Home > Minutes > Archive > FRC Meeting Minutes - 6 March 2007

Fortieth Meeting
6 March 2007

Outcomes of the meeting held on 6 March 2007 at the Offices of the Australian Accounting Standards Board, Level 7, 600 Bourke Street, Melbourne.  The meeting commenced at 9:00 am and concluded at 1:05 pm.

Attendance

FRC Members:
Mr Charles Macek (Chairman)
Ms Elizabeth Alexander, AM
Mr Bruce Brook
Ms Kathryn Campbell
Mr Michael Coleman
Mr Mark Coughlin
Mr Don Challen
Mr John Gethin-Jones
Mr Richard Humphry, AO
Mr Warwick Hunt (by telephone)
Mr David Jackson
Mr Eric Mayne (by telephone)
Mr Jim Murphy (by telephone)
Ms Catherine Walter, AM
Ms Jan West
Mr Lee White (by telephone until 12:00 pm)
Mr Klaus Zimmermann

IASB:
Sir David Tweedie
Mr Tom Seidenstein
Mr Warren McGregor

AASB:
Prof. David Boymal (AASB Chairman)

AUASB:
Ms Merran Kelsall (AUASB Chairman)

Invitees:
Ms Judith Downes (agenda items 1 and 2)
Mr Rob Sharma (agenda items 1 to 4)

FRC Secretariat:
Mr Jorge del Busto (FRC Secretary)
Ms Ronita Ram

Apologies:
Mr John Stanhope

Agenda item 1: Introduction by FRC Chairman

The FRC Chairman, Mr Charles Macek, welcomed IASB and FRC members to the 40th meeting of the FRC.

Minutes

The minutes of the 38th meeting, held in Sydney on 8 December 2006, were approved.

Declarations of interest

Ms Kathryn Campbell declared an interest in respect of agenda item 5, as the Department of Finance and Administration has policy responsibility for the Uhrig review.

Mr Michael Coleman declared an interest in respect of agenda item 6, as Mr Coleman had a self managed superannuation fund that had been audited by a fellow partner of KPMG in prior years.

Updates on meetings

Mr Macek reported on his attendance at the following meetings:

• meeting with the Financial Reporting Panel (FRP);
• meeting with the Victorian State Services Authority;
• ICAA forum attended by CPA Australia, NIA, ASIC and the AQRB.
• AUASB meeting;
• IASC Foundation Trustees’ meeting; and
• appearance before Senate Estimates.

Ms Judith Downes reported on her attendance at the Standards Advisory Council (SAC) meeting on 26 and 27 February 2007.

Update on implementation of strategy meeting recommendations

The FRC agreed in principle to the appointment of a full-time communications manager that would work for the Boards and the FRC to assist in enhancing awareness and understanding of financial reporting and auditing issues in the wider community.  It was also agreed to delegate to the FRC Chairman, in consultation with the Chairs of the AASB and AUASB, the determination of the job description for the position and the oversight of the subsequent selection and hiring process.

This position will be considered by the Finance Committee at its May meeting as part of its examination of the 2007-08 budgets, with a corresponding recommendation put forward for the consideration of the FRC at its 1 June 2007 meeting.

Stakeholder issues

No stakeholder issues were raised at the meeting.

Agenda item 2: Update from IASB Chairman

The FRC welcomed Sir David Tweedie, Chairman of the IASB, to the meeting.  Sir David was accompanied by Mr Tom Seidenstein, Director of Operations at the IASB, and Mr Warren McGregor, IASB member.

Sir David provided a wide ranging overview of the IASB’s future direction.  In particular, Sir David discussed the importance of principles based international accounting standards, which eliminate the need for unnecessary rules and complexity.

Sir David also noted that Australia had made a significant contribution towards the promotion and adoption of international accounting standards and expressed his appreciation for the work undertaken by Australia in this area.

Agenda item 3: Report from Chair of the AASB

Prof. David Boymal, Chairman of the AASB, presented a report on the activities of the Board since the FRC meeting on 8 December 2006.  Issues covered in the report, which was noted by the FRC, included:

• current developments in respect of international standards, including recent roundtables on a range of topics, including IFRS for SMEs, proposed amendments to IAS 37 Provisions and Contingent Liabilities and fair value measurement;
• current developments in respect of international projects relating to intangibles, extractive industries and the public sector;
• AASB documents issued since the last FRC meeting;
• progress with the AASB’s current work to revise the reporting entity regime in Australia, using the IASB exposure draft on IFRS for SMEs as a base;
• an update on the establishment of two advisory panels in accordance with the new interpretations model;
• an overview of the proposed structural and governance arrangements to be adopted as part of the Uhrig review of the Boards;
• the election of Bruce Porter as the deputy Chairman of the Board; and
• recent developments in public sector accounting, including difficulties in the public sector application of the new AIFRS standards;

Prof. Boymal also provided details of the AASB’s proposed priorities and work plan for 2007-08.  The FRC noted the AASB’s priorities for 2007-08 and concluded that they were aligned with the FRC’s expectations for increased attention to the financial reporting needs of the public sector and other not-for-profit sectors.

The FRC agreed to nominate AASB member Mr Glenn Appleyard for a public member vacancy on the International Public Sector Accounting Standards Board, and to provide input to the professional accounting bodies regarding Australian candidates for other vacancies at IFAC related bodies.

Agenda item 4: Report from Chair of the AUASB

Ms Merran Kelsall, Chair of the AUASB, presented a report on the activities of the AUASB since the FRC meeting on 8 December 2006.  Issues covered in the report, which was noted by the FRC, included:

• formulating legally enforceable auditing standards;
• formulating other auditing and assurance standards;
• formulating guidance pronouncements; and
• the AUASB’s participation in international standard setting activities.

It was noted that the AUASB had received the clarification of its Strategic Direction and had commenced redrafting the appropriate auditing standard to ensure reference to IFRS will be made in relevant audit reports.

Ms Kelsall also provided details of the AUASB’s 2007-08 proposed priorities and work plan, noting that the AUASB work programme will focus on revising Guidance Statements and the IAASB Clarity project.  The FRC noted the AUASB’s priorities for 2007-08.

Agenda item 5: Update on Uhrig review – implications for the AASB, AUASB and FRC

A report on the proposed structure of the Boards and the FRC in accordance with the Uhrig review was noted by the FRC.  As outlined in the report, the Government is currently considering the proposed recommendations, but no changes to the current structure are expected before 1 July 2008.

Agenda item 6:  Report from Chair of the Audit Independence Committee

Ms Elizabeth Alexander, Chair of the Audit Independence Committee, reported on the work of the Committee since the FRC meeting on 8 December 2006.

Activities of the Committee during the period included:

• overseeing the work of short-term consultants engaged to undertake the quality review and ethics consultancies;
• holding an MOU meeting with CPA Australia, NIA and KPMG on 21 December 2006, and an MOU meeting with ASIC on 27 February 2007;
• analysing the Register of Company Auditors to determine the proportion of registered company auditors that are not members of the professional accounting bodies;
• reviewing the scope of the FRC’s auditor independence function to extend to non-Corporations Act audits of ‘Australian auditors’; and
• preliminary work on the FRC’s 2006-07 Report on Auditor Independence.

Following consideration of the Committee’s report, the FRC agreed that the FRC Chairman should write to the Parliamentary Secretary to the Treasurer recommending that the FRC should expand the scope of its auditor independence work to encompass independence issues in respect of non-Corporations Act audits (especially in the area of self managed superannuation funds).

Agenda item 7:  Report from Chair of the Finance Committee

Mr Bruce Brook, Chair of the Finance Committee presented a report on the Committee’s work since the FRC meeting on 8 December 2006.

The FRC:

• approved the revised FRC Budget for 2006-07;
• noted the progress reports of the 2006-07 Budgets of the AASB and AUASB;
• authorised a payment to the IASC Foundation in 2006-07 of $800,000;
• agreed to consider a potential further payment of the IASC Foundation at its June meeting, following an update on the FRC, AASB and AUASB budgets for 2006-07; and
• noted the arrangements made by the Secretariat for the Ken Spencer Memorial Lecture held on 5 March 2007.  The FRC noted that as a consequence of the professional accounting bodies’ agreement to co-sponsor the lecture, together with the Department of Accounting and Business Information Systems of The University of Melbourne, there was no need for the FRC to utilise the agreed funding of $25,000.

Agenda item 8:  FRC Secretariat paper on international developments

The FRC noted a Secretariat paper on the work of relevant international organisations and national standard setting bodies, and other material relevant to the international regulatory environment, that had been circulated for the information of members.

Agenda item 9: Other business

A Secretariat paper providing particulars of correspondence received or sent by the FRC for the period 1 December 2006 to 27 February 2007 was noted.

No other matters of other business were raised at the meeting.

At the conclusion of the formal agenda, the FRC met with members of the Australian Institute of Company Directors (AICD) to discuss a range of issues of mutual interest to the FRC and the AICD.