Under the Australian Securities and Investments Commission Act 2001 (ASIC Act) one of the FRC's functions is to provide broad oversight of the processes for setting accounting and auditing standards in Australia and to give the Minister reports and advice about these processes. Specific accounting and auditing standard setting functions for which the FRC was responsible in 2011-12 are contained in subsections 225(2) and (2A) of the ASIC Act. The activities of the FRC in executing these functions and responsibilities can be grouped as follows:
- activities in relation to the standards setting boards in Australia;
- activities in relation to developments in Australia; and
- activities in relation to international developments.
An outline of each of these three areas is provided in this section of the report in conjunction with information about the FRC's performance of its functions in each area.
1.2 Activities in relation to the Boards
The ASIC Act provides the FRC with a number of responsibilities with respect to the two standards setting boards (the Boards), the AASB and the AUASB. These responsibilities include appointing the members of the Boards, giving them advice on certain areas and determining their broad strategic directions.
1.2.1 Appointment of members to the Boards
The ASIC Act provides that the FRC is responsible for appointing the members of the AASB and AUASB (other than the Chairmen, who are appointed by the Minister). In addition, the ASIC Act provides that the members of the Boards (other than the Chairmen) hold office on the terms and conditions determined by the FRC.
The FRC is assisted in the performance of these functions by a Nominations Committee which is responsible for seeking expressions of interest from persons interested in being considered for appointment to either the AASB or AUASB and interviewing and evaluating candidates on the basis of merit. The Nominations Committee is also responsible for preparing and conducting the annual members' peer review for the FRC, the AASB and the AUASB. The membership of the Nominations Committee as at 30 June 2012 is listed in the table below.
|Nominations Committee||Jan West AM||Lynn WoodMark Coughlin
The FRC would like to thank Mr Klaus Zimmermann for his contribution as the previous Chairman of the Nominations Committee. Mr Zimmermann retired from the position at the end of 2011 and has been succeeded by Ms Jan West AM.
The following appointments and re-appointments to the Boards for terms commencing on 1 January 2012 and ending on 31 December 2014 (unless otherwise shown) were approved by the FRC on 14 December 2011:
- AASB: appointment of Mses Liane Papaelias and Carmen Ridley; and the reappointment of Messrs Ian McPhee, John O'Grady and Brett Rix. Mr Victor Clarke was reappointed for two years.
- AUASB: appointment of Professor Nonna Martinov-Bennie and the reappointment of Ms Elizabeth Johnstone and Messrs Colin Murphy and Greg Pound. Mr David Simmonds was reappointed for one year.
The FRC would like to thank the following AASB and AUASB members who left during 2011-12 for their contributions: Mr Glenn Appleyard, Mr Mark Jenkin and Mr Mike Blake.
As at 30 June 2012, the AASB had 14 members while the AUASB had 13 members.
1.2.2 Giving advice or feedback to the Boards and their Offices
The FRC's functions include giving the AASB and AUASB advice or feedback on their priorities, business plans and procedures and giving the Offices of the AASB and AUASB advice or feedback on their budgets and staffing arrangements (including level, structure and composition of staffing).
The FRC monitored the activities of the Boards as part of its regular activities, mainly by asking the Chairmen of the Boards to provide written and oral reports on the Boards' activities at each FRC meeting. The reports provided FRC Members with the opportunity to raise issues and question the Chairmen about the activities of the Boards at each meeting.
The FRC has this year sought to enhance engagement with both of our standards setters - the AASB and the AUASB. The AASB and AUASB each prepared a strategic plan and sought feedback from the FRC. The FRC established sub-committees to examine and provide comment on the strategic plans. The subcommittee members were:
- (AASB) Ms Lynn Wood, Mr Mark Coughlin, Mr Ian Purchas and Ms Jan West AM;
- (AUASB) Ms Lynn Wood, Mr Bruce Brook, Mr Andrew Fleming and Ms Belinda Gibson.
The FRC Chairman and Secretary attended an AASB meeting at which the AASB Strategic Plan was discussed. The FRC is very pleased with the finalised plans of both Boards and believes they will contribute to ensuring that Australia continues to have an appropriate, robust and dynamic financial reporting framework.
1.2.3 Broad strategic directions of the Boards
The FRC's functions include determining the broad strategic directions of the AASB and AUASB. The FRC has developed guidelines to be applied in the development of any strategic directions that are issued to the Boards. The guidelines envisage that, in developing and issuing new and revised strategic directions, the FRC will take into account:
- the Australian Government's stated policies and priorities;
- relevant international and domestic considerations impacting on the setting of accounting or auditing standards; and
- the public interest in the context of the Australian economy.
Since its establishment, the FRC has made three determinations concerning the broad strategic directions of the AASB and AUASB. These directions sought to achieve the following key outcomes:
- to require the AASB to work towards the adoption in Australia of accounting standards that are the same as those issued by the IASB, to ensure their applicability to Corporations Act 2001 (Corporations Act) entities for accounting periods beginning on or after 1 January 2005 (Direction approved 5 September 2002);
- to require the AASB to pursue as an urgent priority the harmonisation of Government Finance Statistics (GFS) and Generally Accepted Accounting Principles (GAAP) reporting (Direction approved 12 December 2002); and
- to require the AUASB to develop Australian auditing standards that have a clear public interest focus and are of the highest quality and to use, as appropriate, International Standards on Auditing issued by the International Auditing and Assurance Standards Board (IAASB) as a base from which to develop the Australian standards (Direction approved 4 April 2005).
Each of these directions is still current. The FRC, in the course of monitoring the activities of the Boards, did not consider that there was any need to amend the existing directions or issue a new direction.