Home > Minutes > 2008 > FRC Meeting Minutes - 11 June 2008

Forty-Sixth Meeting
11 June 2008

Outcomes of the meeting held on 11 June 2008 at the offices of the Treasury, Langton Crescent, Canberra.  The meeting commenced at 9.00 am and concluded at 1.00 pm.

Attendance
FRC Members:
Mr Jeffrey Lucy AM (Chairman)
Mr Bruce Brook
Ms Kathryn Campbell
Mr Michael Coleman
Mr Mark Coughlin
Mr John Gethin-Jones
Mr Warwick Hunt (by telephone)
Mr Jim Murphy
Mr John Stanhope (by telephone)
Ms Catherine Walter
Mr Lee White
Mr Klaus Zimmermann

Invitees:
Mr Don Challen (by telephone)
Ms Judith Downes (by telephone)
Ms Jan West
Dr Ian Watt (for lunch)
Mr Ian McPhee (for lunch)
Mr Warren McGregor

AASB:
Prof. David Boymal (AASB Chairman)

AUASB:
Ms Merran Kelsall (AUASB Chairman)

APRA:
Mr John Trowbridge

FRC Secretariat:
Ms Suzanne Howarth (FRC Secretary)
Ms Heather Sturgiss
Mr Marcus McKillop
Ms Annie Lam

Apologies:
Dr Ken Henry (Treasury)

 

Agenda Item 1 – Apologies and Welcome

The FRC Chairman, Mr Jeffrey Lucy AM, welcomed FRC members and other attendees to the 46th meeting of the Council.

1. Declarations of interest

Members advised the meeting of the following changes to their entries in the register of interests circulated by the Secretariat:

Mr Jeffrey Lucy is now a Member of the Accounting Standards Board of New Zealand.

Mr Michael Coleman is no longer the AICD’s representative on the Consultative Group to the Australian Accounting Standards Board.

Mr Mark Coughlin is a Fellow of ICAA Australia and a Member of the Australian Institute of Company Directors.

Ms Jan West has become a Director of Neuro Sciences Victoria Ltd.

2. Confirmation of Minutes of Previous Meeting

The minutes of the 45th meeting, held in Melbourne on 9 April 2008, were approved.

3. Matters Arising from previous meeting

The meeting noted the Secretariat paper on matters arising from the minutes of the 45th meeting.

Agenda Item 2 – Recent Stakeholder Engagement

1. International Stakeholder Engagement

The meeting discussed a number of issues arising from recent international stakeholder engagement. Key issues considered by the Council included:

Emissions trading. While the IASB is currently developing an international standard on emissions trading, the IASB’s processes are such that it takes a minimum of 3 years for a standard to be finalised.  With emissions trading scheduled for introduction in Australia in 2010, Australia will need to move ahead of the international process.  Given the expected timetable for introduction of emissions trading in Australia, the AASB were asked to prepare a paper, in consultation with Treasury, outlining alternative options for progressing a standard.

Auditor rotation.  The issue of auditor rotation and its potential to put independence at risk was discussed by the Council.  There was a consensus that this is an issue that the FRC should continue to monitor.  (It was noted under Agenda Item 3(a) that this issue forms part of the FRC’s audit independence work programme.)

IASB Staff. Positions.  It was agreed that the Council would liaise with the Trans Tasman Accounting and Auditing Standards Advisory Group (TTAASAG) to actively promote the appointment of Australians and New Zealanders to IASB staff positions.

Warren McGregor updated the meeting on recent developments in the international arena relating to the use of the ‘true and fair’ override.  It was agreed that this issue should be raised at the meeting with Sir David Tweedie in August and noted that the Australian Institute of Company Directors has been undertaking an education campaign in relation to the need to provide additional information in circumstances where the auditor considers that the accounts do not provide a true and fair view.

2. International Credit Crisis Roundtable

The FRC considered proposals put forward at a recent roundtable of the six largest global audit networks to discuss financial reporting and auditing experiences arising from recent audits. Participants identified a number of possible next steps.

The FRC agreed to write to the Accounting Bodies regarding the flow-on implications for Australia of establishment of the expert advisory panel on valuations by the IASB.

Another possible next step identified by the credit crisis roundtable was to refresh guidance for management or directors in assessing going concern.  The FRC agreed to write to the Chairman of ASIC and the ASX Governance Committee bringing this proposal to their attention.

3. International Accounting Standards Committee (IASC) Foundation Governance

The Council noted the changes being proposed to the governance arrangements for the IASC Foundation.  It was agreed that the FRC would pursue with Minister Sherry the possibility of him writing to the Chairman of the IASC Foundation advising that Australia is keen to stay engaged with the work of the IASC Foundation and the IASB.

4. Revised reporting format for international developments

The Council agreed that the Secretariat should continue to provide updates on key international developments on a more regular basis via email.

5. Domestic Stakeholder Engagement

The Chairman updated the meeting on key themes emerging from recent domestic stakeholder meetings. It was noted there was strong support for the preparation of a matrix comparing IFRS with Australian GAAP, especially given that there is some level of confusion internationally as to whether Australia is fully IFRS compliant.  The Chairman also noted that there was strong support for consultation on the timing of introduction of revised international auditing standards.

The Council requested the AASB prepare a paper for the September FRC meeting on the use of IFRS compared with Australian standards and identifying whether there are any gaps between IFRS and Australian GAAP.

Agenda Item 3 – Reports from FRC Subcommittees

1. Audit Independence Committee

   The FRC noted the draft synopsis paper capturing those recommendations from previous consultancies on audit independence to be adopted by the Council as part of the FRC’s work program.  The Chair of the Audit Independence Committee, Ms Cathy Walter, noted that where recommendations have not been incorporated into the FRC’s work plan this is because the recommendations are either outside of the FRC’s jurisdiction, have already been resolved, or already referred to Treasury for consideration.  The paper was accepted as a final subject to minor amendments.  The information contained in the synopsis paper will be incorporated into the Audit Independence report in due course.

2. Finance Committee

The Chair of the Finance Committee, Mr Bruce Brook, updated the meeting on the work of the Committee.  In relation to FRC, AASB and AUASB finances, the Council noted:

• that the Governance Review Implementation Bill (AASB and AUASB) 2008 is expected to be introduced into Parliament in the next sitting and to come into effect from 1 July 2008;
• that it has yet to receive a response to its letter to the Department of Finance and Regulation concerning the AASB & AUASB superannuation defined benefit shortfall.  However, the accounting surplus going forward for the Boards should be sufficient to meet any superannuation shortfall as at 30 June 2008;
• the Profit & Loss statements and Forecasts to 30 June 2008 for AASB and AUASB;
• the draft budgets for the FRC, the AASB and the AUASB;
• that there are 3 possible options for addressing the projected deficit in 2007-08 for the AUASB:
  1. transferring funds from the AASB prior to June 30;
  2. revising the AASB and AUASB appropriations for 2007-08;
  3. making an adjustment to the appropriations for 2008-09.

The Council noted that the recent Ken Spencer Memorial lecture presented by Professor Zeff had been well received and that the topic was both contemporary and appropriate to the Australian context.  For next year’s lecture, it is hoped to engage someone who will be able to present an international audit focus.

3. Nominations Committee

The Council noted the report by the Chair of the Nominations Committee, Mr Klaus Zimmerman.  The proposed changes to the Nominations Committee charter were approved by the Council as was the format for the FRC, AASB and AUASB 2008 Peer review.

In respect of the Peer review, it was agreed that in the case of feedback on FRC members, the FRC Chair would be provided with non-attributed comments whilst in the case of the AASB and AUASB Boards, non-attributed comments would be provided to the relevant Board Chair, the FRC Chair and the Chair of the nominations committee.

The Council noted that Lee White has been appointed to the Nominations Committee.

Agenda Item 4 – Report from Chair of TTAASAG

The meeting noted the update paper on the work of TTAASAG.

In light of the fact that the International Federation of Accountants was again seeking nominations for two public member positions on the International Auditing and Assurance Standards Board (IAASB), the Council agreed to write to TTAASAG indicating their strong support for the nomination of Merran Kelsall, subject to confirmation of her availability, for appointment to the IAASB.  Ms Kelsall left the meeting for the discussion of her nomination.

Agenda Item 5 – Report from Chair of AUASB

The Chair of the AUASB, Ms Merran Kelsall, provided an update on the activities of the AUASB.  With respect to the timing of adoption of the IAASB Clarity Standards, Ms Kelsall noted that the AUASB Board was of the strong view that Australia should proceed on the assumption that these standards will be adopted with effect from January 2010.

The AUASB Chair also presented a research proposal for which a contribution to funding was sought form the FRC.  The Council agreed to defer consideration of the proposal until after the Australian Research Council had taken its decision in respect of funding.

Agenda Item 6 – Report from Chair of AASB

The Chair of the AASB, Professor David Boymal, provided an update on the activities of the AASB.  Issues covered included emissions trading, SME accounting, superannuation, extractive industries and public sector accounting.

As noted under agenda items 2(a) and (e) respectively, the FRC has asked the AASB to prepare papers identifying:

1. options for progressing a standard on emissions trading; and
2. whether there are any gaps between IFRS and Australian GAAP.

Agenda Item 7 – AASB, AUASB &FRC Draft Business Plans and FRC Future Directions

The FRC approved the 2008-09 business plans for the AASB, AUASB and FRC and the future directions proposed by the FRC.

Agenda Item 8 – External Reports

1. Standards Advisory Council report

Ms Judith Downes provided an oral update on the forthcoming meeting of the IASB Standards Advisory Council (SAC) and noted that she would be interested in receiving feedback from Council members on any issues they would like raised at the SAC meeting.

2. IFRIC

The meeting noted the update on the May 2008 IFRIC meeting provided by Ruth Picker.

3. Financial Improvements Project

Mr Bede Fraser from Treasury provided an update on the Treasury’s financial improvements project.  Treasury is currently examining a number of proposals designed to further improve corporate reporting and accountability.  The project is not expected to result in any major policy shifts, but rather is intended to result in continuous improvement to the financial reporting framework which is widely accepted as being very robust.

The FRC asked that Treasury recognise the FRC’s role in any discussion papers and note the Council’s willingness to provide input on any proposals.

Agenda Item 9 – Other Business

1. G100/FRC Review of IFRS

The Chair updated the meeting on arrangements for the review of Australia’s experience with IFRS being co-hosted by the G100 and FRC.  The first part of the review would be held in Sydney on Thursday 12 June 2008.

2. Agenda for FRC meeting with Sir David Tweedie

In addition to those topics already identified, it was noted that, emissions trading and the use of the fair value override should also be raised with Sir David Tweedie at the informal FRC meeting scheduled for 12 August.

3. Public Sector Accounting

The Council noted the contents of the letter from the Department of Finance and Deregulation and the Treasury in relation to AASB 1049, Whole of Government and General Sector Financial Reporting.  It was agreed that:

• the issues raised by Treasury and Finance would be referred to the AASB for consideration;
• the FRC would advise Treasury and Finance it will respond to the letter once it has received the AASB’s advice; and
• the FRC would conduct a workshop on public sector accounting in August.
4. XBRL Update

The Chairman updated the Council on his recent meeting with the Director of the Standard Business Reporting Program, Paul Madden.  Mr Madden will provide an update on XBRL at the September FRC meeting.

5. Stock Lending – ASIC Update

Mr Lee White advised the meeting that stock lending had been a major focus for ASIC in recent times and that going forward ASIC would like to see clear guidance on how stock lending should be treated from an accounting perspective.

6. 2008 IASC Foundation Payment

The meeting noted the payments made by the FRC and the AASB to the IASC Foundation.

Agenda Item 10 ‑ Correspondence

Correspondence was noted.

Agenda Item 11 – Next Meeting

The next meeting of the FRC will be an informal meeting with Sir David Tweedie in Sydney on Tuesday, 12 August 2008, commencing at 9.00 am.  The next formal FRC meeting will be held in Sydney on 3 September.