Forty-Seventh Meeting
12 August 2008
Outcomes of the meeting held on 12 August 2008 at the offices of the ASX, Bridge Street, Sydney. The meeting commenced at 9.30 am and concluded at 12.45 pm.
Attendance
FRC Members:
Mr Jeffrey Lucy AM (Chairman)
Prof. David Boymal (AASB Chairman)
Mr Bruce Brook
Ms Kathryn Campbell (by telephone)
Mr Don Challen (by telephone)
Mr Michael Coleman
Mr Mark Coughlin
Mr John Gethin-Jones
Ms Merran Kelsall (AUASB Chairman)
Mr Eric Mayne
Mr Jim Murphy
Mr John Trowbridge
Ms Catherine Walter
Ms Jan West
Mr Lee White
Mr Klaus Zimmermann
Invitees:
Sir David Tweedie
Mr Warren McGregor
Mr Tom Seidenstein
Ms Judith Downes
Mr Kevin Simpkin (for Warwick Hunt)
Mr Paul Madden
Mr Michael Beahan
FRC Secretariat:
Ms Amanda Kirby (FRC Acting Secretary)
Ms Heather Sturgiss
Apologies:
Mr John Stanhope
Mr Warwick Hunt
Mr Stuart Wilson
Agenda Item 1 – Apologies and Welcome
The FRC Chairman, Mr Jeffrey Lucy AM, welcomed Sir David Tweedie, FRC members and other attendees to the 47th meeting of the Council.
Agenda Item 2 – IASB update (Sir David Tweedie)
Sir David Tweedie provided the meeting with an overview of the work of the International Accounting Standards Board (IASB). Sir David outlined that the next twelve months will determine accounting standards for the next ten years. Sir David provided details of the nine key projects on the IASB's work agenda that are scheduled to be substantially finished by 2011.
The projects and their expected completion dates are listed in the table below.
Project |
Description and expected completion date |
|---|---|
Fair value measurement guidance |
The IASB has established an expert advisory panel in response to the Financial Stability Forum (FSF), report on enhancing market and institutional resilience to address the FSF's valuation recommendations. The IASB plans to issue guidance in the next few weeks. |
Consolidation |
The Consolidation project addresses one part of the FSF recommendation for off‑balance sheet vehicles. The IASB has prioritized this project in order to accelerate its completion and an exposure draft is due for release in the fourth quarter of 2008. The current project plan envisages a revised standard being issued in the second half of 2009. |
Derecognition |
The Derecognition project addresses the other part of the FSF recommendation for off‑balance sheet vehicles. This project aims to reconcile the very different approaches the IASB and US GAAP have to derecognition. The staffs of IASB and FASB are presenting their initial findings at the joint meeting in October 2008. |
Financial instruments |
On 19 March 2008 the IASB published a discussion paper Reducing Complexity in Reporting Financial Instruments. The discussion paper is open for comment until 19 September 2008. |
Performance reporting (or Financial statement presentation project) |
The financial statement presentation project was undertaken jointly by the FASB/IASB to establish a common, high‑quality standard for presentation of information in the financial statements, including the classification and display of line items and the aggregation of line items into subtotals and totals. A discussion paper (FASB preliminary views document) is expected to be published in the third quarter of 2008. |
Liability equity |
On 28 February 2008 the IASB published a discussion paper Financial Instruments with Characteristics of Equity. The discussion paper is open for comment until 5 September 2008. |
Revenue Recognition |
The IASB and the FASB are conducting a joint project to develop concepts for revenue recognition and a general standard based on those concepts. The general standard would replace the existing standards on revenue recognition, IAS 11 Construction Contracts and IAS 18 Revenue. The IASB plans to issue a Discussion Paper (jointly with FASB) for consultation in the second half of 2008. |
Pensions |
In March 2008 the IASB published a Discussion Paper of the Board's preliminary views on Amendments to IAS 19, the IASB standard on employee benefits (including pensions). Comments on the Discussion Paper are due by 26 September 2008. |
Leases |
The Board's long term lease accounting project is expected to result in a fundamental change in accounting for leases. The IASB are working towards issuing a joint discussion paper with FASB in the fourth quarter of 2008. |
The IASB is issuing a revised MOU with FASB which will take the work program out to 2011. Sir David assured the meeting that standards will not be written in the current US prescriptive style rather they will remain principles based.
Agenda Item 3 ‑ Outcomes of G100/FRC review of Australia's experience in implementing IFRS
The FRC and G100 commissioned PriceWaterhouseCoopers to survey G100 members on their experience with International Financial Reporting Standards (IFRS). Thirty six completed surveys were received from a broad range of industries (eighty five members were sent the survey). The survey report is expected to be available to FRC members shortly.
The survey was considered as part of an FRC/G100 workshop on 11 August. A key outcome of the workshop was that a working group will be established to consider and make recommendations to the IASB on the plethora of disclosures
Agenda item 4 – Financial Stability Forum (FSF) update
As part of Sir David's IASB update he noted work that is occurring in response to the FSF's recommendations in relation to fair value in illiquid markets and off‑balance sheet vehicles (see agenda item 2).
Agenda item 5 – Update from Standard Business Reporting Program Director
Paul Madden provided an update of the Standard Business Reporting project. The project is aimed at reducing the regulatory reporting burden on business.
The presentation raised issues about the IFRS assurance process. Specifically, the Program Director is seeking assistance from the FRC in assuring that the Standard Business Reporting taxonomy is a faithful representation of the IFRS XBRL taxonomy. Treasury will prepare a paper for FRC signoff in November. A draft outline of the paper will be considered by the Council at the September 2008 meeting.
Agenda item 6 - IFRS and the associated reporting complexity for preparers and users of financial statements
This item was covered by items 2 and 3 of the agenda.
Agenda item 7 - IASB's proposal for full fair value and the potential for increased volatility in asset pricing
Sir David noted that the IASB has never proposed full fair value and is only looking to apply fair value to financial instruments and commodities. Sir David noted the benefits of fair value as a tool to identify losses.
An issue was raised in relation to inconsistencies in fair value measurement and unlisted property trusts.
Agenda item 8 - IFRS for small and medium sized enterprises
The IASB is in the process of considering responses on the Exposure Draft of an International Financial Reporting Standards for Small and Medium-sized Entities (IFRS for SMEs) that was issued in February 2007.
Agenda item 9- Use of the fair presentation over-ride
Lee White addressed this issue and highlighted the European experience in this matter. Sir David did not consider this problem was due to a failure of the standard.
Agenda item 10 - Emissions Trading
Sir David noted that the IASB is working towards having a standard for emissions trading finalised by 2010. In the case that the standard is not finalised Sir David considered Australia could apply the draft standard. While in the normal course this would raise issues with Australia's compliance with IFRS, Sir David provided an assurance that Australia would be provided flexibility to adopt a draft standard and still remain IFRS compliant. The FRC Chairman will write to Sir David to confirm.
Agenda item 11 - Role of National Standard Setters in supporting IASB
Jim Murphy queried Sir David on whether there is a need for the FRC to be more proactive in seeking to influence the IASB rather than primarily responding to particular issues. Sir David noted the significant contribution Australia makes to the development of international accounting standards.
Agenda item 12 - AASB matrix of accounting standards
The matrix will be discussed at the September 2008 FRC meeting.