Strategy Meeting
20 February 2006
The Financial Reporting Council (FRC) held a special strategy meeting on Monday 20 February 2006 at the Old Treasury Building, Spring Street, Melbourne. The meeting commenced at 9.05am.
Attendance:
FRC Members:
Mr Charles Macek (Chairman)
Ms Elizabeth Alexander, AM
Mr Don Challen
Mr Warwick Hunt
Mr David Jackson
Mr Graeme McGregor, AO
Mr Jim Murphy (by phone, part day)
Mr Tom Pockett
Mr Brian Scullin
Ms Catherine Walter, AM
Ms Jan West
Mr Klaus Zimmermann
FRC Secretariat:
Mr Jorge del Busto (FRC Secretary)
Mr Peter Taft
Guests:
Ms Lynn Ralph (Cameron Ralph), Meeting Facilitator
Mr Geoff Miller (General Manager, Corporations and Financial Services Division, Commonwealth Treasury)
Apologies:
Mr Richard Humphry, AO
Mr Phillip Prior
Mr Roger Cotton
Session A: The FRC’s progress to date
During Session A the FRC undertook a critical examination on how the FRC is performing its functions, emphasising those areas which might require further action or a different approach.
The meeting concluded that the FRC is to establish a closer working relationship with the standard setting bodies, in particular, taking a more active role in providing guidance to the AASB and AUASB on issues of policy as they arise; identify issues requiring particular consideration in the best interests of the Australian economy; and clearly articulate its role in the area of auditor independence.
Setting and monitoring its strategic directions to the Boards
The FRC agreed that it could be more proactive in clarifying and asserting the content of its strategic directions to the Boards. Developing a closer working relationship with the Boards would help the FRC to identify issues where such clarification is required. Areas where the FRC could provide more clear direction were in the application of IFRS to SMEs, the need for consistent and timely interpretation of IFRS, and the treatment of IFRS options and additional guidance by the AASB.
In relation to SMEs, it was noted that the AASB could address this topic as part of a joint project with New Zealand which is being progressed through TTASAG. The FRC also noted the need to be mindful of IASB developments on its SME project.
Monitoring the effectiveness of auditor independence requirements
The FRC considered its relationships with other stakeholders arising from its audit independence functions, noting that these relationships were in their early stages. It was agreed that there was scope for the FRC to clearly articulate its role in the area of auditor independence, commensurate with its resources. The main focus should be on monitoring the effectiveness of the policy framework on auditor independence and providing advice to the Minister rather than monitoring the activities of auditors.
Session B: How can the FRC be more effective?
During Session B the FRC examined the way it was conducting its work, and considered changes that could positively contribute to it operating more effectively.
A number of possible actions were discussed, including inviting representatives of stakeholder groups to provide short presentations at the end of FRC meetings, providing more guidance to the work of the FRC committees on the Council's priorities and considering the option of issuing media releases associated with major FRC outcomes or decisions.
Stakeholder Liaison
FRC members outlined the extent that they were liaising with stakeholders, including with the bodies which had nominated them to the Council. Proposals considered to enhance liaison included formal meetings with the two Boards and the major accounting firms, broadening the scope for the public to provide written comment on issues, and increasing the length of meeting times to incorporate presentations by stakeholders to the Council.
Communications
The FRC agreed that there was scope to enhance its public profile, particularly in respect of its audit independence role. There could be greater use of press releases following major FRC milestones or decisions, such as the release of the annual report on auditor independence.
Committee Structure
The FRC considered that the Committees were working well, but that each Committee should examine its own charter regularly. It was considered that there was scope for the FRC to provide more guidance to its committees on the general direction that the Council wants to progress – for example, on the skills mix to be sought on appointments to the standard setting boards, and on priorities to be pursued through the business plans and budgets of the Boards.
Session C: Long Term FRC Issues
During Session C the FRC focused on longer term issues that may require new strategies and forward planning.
International influence
The FRC noted that there were already high quality Australian and New Zealand members appointed to relevant international bodies. To maintain this presence, the FRC agreed that it would be worthwhile for it to identify suitable candidates for nomination to positions on relevant international bodies and develop appropriate strategies to facilitate that nomination. It was suggested that the Nominations Committee may have a role in this matter.
Funding
The Council agreed to seek clarification / confirmation of the medium-term funding commitments of the professional accounting bodies as well as from the State and Territory Governments, and undertake a bottom-up review of funding needs in order to provide advice for the Commonwealth review of FRC funding in October 2006.
Succession Planning
The FRC agreed that it would seek to set out the skills mix required by the FRC and its different committees, so that it can provide advice to the Minister on future appointments to the Council.
Technology Issues
The FRC agreed that it should get a state-of-play update on XBRL related developments at a future meeting of the Council.
Session D: What Could Be the FRC's Role?
During Session D the FRC looked beyond its current functions to explore possible future roles which could be put to the Government for consideration.
There was unanimous agreement that the priority for the FRC was to be most effective in the performance of its current functions. Any possible expansion of functions would be put to the consideration of Government.
The meeting concluded at 3:10 p.m.