergence objective. The AASB would have an important role to play in the new arrangements and would be assisted in this role by the FRC's continued strong support. The FRC thanked Mr McGregor and welcomed his preparedness to brief the FRC on a regular basis.
The FRC also noted a paper prepared by the secretariat reporting on recent developments in international accounting standard setting.
Agenda item 10: Other business
There were no other items of business.
Agenda item 11: Discussion with business stakeholders
The FRC was pleased that three Sydney-based business stakeholder representatives, together with Mr Warren McGregor, were able to join them for a discussion over lunch. They were Mr Tom Pockett, National President, G100, Mr Rob Dougall, General Manager, Risk Management, Goldfields Limited, and Mr Bob Farrell, Chief Accountant, Brambles Industries Limited. The discussion covered the FRC/AASB relationship, the AASB's consultative arrangements, standard setting priorities, AASB funding, stakeholder involvement with the IASB, and accounting for dual listed company structures.
The FRC noted that the discussion provided a very useful opportunity to extend the FRC's consultation with stakeholders in the standard setting process.