Overview
New arrangements commence
- New institutional arrangements for setting Australian accounting standards came into effect on 1 January 2000, with the replacement of Part 12 of the Australian Securities and Investments Commission Act 1989 (ASIC Act) by a new Part 12 enacted as part of the legislative reform package contained in the Corporate Law Economic Reform Program Act 1999.
Objectives
- The main objectives of the new arrangements, as set out in section 224 of
the ASIC Act, are:
- to facilitate the development of accounting standards that require the provision of financial information that: allows users to make and evaluate decisions about allocating scarce resources; assists directors to discharge their obligations in relation to financial reporting; is relevant to assessing performance, financial position, financing and investment; and is relevant and reliable, facilitates comparability and is readily understandable;
- to facilitate the Australian economy by reducing the cost of capital, enabling Australian entities to compete effectively overseas, and having accounting standards that are clearly stated and easy to understand; and
- to maintain investor confidence in the Australian economy (including its capital markets).
Establishing new bodies
- The Financial Reporting Council (FRC), a peak body with responsibility for
the broad oversight of the accounting standard setting process for the private,
public and not-for-profit sectors, has been established. It comprises key
stakeholders from the business community, the professional accounting bodies,
governments and regulatory agencies.
- The FRC's 13 members were announced by the Treasurer on 20 September 1999 (a list of members is at Appendix A).
- The first (informal) meeting of the FRC was held on 25 October 1999 to enable planning for the establishment of the reconstituted AASB to commence. A total of 5 FRC meetings were held during the financial year.
- The Australian Accounting Standards Board (AASB) has been reconstituted
as a body corporate with power to formulate accounting standards for the
purposes of the Corporations Law and for purposes other than the Corporations
Law - for the public and not-for-profit sectors - and to participate in
and contribute to the development of a single set of accounting standards
for world-wide use. The reconstituted AASB has assumed responsibility for
the functions performed by the previous AASB and by the accounting bodies'
Public Sector Accounting Standards Board (PSASB).
- The FRC appointed 9 part-time members to the AASB on 14 February 2000 and the Treasurer announced the appointment of the AASB's Chairman on 19 April 2000 (a list of AASB members is at Appendix B).
- The first meeting of the reconstituted AASB was held on 29 May 2000.
- The Urgent Issues Group, originally established by the accounting bodies, has continued to operate as a committee of the AASB.
Oversight by FRC
- Key functions of the FRC are to advise the Government on the accounting standard setting process and the development of international accounting standards, and to determine the broad strategic direction of the AASB.
- During the year the FRC was primarily concerned with the establishment of
the new standard setting arrangements.
- Accommodation for the reconstituted AASB has been provided by the Australian Stock Exchange Ltd on a rent-free basis for a period of 4 years from 1 March 2000.
- The FRC has received total offers or commitments from stakeholders to provide funding of $2.88 million in 2000-01 and $2.81 million in 2001-02.
- All Australian Accounting Research Foundation (AARF) staff employed on projects associated with accounting standard setting, and their associated support staff, transferred to the reconstituted AASB with effect from 1 July 2000, having initially provided support to the new Board as contracted employees of AARF.
- The FRC has approved the AASB's priorities, parts of its business plan, budget and staffing arrangements for 2000-01.
- The FRC also gave close attention to arrangements to ensure close consultation by the FRC and AASB with stakeholders in the standard setting process. This issue, and the FRC's work on international accounting standards are outlined below.
Standard setting
- The reconstituted AASB held 2 meetings (for a total of 3 meeting days) in May and June, and progressed a number of significant administrative and standard setting issues. Its first standards and other documents were issued in 2000-01.
- A total of 9 new or revised accounting standards were made by the out-going AASB between July and December 1999 (see Appendix G for details).
- Finally, it is noted that the Senate voted on 17 February 2000 to disallow 2 paragraphs of accounting standard AASB 1015 Acquisitions of Assets - the first time a standard had been the subject of such a motion.
Consultation
- The FRC and AASB are seeking to ensure maximum consultation with, and input from, stakeholders on particular standards and the standard setting process.
- During the first half of 2000-01, the AASB plans to establish a new consultative group which brings together the interest groups represented on the consultative groups of the old AASB and former PSASB.
- The FRC regularly issues a Bulletin about decisions taken at its meetings and other important developments in accounting standard setting.
- The AASB uses its website (www.aasb.com.au) to provide information about the Board, its activities and work program.
- Members of both the FRC and AASB have presented speeches to stakeholders and have met with them to discuss specific standard setting issues.
International
- The FRC has a statutory obligation to monitor the development of international accounting standards and accounting standards that apply in major international financial centres, to further the development of a single set of accounting standards for world-wide use with appropriate regard to international developments, and to promote the adoption of international best practice accounting standards in the Australian accounting standard setting process if doing so would be in the best interests of both the private and public sectors in the Australian economy.
- In accordance with its statutory obligations, the FRC is considering the policy implications for Australia of issues such as the current restructuring of the International Accounting Standards Committee (IASC) and the recommendation by the International Organisation of Securities Commissions (IOSCO) in May 2000 that IOSCO members permit incoming multinational issuers to use 30 core IASC standards to prepare financial statements for cross-border offerings and listings, subject to a range of supplementary requirements. The FRC is also monitoring the work of the European Commission and national accounting standard setting bodies in Canada, France, Germany, Japan, New Zealand, the United Kingdom and the United States of America.
- The reconstituted AASB has maintained the old AASB's involvement in the G4+1, which consists of the national accounting standard setting bodies of Australia, Canada, New Zealand, the United States of America and the United Kingdom (with an observer from the IASC).
- The AASB also provides technical support for the Australian members of the IASC and the International Federation of Accountants Public Sector Committee.
Australian Accounting Standard Setting
Structure of institutional arrangements
