Twentieth Meeting
5 November 2003
Outcomes of the meeting held on 5 November 2003 at the Australian Accounting Standards Board Offices, Australian Stock Exchange Boardroom, Level 3, 530 Collins Street, Melbourne.
Attendance
FRC Members:
Mr Charles Macek (Chairman)
Ms Elizabeth Alexander, AM (Deputy Chairman)
Mr Don Challen
Ms Karen Hamilton
Mr David Jackson
Mr Graeme McGregor, AO
Mr Greg Pound
Mr Phillip Prior
Mr Michael Rawstron (alternative to Mr Jim Murphy)
Mr Brian Scullin
Mr Lewis Ting
Ms Catherine Walter, AM
AASB:
Ms Ruth Picker (Acting AASB Chair).
FRC secretariat:
Mr Jorge del Busto (FRC Secretary)
Ms Gala Poole
Treasury:
Mr Les Pascoe (by phone hook-up)
Apologies:
FRC Members:
Mr John Langoulant
Mr Jim Murphy
Mr Tom Pocket
Mr Ken Spencer
Mr Klaus Zimmermann
Agenda item 1: Introduction by FRC Chairman
The FRC Chairman welcomed attendees to the 20th meeting of the FRC.
No conflicts of interest were declared.
The minutes of the meeting held on 12 September 2003 were approved without alteration.
Agenda item 2: Report by Acting Chair of the AASB
Report on recent AASB activities
The acting AASB Chair, Ms Ruth Picker, updated the meeting on the substantial progress that the AASB has made and is continuing to make in its preparation towards the 2005 IAS adoption date. The acting AASB Chair advised that the AASB is confident that the International Accounting Standards will be ready for application in Australia by the deadline provided that the IASB is able to keep to its timetable.
The acting AASB Chair explained that, at its last meeting, the AASB had taken decisions not to support options in IASs if allowing them would weaken its application in Australia, to permit an option in the case of borrowing costs, as this would facilitate the convergence of public sector GFS and GAAP reporting standards, to include additional implementation guidelines to facilitate the implementation of international standards in Australia and not to decrease the options contained in IFRSs. The meeting was advised that the Australian and New Zealand liaison IASB member, Mr Warren McGregor, approved this stance before the AASB reached its decision, and that the IASB would notify the AASB if they considered this decision to be inappropriate.
The acting AASB Chair also explained that - as legislative instruments accounting standards cannot refer to other instruments which do not, as yet, exist. Therefore, because of the cross references contained in the standards, early adoption of those standards that the IASB has completed to date is not possible. However, the AASB will place the pending standards on its website, for public information, as they are completed.
The FRC expressed its gratitude for the hard work in which the Board and staff of the AASB partake in order to progress its challenging workload and noted the large number of IASB projects that the AASB is either leading or participating in.
The status of copyright
The acting AASB Chair advised that the AASB was still in deliberations with the IASB over issues surrounding the copyright of the Implementation Guidance and Basis for Conclusions of International Accounting Standards. As things presently stand, an agreement has been reached which will allow the standards themselves to be distributed in the same way as other legislative instruments – via the internet or in hardcopy form – without the payment of royalties to the IASB.
Agenda item 3: FRC’s comments on the CLERP 9 draft legislation
Report from the second CLERP 9 taskforce meeting
The FRC Chairman advised the meeting that the FRC’s CLERP 9 taskforce met on 13 October 2003 to discuss its reaction to the CLERP 9 exposure draft and met again on 24 October to discuss the development of a FRC submission on CLERP 9. The FRC Chairman explained the key discussion points which arose from these meetings.
Members noted the minutes of the 13 October CLERP 9 taskforce meeting and a secretariat paper which updated the meeting on the progress of the CLERP 9 taskforce since the last FRC meeting.
The meeting considered the possibility that a consultant be hired to determine the type of activities that would be required from the FRC to discharge its expanded functions under CLERP 9, the extent to which these activities could be undertaken by consultants and their likely cost. It was agreed that the FRC Chairman and Deputy Chairman would make a recommendation to the FRC, at the 5 December 2003 FRC meeting on a list of independent consultants that could potentially be hired to advise the FRC on this work.
The meeting also discussed the possibility that the structure and composition of the FRC would need to be reviewed in light of the FRC’s proposed new functions.
Submission on CLERP 9
The FRC considered the key points raised by the Chairman and a draft FRC submission on CLERP 9 and agreed that the secretariat would redraft the submission to cover the following proposals about the provisions in the draft Bill:
- the FRC’s role should be expanded to include oversight of audit quality (including monitoring and assessing the systems in place in the profession in respect of audit quality and auditor independence) rather than being limited to auditor independence;
- in line with the above, amend section 224 to include specific references to audit quality and auditor independence in the objectives of Part 12 of the Australian Securities and Investments Commission Act 2001 (ASIC Act);
- the provisions should be framed to facilitate a co-regulatory model in which the FRC performs its functions in conjunction with, but still independent of, the professional accounting bodies (while not detracting from the capacity of the FRC to monitor auditors who are not members of a professional body);
- the roles and responsibilities of all regulatory and oversight bodies in the area of auditor quality, should be made clear. (We note that precise delineation may not be practicable in the legislation itself, however, key messages concerning division of functions could perhaps be more appropriately included in the accompanying explanatory material) ;
- the FRC’s information gathering powers should also allow measures, such as inspections, to be used to obtain information;
- the minimum period of 28 days proposed in section 225A for production of documents is too long; and
- the legislative provisions should be framed to ensure the FRC is able to use consultants to perform its audit quality and auditor independence oversight functions and to provide adequate protection to those involved.
The FRC agreed that the FRC Chairman send the submission, on behalf of the FRC, after the following steps had taken place:
- the secretariat has sought comments from the FRC on the draft submission; and
- the secretariat, in consultation with the FRC Chairman and Deputy Chairman, has completed any necessary redrafting after the consideration of any comments received from FRC members.
Agenda item 4: 2003-04 AASB Budget and Business Plan
The FRC Chairman reminded the meeting that approval of the AASB’s 2003-04 budget had been held over from the previous FRC meeting due to the uncertainty surrounding some funding sources, which had since been resolved.
The FRC Audit Committee Chair, Elizabeth Alexander, AM, outlined the major components of the AASB budget, which showed a surplus. In particular, the Audit Committee Chair explained the provisions related to the AASB Superannuation Fund and drew attention to the fact that no contribution to the IASB or any royalty payments to the IASB, associated with the copyright of international accounting standards, were included in the budget.
After discussing the matter, the FRC decided to approve an increase in the contribution rates to the AASB Superannuation Fund as recommended by the actuary and included in the budget, and to continue with the AASB Superannuation Plan’s present 50/50 growth sub-fund/ balanced sub-fund investment split.
The FRC agreed to approve the budget with the condition that notes be added to explain that;
- although it is not reflected in the current budget, a substantial contribution will be made to the IASB during the 2003-04 financial year; and
- some expenses may be subject to change after the appointment of a new full-time AASB Chair, and his/her consideration of priorities for the AASB.
The FRC approved the updated 2003-04 AASB Business Plan.
Agenda item 5: Other Business
AASB appointment
The Chair of the FRC’s Nominations Committee, Mr Phillip Prior, advised the meeting that - after a formal interview on the morning of 5 November 2003 - the Nominations Committee unanimously agreed to recommend to the FRC that it appoints Mr Bryce Denison to the AASB.
The FRC unanimously agreed to appoint Mr Bryce Denison to the AASB. (Mr Denison’s appointment was formalised on 10 November 2003).