4.1. Introduction

The ASIC Act confers on the FRC specific functions associated with the development of international standards:

• monitoring the development of international accounting and auditing standards as well as the accounting and auditing standards that apply in major international financial centres; and
• furthering the development of single sets of accounting and auditing standards for world-wide use with appropriate regard to international developments.

In addition the FRC has been highly cognisant of the call by the G20, from the Action Plan of 2008 (and subsequent years) that 'the key global accounting standards bodies should work intensively toward the objective of creating a single high-quality global standard'.

4.2. Stakeholder engagement

During 2012-13 key engagements with the international standard setter community have included:

• Attendance by the Chairman Lynn Wood, and separately the Chairman of the AASB and AOSSG, Kevin Stevenson, at the IFRS Regional Policy Forum, Hong Kong, 5-6 June 2013.
• Meetings with Mervyn King and Paul Druckman of the IIRC, including a presentation to the FRC on 5 December 2012.
• A visit to London and Brussels, by FRC Chairman and Secretary, 8-12 October 2012, including attendance at the IFRS Trustees meeting.
• Meetings with Mr Ian Mackintosh, Vice Chairman, IASB, including a presentation to the FRC on 28 August 2012.

Details of the various international meetings, and meetings attended as part of the cross-appointment arrangements with New Zealand, are included later in this chapter.

4.3. Monitoring and influencing global standards

In accordance with its governing legislation, the FRC seeks to support and further the adoption of a single set of global financial reporting standards. The only internationally accepted set of accounting standards are IFRS issued by the IASB for use in the preparation of general purpose financial statements. IFRS have been adopted by over 100 countries around the world, including all the members of the European Union (EU) and increasing numbers of countries in the Asia-Oceania region. Australia was one of the earliest adopters of IFRS, which have had force of law under the Corporations Act since 2005. The Australian Government, through the FRC, provided financial support to the work of the IASB through a grant of $1 million to the IFRS Foundation in the period covered by this report. A number of Australia's important G20 partners, notably the United States and Japan, still use their own individual national level accounting standards. Australia also uses the IAASB's ISAs as the basis for ASAs. Over 90 jurisdictions now use, or are committed to using in the near future, the IAASB's ISAs, including the following jurisdictions in our region: China; Hong Kong; India; Indonesia; Japan; Malaysia; New Zealand; Philippines; Singapore; Republic of Korea; and Thailand. The FRC Chairman and Secretary visited London and Brussels in the week 8-12 October 2012. Key themes of the meetings held include:

• Audit regulation — there was a widespread view that regulation of the audit market would be tightened, including in the United States. Few were concerned with international cooperation and coordination, except within the EU.
• IFRS convergence — it was expected that the process of convergence between IFRS and US GAAP would gradually wind up in 2013, and that it would probably be finalised with less than complete convergence on the key projects of: leases; revenue recognition; financial instruments, including classification and measurement; impairment methodology and hedge accounting. It was not expected that decision makers would be able to come to a decision regarding the adoption of IFRS by the United States in the near future.
• Public sector financial reporting — Eurostat, the EU's statistical agency, was leading a process attempting to arrive at common standards for public sector financial reporting in the EU. The FRC's material setting out Australia's model and advocating principles for high quality public sector financial reporting was seen as useful.

4.4. Monitoring and influencing regional standards

4.4.1. IFRS Regional Policy Forum

The 2013 IFRS Regional Policy Forum was hosted by Hong Kong, and attended by the FRC Chairman. Delegates from 16 regional jurisdictions participated. Participants discussed different IFRS convergence approaches to assist economies planning to adopt or converge with IFRS. Among key outcomes, participants reaffirmed their commitment to acceleration of convergence with, and adoption of, IFRS as a set of high-quality global financial reporting standards in the Asia-Oceania region, no matter which convergence approach is taken. Participants also agreed that standard setters should strengthen cooperation with the relevant regulators to promote consistent implementation of financial reporting standards. The IASB Chairman Hans Hoogervorst reflected on the status of IFRS work, including:

• that IFRS is the only accounting standard that countries consider adopting for their domestic financial reporting regimes in preference to individual national GAAP;
• the reasons for the high regard of IFRS — strong governance arrangements, high quality of the standards produced, public transparency and accountability, and a focus on the technical excellence of 'neutral' standards (that is descriptive rather than shaping economic reality); and
• some remaining challenges:
  • supporting the transition by major economies to IFRS (Japan was mentioned, with the recent establishment of an IFRS regional office in Tokyo reflecting this focus); and
  • protecting hard-fought gains and resisting calls to allow deviations by individual jurisdictions from published standards.

4.4.2. Asian-Oceanian Standard Setters Group (AOSSG)

AOSSG was established in 2009 as a forum to:

• promote the adoption of, and convergence with, IFRSs by jurisdictions in the region;
• promote consistent application of IFRSs by jurisdictions in the region;
• coordinate input from the region to the technical activities of the IASB; and
• cooperate with governments and regulators and other regional and international organisations to improve the quality of financial reporting in the region.

The current AOSSG Chairman, Kevin Stevenson, also the Chairman of the AASB, is an FRC member. In March 2013 it was announced that the AOSSG, along with its members: the Accounting Standards Board of Japan (ASBJ); the AASB; and the Chinese Accounting Standards Committee have been selected to serve on the IASB's new ASAF. The AOSSG is focussing on two key priorities:

• deliberating on the four core IASB projects — leases, revenue, insurance and financial instruments; and
• mobilising the relevant AOSSG working groups to provide input from AOSSG members on potential IASB decisions on core topics. The output of these working groups has effectively raised the capacity of the AASB.

The AOSSG is also piloting a Centre of Excellence for IFRS in Developing Countries in Nepal, and this initiative has drawn keen interest from the IASB and World Bank. As a result the AOSSG has been very active in 2012-13 in making submissions to the IASB on a variety of exposure drafts, and has rapidly become one of the key recognisable regional groupings of standard setters, lending greater weight to the views of the region.

4.5. Trans-Tasman harmonisation

4.5.1. New financial reporting framework

In New Zealand the XRB structure contains three entities, the Board of the XRB and two standard setting boards, the New Zealand Accounting Standards Board (NZASB) and the New Zealand Auditing and Assurance Standards Board (NZAuASB). The FRC Chairman is a member of the XRB as part of the arrangement for cross-appointments between Australia and New Zealand. The Chairman of the XRB, Mr Kevin Simpkins is a long-standing member of the FRC. During 2012-13 the FRC Chairman dialled into five XRB meetings, and she attended, with Bruce Paine of the FRC Secretariat, the XRB Strategy Day.

4.5.2. Trans-Tasman Accounting and Auditing Standards Advisory Group (TTAASAG)

Successive FRC Chairmen have been members of TTAASAG, which was established in 2004 to advise the Australian and New Zealand Governments and accounting and auditing standard setters on ways to reduce costs and improve efficiency by aiming for single sets of accounting and auditing standards to apply in both jurisdictions. TTAASAG also seeks to maximise the influence of Australia and New Zealand in the development of international accounting standards and international auditing and assurance standards, including the international standard setting processes supporting the development of those standards.

4.5.3. Cross-membershipswith New Zealand bodies

Following its establishment, TTAASAG proposed that cross-memberships between relevant standard setting and oversight bodies of Australia and New Zealand would be a desirable step in the process of reducing costs and improving efficiency of businesses operating in both jurisdictions. A recent review of the role of cross-appointees conducted by TTAASAG concluded that they are contributing to the standard setting process by facilitating cooperation and communication.

4.6. Key International Meetings

The following table sets out key meetings of the FRC Chairman with international interlocutors in 2012-13.

* with FRC Secretary