The Australian Financial Reporting Council (FRC) was established on 1 January 2000 under section 225 of the Australian Securities and Investments Commission Act 19891 (ASIC Act) for the purpose of overseeing Australia’s accounting standard setting process. One of the key functions of the Financial Reporting Council (FRC) is to provide broad oversight of the processes for setting accounting standards in Australia. Specifically, the FRC is responsible for determining the broad strategic direction for the setting of standards to be followed by the Australian Accounting Standards Board (AASB). The AASB has functions, as set out in section 227 of the ASIC Act, which include: (a) to develop a conceptual framework, not having the force of an accounting standard, for the purpose of evaluating proposed accounting standards and international standards; (b) to make accounting standards under section 334 of the Corporations Act for the purposes of the corporations legislation (other than the excluded provisions); (c) to formulate accounting standards for other purposes; and (d) to participate in and contribute to the development of a single set of accounting standards for world-wide use. Previous FRC Directions to the AASB
In accordance with its responsibility to provide broad strategic directions to the AASB on the making of accounting standards, the FRC issued two specific directions in 2002: * The AASB should work towards the adoption in Australia of accounting standards that are the same as those issued by the IASB - and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) - to ensure their applicability to Corporations Act entities for accounting periods beginning on or after 1 January 2005; * The AASB should pursue as an urgent priority the harmonisation of Government Finance Statistics (GFS) and Generally Accepted Accounting Principles (GAAP) reporting. The objective should be to achieve an Australian accounting standard for a single set of Government reports which are auditable, comparable between jurisdictions, and in which the outcome statements are directly comparable with the relevant budget statements. No further direction concerning the making of accounting standards has been provided by the FRC since 2002. Research into Sector Neutral Standards
At the FRC meeting held on 20 September 2004, the FRC agreed to engage a consultant to undertake research work on the appropriateness of a sector neutral approach to the making of accounting standards. In November 2005, Mr Kevin Simpkins was appointed to undertake research into how adequately a sector neutral approach to the development of accounting standards can meet the information needs of users of financial statements and the public interest more generally. The purpose of the research project was to assist the FRC in considering possible modifications to its strategic direction to the AASB, especially in relation to the public and the other not-for-profit sectors. Parties with a strong interest in the issue of sector neutral standards were invited to register with the FRC Secretariat. Mr Simpkins was Deputy Controller and Auditor-General of New Zealand for three years until May 2005, having previously held other senior positions in the Office of the Auditor-General, Ernst & Young and the New Zealand Institute of Chartered Accountants, where he was Technical Director. He was a member and Deputy Chair of the Financial Reporting Standards Board until 2002 and a member of the (now) International Public Sector Accounting Standards Board until 2003. Mr Simpkins has a long record of involvement in the not-for-profit sector. In preparing his report, Mr Simpkins consulted with:
* a range of domestic stakeholders, including the AASB, professional accounting bodies, government departments and...