Bulletin
2009 / 02 – 2 March 2009
The Financial Reporting Council (FRC) held its 50th meeting in Melbourne on 17 February 2009. The principal achievements of the meeting were:
- A discussion with the Minister for Superannuation and Corporate Law, Senator the Hon. Nick Sherry;
- Consideration of the issues raised by the Treasury paper on Auditing Standards, Ethical Requirements, APESB and the Public Interest;
- A report from the Tokyo Round Table of 3 December 2008;
- An update on recent international developments; and
- Deliberation on the FRC Charter of Functions.
Minister Sherry's Visit
Mr Jeffrey Lucy AM welcomed Senator the Hon. Nick Sherry, Minister for Superannuation and Corporate Law, to the meeting.
Minister Sherry gave a short talk to the FRC, noting he was keen to hear members' views and thanking members for their efforts and continued commitment in the current climate. There was a discussion of the pressures for increased regulation, and of the international and domestic situation.
There was also some discussion of possible market reactions should there be a large number of emphasis of matter opinions from auditors (in situations where there is uncertainty about an entity's ability to continue as a going concern).
Paper on Auditing Issues
Mr Peter Levy of the Treasury provided an overview of the paper prepared by Treasury. It addressed the impact of the Auditing and Assurance Standards Board (AUASB) version of the International Auditing and Assurance Standards Board's (IAASB) International Standard on Quality Control (ISQC) 1 and the roles of the AUASB as the statutory auditing and assurance standards setter and the Accounting Professional and Ethical Standards Board (APESB), by examining the legislative framework. There was engaged discussion of the Treasury paper and the issues.
The FRC took note of Treasury's view that the current audit regulation framework is appropriate. The FRC agreed with Treasury's conclusion that it would be necessary for the AUASB to ensure that the Australian Auditing Standards are amended on an ongoing basis to incorporate references to the current set of ethical standards issued by the APESB. The FRC noted this would not affect or change the status of the APESB.
The FRC agreed it would be appropriate for the AUASB to ensure that the references in the Auditing Standards to relevant ethical requirements should apply to overseas auditors who were not members of one of the Australian professional accounting bodies and to a registered company auditor who was not a member of a professional accounting body.
The FRC noted Treasury's support for the AUASB proposal to make a Standard which would adopt the IAASB's 'Clarity' version of ISQC 1 on public interest grounds.
Tokyo Round Table
Ms Judith Downes (Standards Advisory Committee) gave a report on the Tokyo Round Table of 3 December 2008. Her presentation there focussed on a number of difficulties facing Australian bankers in existing international accounting standards, especially relating to provisioning, hedging and securities for sale.
Recent international developments
Apart from the changes being made at the IASB through its constitutional review, there was some discussion of what strategy the FRC should employ to maximise Australia's international influence. There was general agreement that Australian standard setters and others in the accounting and auditing community would have to work closely with our New Zealand colleagues, and also within the wider region to ensure that Asia-Pacific representatives were more prominent and united. There was a general discussion of the push at the G‑20 and elsewhere to re-incorporate in accounting standards the prudential standards that had been effectively removed in recent years.
Reports by Chairs of AASB and AUASB
The Chairman of the AASB, Mr Bruce Porter, noted the AASB's report and highlighted the large number of documents issued for comment recently by the IASB and IPSASB on which the AASB had made submissions. He also highlighted the recent release of the Discussion Paper Initial Accounting for Internally Generated Intangible Assets, authored by AASB staff on behalf of the National Standards Setters (NSS) Group, and the likelihood that the IASB Discussion paper on Extractive Activities being prepared by a team led by AASB staff will be released soon. Mr Porter reported steady progress on developing an Exposure Draft on Financial Reporting by Superannuation Plans.
The Chairman of the AUASB, Ms Merran Kelsall, outlined key matters contained in the AUASB report. In particular, Ms Kelsall reported on the AUASB's progress with the Clarity Redrafting Project, which is on schedule for completion in October 2009. Ms Kelsall also spoke about the AUASB's initiatives to provide guidance to auditors on going concern and fair value audit considerations during periods of financial instability, which it expects to issue in March.
FRC Charter of Functions
The Council began consideration of a Secretariat paper proposing changes to the Charter of Functions. Following discussion of the document prepared for the meeting it was decided the document would be revised by the FRC Secretariat for approval at the next FRC meeting. The meeting agreed to the revised Charter being published on the FRC's website once approved and noted that the revised Charter will form the basis of the FRC's 2008‑09 stocktake of operations.
Other matters
The FRC will next meet on 5 May 2009 in Sydney.About the FRC
The FRC is the peak body responsible for the broad oversight of the accounting and auditing standard setting process for the private and public sectors, as well as monitoring the effectiveness of auditor independence requirements in Australia. It comprises key stakeholders from the business and investing communities, the professional accounting bodies, governments and regulatory agencies. A list of the current FRC membership is on the FRC's website.
The FRC advises the Government on the accounting and auditing standard setting process and on the development of international accounting and auditing standards. It determines the broad strategic direction of the standard setters, the Australian Accounting Standards Board and the Auditing and Assurance Standards Board.