Home > Minutes > 2008 > FRC Meeting Minutes - 12 February 2008

Forty-Forth Meeting
12 February 2008

Outcomes of the meeting held on 12 February 2008 at the offices of the Australian Accounting Standards and Australian Auditing and Assurance Standards Boards, Level 7, 600 Bourke Street, Melbourne.  The meeting commenced at 9.00 am and concluded at 1.30 pm.

Attendance
FRC Members:            
Mr Jeffrey Lucy AM (Chairman)
Mr Bruce Brook
Ms Kathryn Campbell (by telephone)
Mr Michael Coleman
Mr Mark Coughlin
Mr Don Challen (by telephone)
Mr John Gethin-Jones
Mr Warwick Hunt
Mr David Jackson
Mr Eric Mayne
Mr Jim Murphy
Mr John Stanhope
Ms Catherine Walter AM (joined the meeting at 12.30pm)
Ms Jan West AM
Mr Lee White
Mr Klaus Zimmermann

IASB:
Mr Warren McGregor

AASB:
Prof. David Boymal (AASB Chairman)

AUASB:
Ms Merran Kelsall (AUASB Chairman)

Invitees:
Mr Robert Sharma (APRA)
Michelle Frenkel (AASB, AUASB, FRC Communications Manager)

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

Apologies:
Judith Downes

Agenda item 1: Introduction by FRC Chairman

The FRC Chairman, Mr Jeffrey Lucy AM, welcomed FRC members and other attendees to the 44th meeting of the Council.

Minutes

The minutes of the 43rd meeting, held in Melbourne on 6 December 2007, were approved.

Matters arising

The meeting noted the Secretariat paper on matters arising from the minutes of the 43rd meeting.

Declarations of Interest

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

1. Professor Boymal is now a member of the Financial Reporting Standards Board of New Zealand;
2. Mr Lucy is expected to commence as a member of the New Zealand Accounting Standards Review Board; and
3. Mr Hunt remains a member but is no longer chair of TTAASAG.

No declarations of interest concerning agenda items for the meeting were raised by members.

Updates of meetings

Mr Lucy briefed the meeting on recent meetings with APRA, ASIC the IASB and professional associations.  Mr Lucy commented that Australia and New Zealand are currently under-represented on the staff at the IASB.  It was agreed that TTAASAG and the FRC should encourage the JSC to be more proactive in supporting staffing arrangements for the IASB.

Agenda item 2 – Draft FRC Stocktake Report: January 2008

The meeting noted the draft FRC stocktake report prepared by the Secretariat.  The Chair encouraged the Council to take a closer look at the report which will be discussed at the March 2008 meeting.  The report is still a work-in-progress.  The Secretariat will incorporate member’s comments and circulate a revised draft ahead of the March meeting.

Mr Murphy advised the meeting that Treasury will prepare a note for the next meeting on the linkages between XBRL and the Standard Business Reporting Program and their relevance for the FRC.  A key concern is to ensure that the Australian taxonomy is consistent with the IASB’s IFRS taxonomy.

Agenda item 3 – Preliminary Business Plans

The meeting noted the preliminary draft business plans circulated by the FRC, the AASB and the AUASB.  It was agreed that the Council and the two Boards, with the assistance of a business planning specialist from KPMG, would hold a workshop to take the plans forward.  A progress report on the business plans will be provided at the next meeting.

The discussion focussed on the importance of prioritising various work projects and of developing business plans that can be linked to the regular quarterly reporting to the Council.

• Arising from the discussion in relation to the draft business plan, it was agreed that Treasury would prepare a short note for the FRC outlining the current legal obligations for auditors in relation to prospectuses and forecasts and how auditors are able to verify a forecast.

Agenda item 4 – Report from Chair of Audit Independence Committee

The meeting noted the report by the Chair of the Audit Independence Committee. 

The meeting discussed whether there was a need for the FRC to supplement the work already being done by other bodies on audit quality.  It was agreed that the Audit Independence Committee would report to the March meeting on this issue.  As part of this work, the Secretariat undertook to circulate previous Ministerial and Departmental correspondence on the FRC’s role in audit quality.

Agenda item 5 – Report from Chair of Finance Committee

Mr Bruce Brook, Chair of the Finance Committee, gave an oral report on the Committee’s 8 February meeting.

Mr Brook:

1. updated the meeting on the budget process for 2008-09 and the potential funding implications of the transition to the Financial Management and Accountability Act 1997 (FMA) status.  There is a lack of clarity surrounding funding for 2008-09 financial year with funding expected to be cut by 2 per cent.  In light of the funding uncertainty it will be important for the AASB and AUASB to prioritise their work plans so that if insufficient funding is available it would be possible to identify which projects would need to be dropped in order to reduce staffing levels to the funded amount.
2. recommended the Council approve consultants being engaged to conduct a skills review of the AASB and AUASB prior to the transition to FMA as part of a due diligence exercise.  The expected cost of the consultancy is in the order of $30,000;
3. noted that the Committee accepted the 2006-07 stocktake report;
4. updated the Council on the Committee’s concerns about the forthcoming Ken Spencer Memorial Lecture, to be presented by Professor Stephen Zeff on 28 May 2008;
5. recommended the Council approve an increase of 4 per cent in sitting fees for the AASB and the AUASB.

The FRC:

1. discussed the possibility that with the move to FMA status that the professional bodies may become reluctant to provide funding to the AASB and AUASB.  In light of this discussion the Council agreed that the FRC Chair would hold discussions with the professional bodies on the issue of future funding.
2. agreed that in the event of a funding shortfall, the FRC Chair would take the matter up with the Minister. 
3. Supported the Committee’s recommendation that the Council engage consultants to undertake a review of relevant staffing arrangements in the areas of skill set, compensation, seniority and experience blend, inter alia, of the AASB and the AUASB;
4. agreed that, prior to the Ken Spencer Memorial lecture, it would be appropriate for Mr Lucy to have a discussion with Professor Zeff to encourage him to present a lecture that would be both contemporaneous and supportive of the Council’s objectives.  The Chair undertook to email the Council with the outcomes of the discussion with Professor Zeff.
5. supported the increase in sitting fees for the AASB and AUASB and agreed that the Secretariat should prepare a paper on the implications of the increase for FRC sitting fees.

Agenda item 6 – Report from Chair of Nominations Committee

The meeting noted the report presented by Mr Klaus Zimmerman, Chair of the Nominations Committee.   

The FRC noted that:

1. all previous nominees have now been appointed;
2. all unsuccessful applicants seeking appointment to the AASB and AUASB have been advised that their applications were not successful; and
3. where unsuccessful candidates were considered to have potential as a future nominee, they have been advised that while their current application was unsuccessful, they may wish to reapply in future.

It was agreed that the FRC Nominations Committee will consider the circumstances under which previous applicants can be considered for appointment to the Boards.

Agenda item 7 – Report from Chairman of AASB

The meeting noted the report by Professor David Boymal, Chair of the AASB.  Professor Boymal gave an update on staff changes and AASB priorities going forward.  Key priorities for the Board include superannuation entity accounting, public sector issues, reporting by charities, emissions trading and SME accounting.

In respect of the work being undertaken on extractive industries, Professor Boymal informed the meeting that it is expected that this project will be completed by mid 2009.  The meeting also asked to be kept informed of progress on the development of a standard on superannuation entity accounting.

GAAP/GFS Harmonisation Project

The FRC:

1. noted that following decisions taken by the FRC at its 8 December 2006 meeting, there is an expectation amongst public sector stakeholders that the final stages of the GAAP/GFS Harmonisation project covering entities within the General Government Sector (GGS) will be completed by February 2010 as then proposed by the AASB;
2. reaffirmed its 8 December 2006 decision that,  Stage 1 of the project (covering the GGS and Whole of Government reporting) having been completed, it remains to complete Stage 2 ( covering entities within the GGS) to fulfil the requirements of the Strategic Direction; and
3. requested the AASB maintain its priorities to ensure Stage 2 of the GAAP/GFS Harmonisation project is competed no later than the previously agreed date of February 2010.

Treasury undertook to organise a meeting with representation from the Departments of Treasury and Finance budget areas, the FRC Secretariat and the AASB Chair on implementation issues arising out of the GAAP/GFS Harmonisation project.

AASB’s Governance Guidelines

The AASB has undertaken a review of their Governance guidelines and provided the Council with a copy of the proposed revisions.  It was noted that the guidelines may need to be further revised under FMA. 

The meeting tasked the Secretariat with providing the Council with advice on the proposed revised guidelines.

Interpretations Model

The AASB is proposing to change the Interpretations Model 2006.Specifically, the AASB propose that the model be changed so that public comment is only sought on AASB decisions and not on the advisory panel recommendations and that the Agenda Committee be done away with and agenda decisions be dealt with by the AASB itself.

The Council agreed after consultation with Warren McGregor from the IASB for the Agenda Committee to cease and the change of agenda decisions in future to be dealt with by the AASB.  The Council also asked that the AASB provide a recommendation to the next meeting on the proposed change concerning public comment which reflects the Board’s previous experience on public consultation.

Agenda item 8 – Report from Chairman of AUASB

The meeting noted the report by Ms Merran Kelsall, Chair of the AUASB. Key priorities for the Board in 2008/09 are the Clarity project to update standards, and standards and guidance on climate change and emissions trading and various other items,

Agenda item 9 – Report from Chair of TTAASAG

Mr Warwick Hunt presented an oral report of behalf of TTAASAG.  Mr Hunt noted that TTAASAG are working collaboratively with the FRC Chair and the Nominations Committee to identify suitable nominees for international appointments.

The Council asked the Chair of the Nominations Committee to review its charter to gauge whether an amendment or an addendum is needed to allow it to work collaboratively with TTAASAG in relation to identification of nominees for international appointments.

It was noted that TTAASAG will liaise with other stakeholders to advise that they wish to ensure a collaborative approach to nominations.

It was agreed that the issue of references to IFRS in auditing standards should be referred to TTAASAG for further discussion with the Chair of TTAASAG to report back to the FRC in due course.

Agenda item 10 – Other business

The meeting discussed the 8 February 2008 letter to the FRC Chair from the President of the G100 Group of Chief Financial Officers.  The G100 are seeking a post-implementation review of the adoption of IFRS. 

It was agreed that the Council would write to Sir David Tweedie, Chair of the IASB, to outline the G100’s request and ask whether the IASB would be willing to support a review in an international context.

The Chair commended to Council members a report he had received by the European Parliament on the IASB/IASC Foundation.  The Secretariat undertook to circulate the paper to the Council.

The Secretariat agreed to progress with Treasury meetings for Sir David who will be in Canberra on Tuesday 5 August. 

The FRC Chair introduced Ms Michelle Frenkel, Communications Manager for the FRC, AASB and AUASB and Ms Annie Lam and Ms Heather Sturgiss from the Secretariat to the meeting.

Agenda item 11 –Next Meeting

The next meeting of the FRC will be in Melbourne on Tuesday, 9 April 2008, commencing at 9.00 am.