Twenty-Fifth Meeting
19 May 2004
Outcomes of the meeting held on 19 May 2004 at the Australian Stock Exchange Boardroom, Level 8, 20 Bridge Street, Sydney.
Attendance
FRC Members:
Mr Charles Macek (Chairman)
Ms Elizabeth Alexander, AM (Deputy Chairman) (by Phone Hook-Up)
Mr Roger Cotton (Alternate to Mr Klaus Zimmermann)
Ms Karen Hamilton
Mr Graeme McGregor, AO (by Phone Hook-Up)
Mr Jim Murphy
Mr Tom Pockett
Mr Greg Pound
Mr Phillip Prior
Mr Brian Scullin
AASB:
Mr David Boymal (AASB Chairman)
FRC secretariat:
Mr Jorge del Busto (FRC Secretary)
Mr Richard Scherlowski
Invitees:
Mr Bill Edge (Auditing and Assurance Standards Board)
Mr Richard Mifsud (Australian Accounting Research Foundation)
Mr Peter Mumford (New Zealand Ministry of Economic Development)
Apologies, FRC Members:
Mr Don Challen
Mr David Jackson
Mr John Langoulant
Mr Warren McGregor
Mr Lewis Ting
Ms Catherine Walter, AM
Mr Klaus Zimmerman
Agenda item 1: Introduction by FRC Chairman
The Chairman of the Financial Reporting Council (FRC), Mr Charles Macek, welcomed members to the 25th meeting of the FRC.
The minutes of the 24th FRC meeting, held on 23 April 2004, were approved as a true and accurate record of the meeting.
Ms Karen Hamilton, declared a possible conflict of interest as an employee of the ASX in regard to agenda item 5, AUASB staffing and accommodation arrangements, as one option for AASB and AUASB accommodation arrangements related to ASX office space.
The FRC Chairman provided a brief update on the sorts of questions he was asked during a parliamentary committee hearing inquiring into CLERP 9 on 29 April 2004. He mentioned the questions he took on notice, including the information the FRC received at the June 2002 meeting when the FRC issued a strategic direction to the AASB in regard to the adoption by Australia of international accounting standards.
Agenda item 2: Report from Chair of the AASB
IASB/AASB Work Program Update
The AASB Chairman provided an update on progress in regard to AASB and IASB work programs and reaffirmed that its 2005 set of standards will be posted in the AASB’s by 30 June 2004. He also provided an update on his recent trip to London for the liaison National Standard Setting (NSS) meeting. He noted that he provided a paper on the role of national standard setters and that the AASB will make further presentations in London to the world standard setters meeting in September 2004.
The AASB Chairman indicated that GAAP-GFS harmonisation will be a high priority of the AASB post 30 June 2004, with the objective of having the corresponding standards ready by June 2005.
Copyright
The AASB Chairman noted that following the agreement by CPA Australia with the IASB in regard to royalties and copyright payments for the basis for conclusion and the additional guidance or explanatory material in regard to international accounting standards, there was a need for the other two major professional accounting bodies to engage in a similar agreement with the IASB so that the copyright issue could be resolved. Discussions were continuing with ICAA and NIA to resolve this matter.
UIG Charter
The AASB Chairman noted that the International Financial Reporting Interpretations Committee (IFRIC) may not be able to deal with unique interpretation concerns for an individual country and have indicated that they can only deal with interpretation concerns that are shared by more than one jurisdiction. Accordingly there may be a future role for the AASB or UIG in regard to Australian interpretations for IASB issued accounting standards.
The meeting approved, as an interim measure, the proposed revisions to the UIG Charter as outlined by the AASB Chairman, and agreed that further consideration of the UIG role will be undertaken by the FRC in six months.
The AASB Chairman confirmed that Australian interpretations would be carried out to ensure there is no conflict with IASB standards.
Agenda Item 3: Report from Nominations Committee Chairman
The FRC meeting approved the recommendation from the Nominations Committee that Mr Wayne Cameron be re-appointed to the AASB for a further term of one year, commencing on 7 June 2004. Mr Wayne Cameron’s initial appointment to the AASB, for a three year period, commenced on 7 June 2001.
Agenda Item 4: Update on FRC funding issues
The Chairman noted a Secretariat paper indicating that FRC funding had been addressed in the 2004-05 Commonwealth Budget. Business contributions remain a part of the FRC funding model, with FRC funding to be considered again as part of the 2005-06 Commonwealth Budget. It was also noted that the provisions set aside in the contingency reserve for 2005-06 to 2007-08 allows Treasury, on behalf of the FRC, to enter into long-term commitments associated with implementation of CLERP 9 reforms.
Mr Bill Edge, Chairman of the AuASB and Mr Richard Mifsud, Executive Director of the Australian Accounting Research Foundation provided an update on the proposed AUASB Budget for 2004-05.
The meeting noted that in line with the updated indicative requirements of the AUASB in 2004-05, the on-going support from the government and business and the fact that currently the accounting bodies are funding the operation of the AuASB, it would be appropriate for the accounting bodies to maintain their current level of overall funding in 2004-05. Consequently, the meeting agreed that the FRC Chairman will be writing to the accounting bodies requesting from them contributions consistent with their current funding of the audit standard setting process and their contributions to the FRC. Confirmation of the commitment from the States and Territories will also be sought.
The meeting also agreed that prior to the 18 June FRC Meeting, the Audit Committee will meet to discuss an updated business plan and 2004-05 budget for the AASB, and an updated indicative business plan and 2004-05 budget for the AUASB. It also agreed that the Audit Committee will discuss the 2004-05 FRC’s own budget.
Agenda Item 5: AUASB staffing and accommodation arrangements
The meeting noted a Secretariat paper and agreed that the AASB enter into a lease with the ASX in regard to transferring to Level 4 of the ASX Building, 530 Collins Street, Melbourne, and sublet excess office space to the AUASB when CLERP 9 becomes effective.
The FRC Chairman established a small AUASB Strategic Direction Taskforce to consider any future strategic directions that the FRC may issue to the AUASB. To assist these discussions Mr Bill Edge, Chairman of the AuASB and Mr Richard Mifsud, Executive Director of the AARF, will prepare a paper on the potential strategic direction to be issued to the AUASB, in addition to the updated indicative business plan and 2004-05 AUASB budget. This Taskforce will meet prior to the scheduled 18 June 2004 FRC Meeting and report to it. Staffing issues will be considered in the context of the Audit Committee budget discussions.
Agenda Item 6: Report on progress of Memorandum of Understanding’s (MOU’s)
The meeting considered the progress report from the Secretariat on the individual draft MOUs progressed with a number of parties in order to assist the FRC in the performance of its expanded functions regarding the oversight of auditor independence requirements under the CLERP 9 Bill. The Chairman noted that he will hold further consultations with the Institute of Chartered Accountants under the general objective of having a common MOU with the professional accounting bodies.
The meeting agreed that the FRC should seek legal advice in regard to the MOUs to ensure that their wording does not limit in any way the functions and powers of the FRC and is consistent with the wording of the CLERP 9 Bill. The meeting also agreed that all MOUs should have a common commitment to agree to further revision in light of implementation experiences. It was also noted that in cases where organisations cannot legally enter into MOUs with the FRC, an exchange of letters of agreement may be used as an alternative.
Agenda Item 7: Report on CLERP 9 taskforce meeting
The meeting noted the draft Minutes from the CLERP 9 Taskforce Meeting held on 6 May 2004 and continued the discussions of the expanded FRC role under CLERP 9 in view of the recommendations contained in the report prepared by the consultant Mr Robert Lynn. It was agreed that Treasury will prepare a paper for the FRC to facilitate further discussions on this topic by setting out the FRC’s role on auditor independence and how it fits within the overall oversight and compliance framework. The CLERP 9 taskforce will hold a meeting in the week starting on 24 May to discuss this paper and report to the FRC at the 18 June 2004 FRC Meeting.
Agenda Item 8: Other Business
The Chairman foreshadowed a proposed agenda item for the 18 June 2004 FRC meeting in regard to an internal review of the functioning of the FRC, including a stock-take of its operations. As part of the review the FRC will examine whether its meetings should be open to the public.
There was some discussion and general support for engaging an academic consultant to conduct a study in regard to the rationale and effects of a sector neutral standard setting process in regard to the profit, not-for-profit and public sectors.
The FRC noted copies of relevant correspondence since the last FRC meeting.