|Friday 10 March 2023
|10:00 am – 4:00 pm
|Treasury’s Sydney office / MS Teams
All agenda items except item 1 were discussed in public.
1. Matters for Non‑Public Session
This agenda item was discussed in private.
2.A Attendees and apologies
|Members in attendance:
|Andrew Mills (FRC Chair)
|Deepti Paton (Treasury)
|Dr Keith Kendall (AASB Chair)
|Zoe Irwin (Treasury)
|Bill Edge (AUASB Chair)
|Jodic Chan (Treasury)
|Suzanne Bell (KPMG)
|Cooper Tym (Treasury)
|Michele Embling (XRB Chair)
|Athanasios Kallos (Treasury)
|Cameron McDonald (Evans and Partners)
|Liz Prescott (KPMG)
|Emma Herd (EY)
|Ainsley Davidson (Chartertech)
|Thea Eszenyi (ASIC)
|Tracey Carroll (Department of Finance)
|Doug Niven (ASIC)
|Greg Yanco (ASIC)
|Justin Williams (Office of the AASB and AUASB)
|Nikole Gyles (Office of the AASB)
|Anne Waters (Office of the AUASB)
|Matthew Zappulla (Office of the AUASB)
|April Mackenzie (XRB)
|Joanna Perry (ex‑IFRS)
|Kris Peach (PIOB)
|Michael Bray (KPMG)
|Robert Buchanan (PIOB)
|Rebecca McCallum (Treasury)
2.B Declarations of interests
Members confirmed the agenda items for this meeting did not give rise to a conflict of interest for any member.
3. Matters for noting/action
3.A Minutes of the previous meeting – 23 November 2022
Members noted the minutes from the FRC meeting on 23 November 2022 which had been approved out‑of‑session.
3.B Minutes of Out‑of‑Session Meetings – 2 February 2023
Members noted the approved minutes for the 2 February 2023 out‑of‑session meeting.
3.C Matters arising
Members reviewed the Matters Arising list (document 3C).
The FRC agreed on matters that had been actioned and discussed including the removal of certain on‑going matters that were not required to be in the Matters Arising document.
FRC Secretariat to update the Matters Arising document and circulate the FRC calendar to members.
4 Oversight of Australian Standards
4.A Australian Accounting Standards Board
Members noted the AASB Chair Report (document 4A).
The AASB Chair highlighted the following:
- The AASB chair and staff member attended the recent ISSB event in Montreal as part of its new sustainability responsibilities.
- It was also noted that sustainability is a major focus for the AASB i.e. General Requirements for Disclosure of Sustainability‑related Financial Information (S1) and S2 Climate‑related Disclosures (S2).
- The AASB noted that the open‑for‑comment period on the Tier 3 reporting for the public and not‑for‑profit sectors would soon end.
- The impact of sustainability reporting on financial reporting.
- The interaction of climate transition action plans with financial statements and reporting risks.
4.B Auditing and Assurance Standards Board
Members noted the AUASB Chair Report (document 4B).
The AUASB Chair highlighted the following:
- The AUASB Chair has been appointed a member of the IAASB’s Sustainability Working Group which is developing an overarching standard for assurance on sustainability reporting which will be suitable across all sustainability topics and reporting frameworks, and to be used by all assurance practitioners (i.e. accounting profession and other assurance providers). An Exposure Draft of the proposed IAASB sustainability assurance standard is intended to be released by September 2023. Timeframe to completion of the sustainability assurance standard is 15‑16 months (end of 2024).
- The AUASB has prioritised issuing guidance for public sector auditors in areas identified as presenting challenges in applying AUASB Standards in the public sector.
- The structure and plans of international bodies (IAASB, ISSB and IASB) ‑ The Chair of the AUASB commented on the usefulness of the AASB, AUASB and FRC’s structure to share information and expertise.
5. Monitoring and Influencing International Developments
5.A XRB Update‑verbal
Michelle Embling, the XRB Chair, provided a verbal update to members.
- The New Zealand Climate‑related Disclosure standards were issued in December 2022.
- The XRB is currently continuing work on broader sustainability reporting and guidance to ensure that climate standards from December 2022 will be implemented appropriately.
- An exposure draft of a proposed temporary assurance standard which will apply to the mandatory assurance requirements over parts of climate statements ie., greenhouse gas emissions disclosures, has been issued for public comment. This proposed temporary standard will bridge the gap until the international standard is available.
- New Zealand are also considering how an assurance licensing regime may be set up to enable auditors / assurance providers to provide assurance on GHG emissions.
- The XRB is currently examining its own governance structure for separating sustainability standards into another body.
5.B Presentation about the IFRS Foundation
Joanna Perry, former Trustee of the IFRS Foundation, provided a verbal update to members on Australia and New Zealand’s involvement with IFRS and discussed the role they play in the Oceania region.
5.C International Developments ‑ Financial Reporting
Robert Buchanan and Kris Peach, of the PIOB, provided a verbal update to members on the PIOB’s oversight of the global system of standard‑setting for auditing, assurance, and ethical standards.
The FRC and Treasury agreed to recommend suitable candidates for international Board membership if any could be identified.
FRC to use stakeholder engagement to identify people with skills to be an international Board member.
5.D Funding International Bodies
Members agreed to recommend to the Australian Government that they extend its agreement with the IFRS Foundation for a further year. Members also considered whether to increase the value of the grant by $1 million.
Members also discussed alternative funding arrangements between Australia and the international standard setting bodies.
At the next Quarterly meeting, the FRC to consider and discuss what the future with international bodies looks like and the approach to funding.
5.E International Developments
Michael Bray provided a verbal update and a presentation to members (Attachment C of Item 5E).
- Michael Bray noted that amending the ASIC Act to give remit to the AASB on sustainability is one avenue for quicker action, while an Australian equivalent of the ISSB would be more internationally aligned.
6. Financial Reporting Framework Objects‑Indicators
Members noted the data in Attachments A and B to Item 6, and discussed domestic investor confidence and the weighted average cost of capital (WACC).
FRC Secretariat to source academic research from different jurisdictions about the existence of any relationship between IFRS disclosure requirements and WACC.
7. Audit Quality
7.A Audit Quality in Australia: The Perspectives of Audit Committees‑Final Report
Members considered the findings arising from Professor Simnett’s and Trotman’s research report and noted the possible considerations for FRC to monitor, however there were no immediate actions arising.
7.B Updated Audit Quality Action Plan
Members noted the updated version of the Audit Quality Action Plan with a focus on audit quality processes.
- Members assessed the Audit Quality Action Plan as a whole and considered the document may need to be iteratively updated over time depending on emerging issues and priorities.
- Members noted that action item number 3 (audit quality indicators) could be considered as we meet with the firms and other stakeholders on the audit quality review.
- Members discussed the Audit Quality Action Plan focuses on audit of financial reporting and it was now appropriate to incorporate a future action to consider how the quality of assurance on sustainability reporting is being supported and monitored.
- Anne Waters to investigate with the firms’ whether transparency reports could be used to report audit quality indicators.
- Add a future action to consider how the quality of assurance on sustainability reporting is being supported and monitored.
- Anne Waters to update the Audit Quality Action Plan with suggestions made by FRC members and publish it.
- There will be a further update at each FRC quarterly meeting this year on the progress of the Audit Quality Action Plan.
7.C Audit Quality Management Review
Members agreed on the scope of the Audit Quality Management Review.
- The Chair provided a verbal report to members on information gathered from stakeholders to date.
There will be a further update at each FRC quarterly meeting this year on the progress of the Audit Quality Management Review.
8. Extended External Reporting
Members discussed the Australian Sustainability Finance Institute’s (ASFI) consultation paper on sustainable taxonomy
- Treasury informed the FRC of their current work on a broader sustainable finance agenda which includes a sustainable taxonomy. Treasury is also cognisant of the need to ensure a cohesive narrative on the work.
Sam Hurley, Treasury to attend a future quarterly meeting and provide a brief outline of the work on the Government's Sustainable Finance Agenda.
9. Public Sector Advisory Group
Members noted the minutes of the Public Sector Advisory Group (PSAG) meeting from 22 February 2023.
- Tracey Carroll, Chair of the PSAG, provided minutes ahead of time and an update was briefly provided by members who attended the PSAG.
- The FRC noted the importance of public sector oversight and that PSAG’s findings would be valuable to communicate important information and recommendations to the FRC.
10. Emerging Issues and FRC Priorities
Members discussed relevant developments on the emerging issues it is currently monitoring as at Item 10 in the meeting pack.
Members also discussed recent media attention on accounting firms.
11. Monitoring and Influencing Australian Developments
11.A Stakeholder Reports
The FRC Chair noted the 8 Stakeholder Reports and appreciated the information provided.
- The AUASB Chair expressed concern regarding certain stakeholders not responding to the requests for stakeholder reports.
- Further, it was agreed that stakeholders should be supplying information they believe would be of specific interest to the FRC at the top of the stakeholder report in addition to reporting their own progress.
The FRC Chair to contact selected stakeholders that have not responded to requests.
12. Other Business
12.A Nominations Committee
Suzanne Bell, as the Chair of the Nominations Committee, provided a verbal report to the FRC members.
Suzanne noted that FRC members should be mindful of potential candidates for the AASB and AUASB.
12.B Correspondence Received and Sent
The FRC Chair provided a verbal update to members.
- The FRC Chair wrote the Assistant Treasurer on 9 March 2023 to provide an update on the Audit Quality Management Review.
12.C Key Action Items Summary
The FRC Chair and Secretariat provided a summary of the action items arising from this meeting.
13. Next Meeting and Close
13.A Revised FRC Meeting Schedule
Members agreed to retain the current schedule of meeting dates on a quarterly basis and to consider possibility of holding more Out‑of‑Session meetings to cover discrete issues.
13.B 5 July 2023
Members agreed to discuss alternative dates for the second quarterly meeting of the year to ensure that meetings are more equidistant.
Confirm availability of members and Secretariat to determine the next quarterly meeting date.