Overview
Oversight by FRC
The key functions of the FRC are to determine the broad strategic direction of the Australian Accounting Standards Board (AASB) and to advise the Government on the process of setting accounting standards and on developments in international accounting standards.
In performing its functions, the FRC takes into account the objectives of standard setting set out in the ASIC Act 2001 - aiming to facilitate the development of high quality accounting standards, to facilitate the Australian economy, and to maintain investor confidence.
Direction-setting activities of the FRC
During the year the FRC:
- formally endorsed the objective of convergence of Australian accounting standards with International Accounting Standards Board (IASB) accounting standards by 1 January 2005, subject to the Government's support at the appropriate time for any necessary amendments of the Corporations Act;
- consulted extensively with the private sector concerning contributions to the standard-setting process, taking into account business' desire for clear performance assessment;
- began a process of raising funds from the private sector for international and Australian standard setting;
- approved a comprehensive review of any AASB standard where there is a conflict of substance with IASB standards;
- considered the AASB's broad strategic direction and proposed budget and staffing arrangements for 2002-03, and endorsed the broad shape of the AASB's proposed business plan for 2002-03; and
- reviewed, with the AASB Chairman, approaches to improving the operation and output of the AASB.
Other activities of the FRC
The FRC also:
- made 3 new appointments to replace members who had resigned from the AASB, and one re-appointment;
- approved and published a selection criteria framework for appointments to the AASB;
- approved the payment of a modest increase in sitting fees for part-time AASB members, to be reviewed in September 2002; and
- ran a 1 day workshop covering FRC/AASB relations with international bodies, the functioning of the UIG, and public sector accounting standard issues.
The FRC's work on international accounting standards is outlined separately below.
Standard setting
The AASB held 13 meetings in 2001-02 for a total of 20 meeting days, at which it addressed significant standard setting and administrative issues.
A total of five new or revised accounting standards, two policy statements, five exposure drafts and three invitations to comment were issued by the AASB in 2001-02.
The Urgent Issues Group (UIG) met 8 times in 2001-02 and issued 9 new Abstracts during that period.
Consultation
The FRC and AASB are jointly and individually seeking to ensure maximum consultation with, and input from, stakeholders on particular standards and the standard setting process.
In 2001-02, the FRC:
- initiated a consultation round with business and other stakeholder organisations throughout the year, which included discussions on future private sector funding for standard setting and harmonisation;
- liaised closely with international standard setting stakeholders;
- issued six bulletins about decisions taken at its meetings and other important developments in the accounting standard setting process;
- maintained a close liaison with Australia's international representatives on the IASC, IASB, IFAC PSC, and IFRIC - including Mr Ken Spencer, Mr Warren McGregor, and Mr Ian Mackintosh;
- released a website (www.frc.gov.au) to further facilitate consultation.
- In 2001-02, the AASB:
- met once with its Consultative Group - made up of representatives of industry, business, investor, academic, regulatory and professional bodies.
- used its website (www.aasb.com.au) to provide information about the Board, its meetings and activities, and its work program;
- issued media releases to announce when new or revised accounting standards had been made; and
- issued an AASB Action Alert after each AASB meeting to summarise the proceedings of the meeting.
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.
The FRC is considering the policy implications for Australia of developments including:
- The EU directive for member states to adopt IASB Accounting Standards by 1 January 2005;
- The international regulatory response to accounting and auditing involvement in corporate failures such as Enron and WorldCom; and
- The IASB standards improvement project and exposure drafts.
The FRC is also monitoring the work of the European Commission, IFAC-PSC and national accounting standard setting bodies in Canada, France, Germany, Japan, New Zealand, the United Kingdom and the United States.
Australians have been successful in obtaining appointment to the IASB, IOSCO and IFRIC. Particulars of these appointments appear later in this report. In addition, several Australians have also been employed by the IASB's technical secretariat.
Accountability
Mr Jeff Lucy appeared before the Senate Economics and Legislation Committee in 2001-02.
Australian accounting standard setting
Figure 1: Structure of institutional arrangements
