Bulletin
2009 / 08 – 11 December 2009
The Financial Reporting Council (FRC) held its final meeting for 2009 in Melbourne on 1 December 2009. The principal issues considered by the meeting were:
- international developments;
- reports from stakeholder bodies;
- strategic issues; and
- other matters.
International developments
The Chairman reported on recent international stakeholder meetings. He noted that between 29 September and 9 October 2009, the FRC Chairman, Mr Jeffrey Lucy AM, and the FRC Secretary, Ms Genevieve Watson, met with a range of bodies from the accounting and auditing communities of the United Kingdom, Europe and the United States. The visit was scheduled to coincide with the meeting of the International Accounting Standards Committee Foundation's Trustees in New York on 6‑8 October.
Key issues canvassed during the meetings were the topical matters of IAS 39, IFRS convergence, and the pronouncements of the G-20, all of which continue to be subject to international debate. On the matter of convergence with IFRS, significant discussion was had during the visit regarding greater global take-up of IFRS, most particularly in relation to the ongoing discussion with the US (in light of the SEC's comments regarding commitment to the roadmap) and broader Asia-Oceania adoption. The G-20 made strong statements coinciding with the period of the meetings voicing support for a single set of global accounting standards.
In support of enhanced regional cooperation, the FRC Chairman conducted an Asia-Oceania trustees meeting in the margins of the broader trustees meeting to strengthen ties and share information between the regional nations. In particular, strong relationships are forming with Japan at a vital time in their consideration of IFRS adoption.
Mr Kevin Simpkins, the Chair of the New Zealand Accounting Standards Review Board (ASRB), briefed the meeting on recent developments in New Zealand (NZ). At the end of September, the Ministry of Economic Development's discussion document on a statutory framework for financial reporting in New Zealand and the ASRB's companion discussion document on the ‘Proposed Application of Accounting and Assurance Standards under the Proposed New Statutory Framework for Financial Reporting' were released for public comment.
Subsequently, in late October, the NZ Government announced a new regime for auditor registration and oversight, with the NZ Institute of Chartered Accountants regulating auditors as a specialist profession and the ASRB becoming responsible for monitoring and reporting on the way the Institute regulates auditors. Legislation to implement the new regime will be introduced into the New Zealand Parliament during 2010.
Mr Kevin Stevenson, the Chair of the Australian Accounting Standards Board, reported on a successful first meeting of the Asian-Oceania Standards Setters Group (AOSSG), which was held in Kuala Lumpur during November. A Malaysian delegate was elected Chair of the Group, while a Japanese delegate was elected Deputy Chair. Mr Stevenson informed the meeting that the AOSSG appeared to be looking to Australia for input on its more complex projects.
In addition to the regular reports on activities of the Standards Advisory Council, the International Financial Reporting Interpretations Committee and the International Public Sector Accounting Standards Board, the FRC received a comprehensive oral report from Ms Caithlin Mc Cabe, a member of the International Auditing and Assurance Standards Board (IAASB), on recent activities of that Board. Ms Mc Cabe's report was divided into three parts: outcomes of the IAASB's September meeting; the agenda for the December meeting; and her involvement with Australian stakeholders. Ms Mc Cabe was invited to provide similar reports to future FRC meetings.
Engagement with stakeholder bodies
During mid November, the FRC's Chairman and Secretary met with eight of the FRC's Sydney and Melbourne-based stakeholder bodies to discuss auditor independence and a range of other matters. Issues canvassed at these meetings included:
- audit independence requirements: no concerns were raised by stakeholders and there appears to be no cause for modifying the requirements at this time;
- material financial fraud and the possibility of voluntary SOX 404 style requirements: this topic was discussed with stakeholders but, at this stage, there appears to be no case or appetite for such requirements; and
- closer cooperation with New Zealand: developments in this area were discussed and welcomed, in particular the recent Prime Ministerial release of the Statement of Intent was noted and the impetus this gives to pursuing Trans Tasman initiatives that provide for comparable financial reporting outcomes.
A report by Mr Stevenson, Chair of the AASB, covering the work of the Board during the period since the FRC meeting on 21 September was circulated for consideration at the meeting. Comments made by Mr Stevenson in speaking to his report included that: he is delighted with the progress being made by the AASB; the AASB and NZ Financial Reporting Standards Board have decided, in the context of the Australia/NZ Prime Ministers' outcomes framework, to review differences in the reporting requirements for ‘for-profit' entities and prepare an exposure draft to resolve those differences; and IFRS 9 Financial Instruments: Recognition and Measurement was issued by the International Accounting Standards Board during November and the AASB hopes to make the Australian standard in near future.
A report by Ms Merran Kelsall, Chair of the AUASB, on the work of the Board during the period since the last FRC meeting was circulated for consideration at the meeting. In speaking to her report, Ms Kelsall informed the Council that, with the making of the ‘clarity' auditing standards, the Board's emphasis was now one of communication. Joint information sessions have been arranged with the professional accounting bodies; it was noted that different messages may be needed for different segments of the practitioner group. Other matters reported on by Ms Kelsall included her attendance at a recent meeting of the NZ Professional Standards Board, a move designed to foster closer relations between the two bodies.
Strategic issues
The FRC considered a paper by The Institute of Chartered Accountants in Australia (ICAA) about the need to align the use within government requirements of the words ‘audit' and ‘assurance' and associated reporting to the standard setting framework. Following consideration of the paper, the Council agreed that it would be appropriate for the FRC Chairman to write to relevant Ministers drawing attention to the issue raised by the ICAA.
The FRC noted progress with separate proposals by the Australian Government and the AASB for reducing the reporting regulatory burden on Australian entities. The proposals – one involving wide ranging amendments to the Corporations Act 2001, the other involving changes to Australia's accounting standards – are measures designed to reduce the net time and cost spent by Australian entities in the preparation of financial reports. The AASB's consultation paper also proposes to clarify circumstances in which general purpose financial statements (GPFS) will be required to be prepared. Under the reforms being proposed, financial statements prepared under a legal mandate in accordance with Accounting Standards and lodged on a public register (such as ASIC) would be regarded as GPFS. Both proposals were released for public comment on 4 December and further information about them can be obtained from the websites of the Australian Treasury, AASB and FRC.
The FRC gave further consideration to recent developments concerning the completion of Phase 2 of the GAAP/GFS Harmonisation Project by the AASB. Following consideration of the relevant issues, the FRC confirmed that the broad strategic direction (issued in December 2002) is still relevant.
Other matters
The next regular meeting is scheduled be held on 3 March 2010 (with the venue to be confirmed). The tentative dates for the other meetings in 2010, and the proposed venues, are: May (with the date and venue to be confirmed); Tuesday, 27 July (Melbourne); Tuesday, 21 September (Sydney); and Thursday, 2 December (Melbourne).
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.