Forty-Ninth Meeting
26 November 2008
Outcomes of the meeting held on 26 November 2008 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 1.00 pm.
Attendance
FRC Members:
Mr Jeffrey Lucy AM (Chairman) (by telephone until 9.35 am)
Ms Kathryn Campbell
Mr Don Challen
Mr Michael Coleman
Mr Mark Coughlin
Ms Merran Kelsall
Mr Eric Mayne
Mr John Stanhope (by telephone until 11.50 am)
Mr John Trowbridge
Ms Catherine Walter AM
Ms Jan West AM
Mr Lee White
Mr Stuart Wilson
Mr Klaus Zimmermann
AASB:
Mr Bruce Porter (Acting Chair)
Mr Angus Thomson (Technical Director)
Invitees:
Ms Judith Downes (SAC) (until 11.35 am)
Mr Bede Fraser (Treasury)
Mr Kevin Simpkins (NZ ASRB)
FRC Secretariat:
Ms Suzanne Howarth (FRC Secretary)
Mr Les Pascoe
Apologies:
Mr Bruce Brook
Mr John Gethin-Jones
Mr Warren McGregor
Mr Jim Murphy
Ms Ruth Picker
Agenda Item 1 - Apologies and Welcome
The FRC Chairman, Mr Lucy, welcomed FRC members and other attendees to the 49th meeting of the Council.
Mr Lucy informed the meeting that, because of another commitment, he would have to leave the meeting shortly after 9.30 am and recommended that, at that time, Mr White should assume the Chair for the remainder of the meeting. The meeting endorsed this recommendation.
On a motion by Mr Lucy, members also resolved to acknowledge the significant contributions Mr Warwick Hunt (whose term ended in September 2008) and Mr White (who will be leaving the FRC in early 2009) have made to the work of the Council during their respective terms of office.
(a) Declarations of interest
Members advised the meeting of the following amendments to their entries in the register of interests circulated by the Secretariat:
- Mr Challen is a Fellow of the ICAA;
- Mr Coughlin is a Fellow of the ICAA. He has also been appointed as a director of the Women's and Children's Hospital Foundation.
- Mr Stanhope has been appointed as a director of Telstra Sensis Media (China) Ltd; and
- Ms West is now the Chairman of the Professional Conduct Tribunal of the ICAA. She has also been appointed as a director of Neuro Sciences Victoria Ltd.
Mr Porter, the part-time Acting Chairman of the AASB, tabled a statement listing his professional memberships and other relevant interests.
Mr White informed the meeting that he had accepted a position with ICAA and that he would be leaving his current position with ASIC in early 2009.
(b) Confirmation of Minutes of Previous Meeting
The minutes of the 48th meeting, which was held in Sydney on 3 September 2008, were approved.
(c) Matters Arising from previous meeting
The meeting noted the Secretariat paper on matters arising from the minutes of the 48th meeting.
Agenda Item 2 – Recent Stakeholder Engagement/international developments
(a) Report by Chairman
The meeting noted a report by the FRC Secretary on the FRC Chairman's October 2008 visit to Beijing and Tokyo. In speaking to the report, Mr Lucy made a range of observations, including that:
- two conferences about IFRS will be held in the region in the first half of 2009: a regional policy forum in China in March and a PricewaterhouseCoopers conference in Tokyo in April;
- Japan is likely to adopt IFRS from 2011;
- China is now compliant with IFRS in all but two areas, although proposed amendments to the related party disclosures standard is expected to eliminate one of the areas of difference;
- there was the potential for the regional IFRS standard setters group covering China, Korea and Japan to be expanded to include Malaysia, India, Hong Kong, Australia and New Zealand;
- the reforms to the Standards Advisory Council to apply from next year will focus on stakeholder representation and geographic spread of members; and
- it had been agreed that there should be staffing exchanges between the AASB and the Chinese Ministry of Finance.
The meeting noted the letter dated 11 November 2008 from the Chairman of the IASC Foundation to US President George W Bush informing leaders of G20 countries of the role that the IASB is playing in addressing issues emanating from the credit crisis. The Declaration of the Summit on Financial Markets and the World Economy held in Washington DC on 15 November 2008 was also noted by the meeting. Mr Lucy briefed the Council on issues arising out of recent IASC Foundation meetings, including:
- the establishment of a high level Monitoring Board to oversee the work of the IASC Foundation is expected to occur before the end of 2008;
- the G20 meeting declaration had been a relief to the IASC Foundation, as some trustees had thought that one or more European jurisdictions might have sought to take stronger action in respect of IFRS; and
- nominations made by the FRC, Australian Treasury and TTAASAG for appointment to the position of Chair of the Standards Advisory Council were not supported by the Foundation..
Mr Lucy informed the meeting that the FRC had entered into a new Memorandum of Understanding (MOU) with APRA. The new MOU provides that APRA will report to the FRC, at least annually, on matters relating to auditor independence. The MOU also provides that APRA will report to the FRC on compliance with APRA's reporting requirements that are relevant to the FRC's functions, if and when such matters arise.
At this point Mr Lucy withdrew from the meeting and Mr White assumed the Chair.
In view of Mr Lucy's absence, it was agreed that agenda item 2(a)(v) (Discussions with FRC Members following peer reviews) should be deferred until the next meeting of the Council.
(b) Draft report to Minister
A draft report to the Minister for Superannuation and Corporate Law concerning the activities of the FRC over the last four months was considered by the Council. Following a discussion about the structure and content of the draft report, it was agreed that the FRC Secretary should revise the draft having regard to the views expressed during the meeting and settle the document in consultation with the FRC Chairman.
During consideration of the draft report, the need to achieve greater international recognition of Australia's adoption of IFRS was also discussed. The meeting noted a suggestion that a paper outlining ways of streamlining the processes for adoption of IFRS, while still giving the Australian parliament control over the process, could be prepared in consultation with the AASB. It was subsequently agreed that, given the similarities with the parliamentary arrangements in New Zealand, TTAASAG should examine this issue (see Agenda Item 5).
(c) Water accounting issues
A paper prepared by the Water Accounting Development Office concerning the national water accounting development project was circulated for the Council's consideration. Articles by Professor Jayne Godfrey (Accounting for Change) and Senator Penny Wong (Water for the Future) were also circulated for the information of Council members.
Following consideration of the paper, the FRC agreed that the AASB should meet with the Water Accounting Development Committee concerning its work on this topic (and the relationship between that work and Australian accounting standards) and report back to the next meeting of the FRC.
While considering this issue, FRC members also noted the impact the work of valuers can have on financial reporting outcomes and agreed that a report on this topic should also be prepared for the next FRC meeting.
(d) Public Sector accounting workshop
A Public Sector accounting workshop, which was arranged by the FRC, was held in Canberra on 5 November 2008. A report on the workshop, prepared by the Department of Finance and Deregulation and Australian Treasury, was circulated for consideration by the Council. Other papers circulated to FRC members in conjunction with the workshop report were: revised workshop papers about development of public sector reporting in Australia and public sector issues; and a letter from Mr Ken Warren of the New Zealand Treasury providing information on how New Zealand reconciles the GAAP based audited financial statements with its budget outcome reporting.
In introducing this item, Mr Challen informed the meeting that workshop participants had agreed on a number of high level messages, including the need for one set of Australian accounting standards and one Australian standard setter. There was no enthusiasm among workshop participants for moving to either a 'two Boards' or a 'committees' model of standard setting. Mr Challen indicated that workshop participants were also of the view that there should be a review of AASB 1049 Whole of Government and General Government Sector Financial Reporting to address implementation and other issues associated with the standard, though there was some difference of view around the best timing for such a review.
The FRC agreed that the Secretariat should finalise the workshop report and that actions arising out of it should be considered at the next meeting of the FRC.
(e) SAC and London Round Table – Judith Downes
Ms Downes spoke to her reports on two meetings she recently attended in London: the SAC Meeting held on 13-14 November 2008 and the Round Table Meeting on Global Financial Crisis held on 14 November 2008. Observations made by Ms Downes included that:
- concerns were raised that the voice of jurisdictions in Asia are not being heard; and
- there is a need to formalise a 'fast-track' due process for use in circumstances where the normal due process may be too slow.
The meeting also noted that work in preparation for the joint IASB/FASB round table on the global financial crisis, to be held in Tokyo on 3 December 2008, was being undertaken on behalf of the FRC by Ms Downes and that she would be attending the meeting. The FRC confirmed the contract, arranged by the Australian Treasury with Ms Downes on behalf of the FRC, for the preparation of the Australian report for the round table.
Mr Porter informed the meeting that he would also be attending the Tokyo round table.
(f) IFRIC – Ruth Picker
Ms Picker's report on the IFRIC Meeting, held in London on 6 November 2008, was noted by the Council. The FRC agreed that reports by Ms Picker on IFRIC meetings should be provided to the Chair of the AASB.
Agenda Item 3 – FRC operations
The draft report on how the FRC performed its statutory functions during 2007‑08 was approved by the FRC, subject to editorial amendments to paragraphs 1.3, 2.25 and 3.23. The FRC agreed that the report, as amended by the meeting, should be published on the FRC's website.
The FRC noted advice from the FRC Secretary that the stocktake of functions for 2008‑09 may need to be modified to reflect the new governance arrangements for the AASB and AUASB.
The FRC Secretary also informed the meeting that the Secretariat was examining the operations of the FRC in light of the new governance arrangements for the AASB and AUASB and the role the FRC should have concerning the due process followed by the Boards when making or amending standards. Papers on both these issues would be prepared for the FRC's next meeting.
Agenda Item 4 – Reports from FRC Committees
(a) Audit Independence Committee
Ms Walter, Chair of the Audit Independence Committee, reported on the work of the Committee since the previous FRC meeting in September 2008. In conjunction with her report, Ms Walter sought approval for an updated work program for the remaining months of 2008‑09.
The FRC approved the updated work program, subject to:
- the references to 'AQRB' in columns two and three of function (1) being changed to refer to 'other relevant bodies'; and
- the reference to 'listed entities' in column two of function (1) being changed to refer to 'significant public interest entities'.
During consideration of the updated work program, Mr Eric Mayne indicated that ASX could assist the FRC Secretariat in extracting the information needed to perform functions (4) and (9).
(b) Nominations Committee
Mr Zimmermann, Chair of the Nominations Committee, reported on the Committee since the previous FRC meeting, including action taken to fill upcoming vacancies on the AASB and AUASB.
The FRC approved:
- the report by the Chair of the Committee;
- the Committee's recommendations for appointments to the AASB and AUASB in 2008‑09; and
- the Committee's intention of undertaking a broader strategic review of the membership of the two Boards.
Agenda Item 5 – Report from Chair of TTAASAG
The FRC noted the report from the Chair of TTAASAG. In speaking to the report, Mr Fraser (on behalf of the Group's Chair) informed the meeting that:
- Australian Treasury will be writing to the Chinese Ministry of Finance concerning the date of the IFRS regional policy forum;
- a list has been prepared of potential Australian and New Zealand candidates for appointment to the IASB; and
- TTAASAG will prepare a paper on issues associated with implementing IFRS in Australia and New Zealand.
Agenda Item 6 – Report from Chair of AASB
Mr Porter, acting Chair of the AASB, reported on the work of the Board since the last Council meeting. The FRC noted: the Chair's report; an information document on revisions to IAS 39; and an update on the differential reporting project.
Agenda Item 7 – Report from Chair of AUASB
The FRC noted Ms Kelsall's report on the work of the AUASB since September 2008. In speaking to her report, Ms Kelsall provided Council members with a comprehensive overview of the issues to be considered at the AUASB Consultative Group meeting scheduled for 2 December 2008.
Ms West briefed the FRC on the work of the subcommittee established to consider the AUASB's decision to adopt the proposed 'clarity' version of the International Standard on Quality (ISQC1). Ms West informed the FRC that it is not in a position to instruct either the AUASB or the profession's APESB in respect of this standard. As this matter raises issues of public interest and international comparability, the FRC agreed that it would be appropriate to seek information from APESB about the potential impact for a practitioner being required to comply with an AUASB version of ISQC1 and a similar APESB version. In addition, it was agreed that Treasury should prepare a background paper on the broader issue of the role of the statutory standard setter and APESB for consideration at the February meeting of the FRC.
The FRC also considered whether a consultant should be engaged to undertake work on audit-related issues associated with the global financial crisis, including 'going concern'. The Council concluded that, rather than a decision about the need for a consultant being taken at the meeting, the FRC Secretariat should work off-line with the FRC Chairman on developing a scope of work for any potential consultancy.
Ms Kelsall concluded her report by informing the meeting that her nomination for appointment to the IAASB had been unsuccessful. Ms Kelsall's news prompted consideration of whether Ms Caithlin McCabe, an Australian who was appointed to the IAASB at the start of 2008, should be invited to provide the FRC (and/or AUASB) with short written reports of IAASB meetings. The meeting agreed that the Secretariat should contact Ms McCabe concerning the provision of such reports.
Agenda Item 8 ‑ Correspondence
A Secretariat paper listing FRC correspondence for the period from 18 August to 13 November 2008 was noted.
Agenda Item 9 – Other matters
(a) Update on AASB Chair Appointment
Mr Fraser, of the Australian Treasury, briefed the meeting on progress with the appointment of a new Chairman for the AASB. The meeting noted Mr Fraser's advice that the Minister for Superannuation and Corporate Law had received the report of the panel established to advise the Government on the appointment and that the Minister is seeking approval from Cabinet for the preferred candidate.
(b) Report on preparations for 2009 Ken Spencer Memorial Lecture
The FRC noted a Secretariat paper outlining actions that have been taken in preparation for the 2009 Ken Spencer Memorial Lecture. Mr Mark Olson, Chairman of the US Public Company Accounting Oversight Board, has accepted an invitation to give the lecture. Following consultation with Mr Olson, it has been agreed that the lecture will be delivered in Melbourne on Wednesday, 11 March 2009.
Agenda Item 10 – Next Meeting
The FRC considered a Secretariat paper listing proposed meeting dates for 2009 and agreed that FRC meetings should be held on: 17 February (Melbourne), 5 May (Sydney), 10 June (Canberra), 21 September (Melbourne), 30 October (Melbourne) and 1 December (Melbourne). It was agreed that each meeting should commence at 9.00 am and conclude at 1.00 pm.