Thirty-Third Meeting
16 December 2005
Outcomes of the meeting held on 16 December 2005 at the Australian Securities and Investments Commission, Level 18, 1 Martin Place, Sydney. The meeting commenced at 10.05am.
Attendance
FRC Members:
Mr Charles Macek (Chairman)
Ms Elizabeth Alexander, AM
Mr Don Challen
Mr David Jackson
Mr Graeme McGregor, AO
Mr Jim Murphy
Mr Tom Pockett
Mr Phillip Prior
Ms Catherine Walter, AM (by phone)
Ms Jan West
Mr Klaus Zimmermann
AASB:
Mr David Boymal (AASB Chairman)
AUASB:
Mr Richard Mifsud (AUASB Principal Executive)
FRC Secretariat:
Mr Jorge del Busto (FRC Secretary)
Mr Les Pascoe
Invitees:
Mr William Bartlett (Consultant to the FRC on auditor independence –
Item 6 only)
Ms Judith Downes (IASB Standards Advisory Council – Item 1 only) (by phone)
Mr Eric Mayne (Australian Stock Exchange)
Mr Robert Sharma (Australian Prudential Regulatory Authority – Items 1
to 6 only)
Mr Kevin Simpkins (Consultant to the FRC on Sector Neutral Standards Project
– Item 9 only) (by phone)
Mr Lee White (Australian Securities and Investments Commission)
Ms Kerstin Wijeyewardene (Commonwealth Treasury)
Apologies
Mr Richard Humphry, AO
Mr Warwick Hunt
Mr Brian Scullin
Ms Merran Kelsall (AUASB Chairman)
Agenda item 1: Introduction by FRC Chairman
The FRC Chairman, Mr Charles Macek, welcomed members to the 33rd meeting of the FRC.
Declarations of Interest
A list of each member’s current business and professional affiliations to indicate relevant interests has been complied. A copy was circulated with the agenda papers. It was agreed that the Secretariat should include relevant information that has been provided by members prior to the compilation of the list.
Minutes
The minutes of the 32nd FRC meeting held on 16 September 2005 were approved.
Matters Arising from the Previous Meeting
A list of matters arising was circulated with the agenda papers, and noted.
Update on meetings
The FRC Chairman and Secretary reported on their meetings in Europe and North America in November. A written summary of the meetings was circulated to FRC members. The main theme emanating was the genuine commitment to convergence around the globe. The extent of mutual recognition between IFRS and US GAAP would depend on the assessment by the Securities and Exchange Commission that IFRS are being applied consistently and that differences with US GAAP are not significant. It was noted that the IASB’s project on SMEs would focus more on smaller than medium-sized entities.
The FRC Chairman reported that the IFRS Regional Policy Forum held in Sydney on 24 October had been very successful, and he would look at further opportunities to develop links between Australia and the other countries at the forum.
The FRC Chairman met with Mr Andrew Rogers concerning the Audit Quality Review Board (AQRB). The AQRB is expected to be launched early in 2006 and be operational by the second quarter of 2006. The AQRB and FRC will explore the possibility of signing an MoU at that time.
The FRC Chairman observed that the new SEC Chairman had shown strong interest in the use of XBRL for financial reporting, and that this was an issue that the FRC should look into.
Ms Judith Downes provided a written summary of the meeting of the IASB Standards Advisory Council (SAC) held in November. It was expected that China, Japan and India would be making a strong commitment to convergence with IFRS and that these countries and other emerging markets would drive further changes, overriding calls for stability in the standards. Another issue raised at the SAC was the extent to which national standard setters would be able to provide interpretations that are IFRS compliant and the liaison with the International Financial Reporting Interpretations Committee in this respect.
Notes were circulated to FRC members from meetings that FRC members had with the Chairman of the IASB, Sir David Tweedie, during Sir David’s visit to Australia in late November.
Agenda item 2: Report from the Chairman of the AASB
The FRC noted an update on AASB issues, including IFRS adoption and the recent visit by International Accounting Standards Board (IASB) Chairman Sir David Tweedie.
The AASB Chairman noted differences of views over the GAAP / GFS harmonisation proposal, and the extent to which it complied with the FRC’s strategic direction to the AASB. The FRC agreed that the AASB should attach high priority to further progress on the GAAP / GFS harmonisation proposal and share with the FRC the feedback it has received from stakeholders on its exposure draft.
The AASB Chairman informed the FRC that comments on its proposed new interpretations model were due by 18 January 2006. The FRC asked to be briefed by the AASB on the feedback, as well as the impact that this model would have on its budget and business plan. These matters will be considered at a future FRC meeting early in 2006.
The AASB has sought to clarify with the IASB the appropriateness of paying royalties to the IASB for the use of material related to IFRS. The letter sent by the AASB to the IASB was tabled. The AASB is of the view that the FRC’s contribution to the IASB should obviate the need for Australian stakeholders to pay additional royalties to the IASB for the use of this material.
Agenda item 3: Report from the Chairman of the AUASB
The FRC noted an update on matters concerning the AUASB, including progress in the redrafting of Australian Auditing Standards, and international developments in auditing standards.
Agenda item 4: IFRS Implementation Review
The FRC noted that since the last FRC meeting, the FRC Chairman had written to the Treasurer on issues raised by stakeholders concerning IFRS implementation, and had corresponded with the AASB and ASX on these matters.
The AASB Chairman expressed general agreement with the FRC Chairman over progress with implementation. Two issues of concern raised by stakeholders, which remain unresolved, were the level of Australian influence over the development of IFRS, and the value of the Urgent Issues Group in making interpretations.
The FRC agreed that legal advice be sought on the extent to which the requirements of the Australian Securities and Investments Commission Act 2001 (ASIC Act) conditioned the role of the AASB in its treatment of options and interpretations of IFRS, and that this matter be considered by the FRC following receipt of the advice. The AASB Chairman will provide background information to the FRC Secretariat to assist in the request for this advice.
The FRC agreed that consideration of the strategic direction to the AASB be deferred pending progress with this issue, and receipt of the report from Mr Kevin Simpkins on sector neutral standards.
Agenda item 5: Report from the Chair of the Trans-Tasman Accounting Standards Advisory Group (TTASAG)
The FRC noted the report, which provided some background on TTASAG and its work in co-ordinating the IFRS Regional Policy Forum.
Agenda item 6: Report from the Chair of the Audit Independence Subcommittee
The Chair of the Auditor Independence Subcommittee reported on matters including the auditor independence work programme and meetings held with MoU stakeholders. A new series of meetings with accounting firms, including mid-tier firms, would be a priority.
Progress was noted on the engagement of consultants to deal with matters during 2005-06, as agreed at the FRC meeting on 16 September 2005. Advertisements seeking tenderers for these consultancies will appear in the press in December and January. It was agreed to not proceed at this stage with the engagement of a consultant on auditor independence issues in respect of non-Corporations Act audits, such as superannuation funds. It is anticipated that arrangements for the other consultancies will be finalised early in 2006 following a public tender process.
The FRC noted that the FRC report on auditor independence for 2004-05 was included in the same publication as the annual reports for the FRC, AASB and AUASB. Consideration will be given to the auditor independence report for 2005-06 being published separately from the annual reports.
Agenda item 7: Report from the Chair of the Finance Committee
The FRC approved revised 2005-06 budgets for the FRC, AASB and AUASB.
The FRC agreed to pay sitting fees to FRC members for attendance at meetings of both standing committees of the FRC and ad hoc committees established by the FRC, for meetings held on or after 1 January 2006, and approved the corresponding guidelines that will apply to these payments.
The FRC authorised the payment of up to $800,000 to the IASC Foundation during the first quarter of 2006, with the amount being determined having regard to the AASB’s negotiations with the IASB concerning royalty payments for use of material relating to the IFRS.
The FRC agreed to close the FRC bank account held by the AASB after transferring remaining moneys to the AASB bank account.
The FRC noted that Mr Kevin Stevenson had accepted an invitation to present the Ken Spencer memorial lecture, and authorised the FRC Secretariat to finalise arrangements for the lecture, including its time and venue and required publicity.
Agenda item 8: Report from the Chair of the Nominations Committee
The FRC noted that peer evaluations were carried out by AASB and AUASB members, including both written comments and quantitative responses to a series of questions, and that the Nominations Committee had discussed the evaluations with the Chairs of the respective Boards, who will discuss relevant matters with their Board members individually.
Evaluations of the AASB and AUASB Chairs were forwarded directly by the FRC
Secretariat to the FRC Chairman. The Nominations Committee considered that there
is an opportunity for some Board members to increase their focus on the public
interest responsibilities of the Boards and to tackle issues beyond their
own immediate professional interests.
The FRC agreed to make the following appointments to the AASB:
- Ms Jan McCahey, for three years commencing on 1 January 2006;
- Mr John O’Grady, for three years commencing on 1 January 2006; and
- Mr Colin Parker, for three years commencing on 15 February 2006.
The FRC agreed to make the following re-appointments to the AASB:
- Mr Glenn Appleyard, for three years commencing on 1 January 2006;
- Mr Brett Kaufmann, for one year commencing on 15 February 2006; and
- Ms Joanna Perry, for one year commencing on 1 January 2006.
The FRC agreed to make the following appointments to the AUASB:
- Mr Chris Hall, for three years commencing on 1 January 2006;
- Mr David Simmonds, for three years commencing on 1 January 2006;
- Mr Mike Blake, for three years commencing on 1 January 2006;
- Mr Greg Pound, for three years commencing on 1 January 2006; and
- Ms Elizabeth Johnstone, for three years commencing on 1 January 2006.
The FRC agreed to make the following reappointment to the AUASB:
- Mr Ian McPhee, for three years commencing on 1 January 2006.
The FRC noted that there will be no ‘reserve list’ for possible appointment to either the AASB or AUASB in the event of any unanticipated vacancies arising before the next public selection exercise. It was also noted that it would be desirable to encourage candidates from the corporate sector, in particular from users of accounting and auditing standards, to put themselves forward for the Boards in the future.
Agenda item 9: Sector Neutral Accounting Standards Project
The FRC noted that a contract for Mr Kevin Simpkins to undertake research on sector neutral accounting standards had been executed on 24 November 2005.
Mr Simpkins updated Council members on progress with the project, and provided an overall project plan for their consideration. Issues to be resolved included the stakeholder / user groups to be consulted, and whether the situation for SMEs fitted within the scope of the project.
Mr Simpkins met with the Sector Neutral Accounting Standards Steering Committee in November. A further meeting is scheduled for 19 January 2006. FRC members with views on the project plan or stakeholder groups were asked to forward them to the Secretariat ahead of that meeting.
Agenda item 10: International developments
A paper on the work of relevant international organisations and national standard setting bodies, and other material relevant to the international regulatory environment, was circulated for the information of members.
Agenda item 11: Other business
Correspondence was noted.
The meeting dates for the FRC in 2006 were agreed. These are:
- Monday 20 February (special strategy meeting)
- Monday 20 March
- Thursday 22 June
- Tuesday 26 September
- Friday 8 December
Meetings will commence at 9am. The venues for these meetings will be finalised following further consultation between FRC members and the Secretariat.
Concerning the strategy meeting on Monday 20 February, FRC members were requested to make suggestions to the Secretariat, by Friday 13 January, on:
- an appropriate venue for the meeting;
- whether an external facilitator should be engaged; and
- issues to be addressed at the meeting.
The meeting concluded at 1.45pm.