Eleventh Meeting
28 September 2001
Outcomes of meeting held on 28 September 2001 in the Australian Stock Exchange Boardroom, adjacent to the offices of the Australian Accounting Standards Board, Level 3, 530 Collins Street, Melbourne.
Attendance
Members:
Mr Jeffrey Lucy, AM (Chairman)
Mr Michael Ullmer (Deputy Chairman)
Ms Elizabeth Alexander, AM
Mr David Jackson
Mr Charles Macek
Mr Graeme McGregor, AO
Mr Ian Mackintosh (participating by phone)
Mr Gary Potts (participating by phone)
Mr Phillip Prior (participating by phone)
Mr Michael Roche (informal Alternate for Mr Robert Nottle, CBE)
Mr Robert Wylie (informal nominee of The Institute of Chartered Accountants
in Australia)
AASB:
Mr Keith Alfredson (Chairman)
Guests:
Mr Ken Spencer, IASC Foundation Trustee, and Mr Warren McGregor, IASB Liaison Member for Australia and New Zealand, have standing invitations to attend FRC meetings for relevant agenda items. Mr Spencer and Mr McGregor attended for agenda item 8, International issues.
FRC secretariat:
Mr Michael Kooymans
Apologies:
Mr Don Challen
Mr Leigh Hall, AM
Mr Robert Nottle, CBE
Agenda item 1: Introduction by FRC Chairman
The proposed agenda was adopted.
The minutes of the meeting held on 4 June 2001 were confirmed without change.
The FRC Chairman welcomed the appointment by the Treasurer on 13 September 2001 of two new members and one Alternate member of the FRC - Mr Ian Mackintosh, appointed on the nomination of the Australian Securities and Investments Commission, and Mr Phillip Prior, appointed on the nomination of the Commonwealth, with Mr Jim Kerwin appointed as Alternate member to Mr Prior.
The FRC Chairman also welcomed Mr Ullmer's willingness to continue to serve as FRC Deputy Chairman.
The FRC ratified the appointment of two members to the FRC Audit Committee - Mr Graeme McGregor, AO and Mr Robert Nottle, CBE. These appointments were made as a result of two retirements from the Committee - Ms Jan McCahey, who resigned from the FRC on 31 March 2001, and Mr Jeffrey Lucy, AM, on his appointment as FRC Chairman from 17 July 2001.
The FRC Chairman welcomed two nominees of stakeholder bodies attending their first FRC meeting on an informal basis - Mr Rob Wylie, attending on the nomination of The Institute of Chartered Accountants in Australia, and Mr Michael Roche, attending on the nomination of the Australian Stock Exchange.
On an issue of procedure, the FRC agreed to continue the present practice whereby the AASB Chairman attends FRC meetings for all agenda items and Mr Ken Spencer (IASC Foundation Trustee) and Mr Warren McGregor (IASB Liaison Member) have standing invitations to attend for international items. It was noted that an FRC member could propose restricting a segment of any future meeting to FRC members if considered appropriate.
Agenda item 2: Report by FRC Chairman on developments since his appointment as Chairman
The FRC Chairman reported on his discussions with representatives of stakeholder bodies since his appointment in July 2001, including on the question of business sector funding for the accounting standard setting arrangements. Further stakeholder discussions, including with company Chief Executive Officers, are planned before the end of the year.
It was agreed that a secretariat note summarising the views of stakeholder bodies would be re-ordered by subject matter to assist the FRC in its further consideration of the issues raised.
The FRC Chairman also reported on his recent discussions with the Minister for Financial Services & Regulation, the Hon Joe Hockey, MP, the Parliamentary Secretary to the Minister for Finance and Administration, the Hon Peter Slipper, MP, the Chairman of the International Accounting Standards Board, Sir David Tweedie, and the Chairman of the UK Financial Reporting Council, Sir Bryan Nicholson.
Agenda item 3: Proposed FRC workshop, Sydney, 3 December 2001 - draft agenda
The FRC broadly endorsed the draft agenda proposed for a workshop session of the FRC scheduled for 3 December 2001. It was agreed that a stand-alone item would be included on the FRC's and AASB's relationship with international counterpart bodies, and that this discussion would also cover the FRC's monitoring of international developments. Some re-ordering of items was suggested and members were invited to suggest additional items through the secretariat over the next two weeks.
Members were invited to advise the secretariat if they wished to take the lead on a particular topic, or had suggestions for guests who might be invited to attend the workshop or dinner.
The FRC accepted an offer by Mr Mackintosh, who is also Chairman of the International Federation of Accountants-Public Sector Committee, to give a presentation on the role of that body.
Accounting standard setting for the public sector
Mr Prior gave a presentation to the meeting on the importance of the public sector in the accounting standard setting process and circulated an information paper on accounting in the Commonwealth Government.
Agenda item 4: Report by Chairman of AASB
The FRC discussed approaches to improving the operation and output of the AASB, noting that this was a key FRC accountability. It was agreed that a small group of FRC members comprising the Chairman, Ms Alexander, and Mr Potts would work with the AASB Chairman to develop strategies in this area and report to the FRC meeting proposed for 3 December 2001. It was noted that there would be increased opportunities in future for the Board to leverage off the work of the IASB.
The meeting noted that the proposed AASB budget for 2001-02 implied an operating deficit of $254,000, in part reflecting the change in the AASB's publications policy to cease the commercialisation of accounting standards and UIG abstracts and rationalise the subscription service. While the net cash deficit can be funded in 2001-02 by available cash, the FRC was not willing to approve a budget incorporating an ongoing level of expenditure not covered by stakeholder funding commitments. It was agreed that a revised budget would be considered by the FRC at its December 2001 meeting. It was noted that the FRC Chairman was working constructively to address the question of business funding for the standard setting arrangements, but that there remained some potential for AASB expenditures to be reviewed.
It was agreed that the FRC would return to the issue of the AASB's broad strategic direction for 2001-02 at the meeting scheduled for 3 December 2001, following discussion of the Board's role in international standard setting at the FRC workshop planned for earlier that day and responses by stakeholders to AASB Exposure Draft 102, `International Convergence and Harmonisation'.
Agenda item 5: FRC / AASB draft Annual Report for 2000-01
The FRC noted a report by the Chair of the FRC Audit Committee, Ms Alexander, on the Committee's meeting on 3 September 2001 at which the Committee decided to recommend to the FRC that it approve the AASB's financial statements for 2000-01 and authorise two of the AASB's directors to sign the Statement by Directors.
The FRC agreed to a number of proposed amendments to the draft Annual Report which were circulated at the meeting.
The FRC approved the FRC/AASB Annual Report for 2000-01, including the AASB Directors' Report and the financial statements and associated notes. The FRC resolved to authorise the FRC Chairman to sign the report and the Chairman and Deputy Chairman to sign the Statement by Directors.
Agenda item 6: AASB / FRC Risk Management Program
It was noted that a Risk Management Program for the AASB had been approved by the FRC at its meeting on 30 April 2001. That meeting 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, with this further drafting being considered by the Audit Committee prior to consideration by the full FRC.
It was agreed that, following approval by the Audit Committee, a secretariat paper on this issue would be circulated to FRC members for comment, with the FRC Chairman and Deputy Chairman authorised to approve the final document.
Agenda item 7: Amended conflict of interest guidelines for FRC members
The FRC considered legal advice concerning the need for FRC members to declare material personal interests in relation to particular accounting standards in circumstances where the FRC is precluded under its legislation from involvement in the development or making of particular standards.
It was agreed that, while material personal interests were unlikely, all such interests should be declared. The FRC approved amendments to the FRC Rules of Procedure to incorporate conflict of interest provisions.
Agenda item 8: International issues
Mr Warren McGregor, IASB Liaison member for Australia and New Zealand (and an observer at AASB meetings), briefed the FRC on the operations of the IASB. He noted that the IASB has on its work program a solid core of complex projects with potentially significant impact around the world. The IASB was very happy with the AASB's role in relation to international accounting standards, with a AASB exposure draft setting out its proposed revised policy on international convergence and harmonisation being very well received. With regard to United States views on the IASB, there had so far been a positive response from US IASB representatives and a preparedness by the FASB to involve itself in joint projects.
There was some discussion of due process and timing issues relating to projects on both the IASB and AASB work programs. For example, it was noted that, while the IASB was pursuing a similar approach to the FASB on accounting for business combinations, IASB due process meant that its standard may not be implemented until mid-2003. There was a question in these circumstances whether the AASB might consider pursuing an interim Australian solution to ensure that Australian companies do not suffer a competitive disadvantage vis-à-vis their US counterparts. It was noted that the US approach was being field-tested in Australia as an input to IASB processes.
Mr Ken Spencer, IASC Foundation Trustee, briefed the FRC on IASC developments, including funding of the international standard setting process and forthcoming appointments to the Standing Interpretations Committee. On funding, he noted that the Foundation was seeking commitments of around $US20 million a year world-wide and that he had approached some corporates in Australia for contributions.
The FRC noted a paper prepared by the secretariat reporting on recent developments in international accounting standard setting.
Agenda item 9: Forward meeting dates for FRC meetings
The FRC considered a schedule of possible forward meeting dates for 2002. It was agreed that members would advise the secretariat of any difficulties with the suggested schedule which could be amended if necessary at the FRC meeting proposed for 3 December 2001. It was noted that meetings proposed for July and December 2002 could be held in Sydney, with the remaining meetings being held in Melbourne.
Agenda item 10: Other business
AASB appointments and remuneration
It was noted that a vacancy on the AASB was likely at the end of 2001 due to the appointment of Mr Kevin Stevenson to the IASB staff, and that the terms of appointment of three AASB members (Mr Batten, Professor Peirson, and Ms Picker) expire on 14 February 2002. It was agreed that the FRC meeting proposed for 3 December 2001 would consider recommendations by the FRC Nominations Committee for appointment or re-appointment to these positions.
It was noted that responses to the FRC's press advertisement seeking expressions of interest in appointment to the AASB would be an important input to the Nominations Committee's consideration. The secretariat reported briefly on the number and quality of these responses.
It was agreed that the Nominations Committee would also make recommendations to the FRC on the question of the remuneration of part-time AASB members. At its meeting on 8 September 2000, the FRC agreed that this remuneration would be reviewed after one year.
Proposed indemnity for FRC members
It was agreed that the secretariat would circulate a paper outlining the state of play on this issue and including a copy of an immunity provision (section 246) of the Australian Securities and Investments Commission Act 2001 which applies to FRC members.
Possible remuneration for FRC Chairman
The secretariat advised the FRC that the Department of the Treasury proposed to raise with the Treasurer whether it would be appropriate for the present FRC Chairman to receive some remuneration in the light of his work-load and the absence of stakeholder remuneration support.