Commonwealth Consolidated Acts

CORPORATE LAW ECONOMIC REFORM PROGRAM ACT 1999 - SCHEDULE 2

1 Part 12

Repeal the Part, substitute:

Part 12—Accounting standards

224 Main objects of this Part

The main objects of this Part are:

(a)

to facilitate the development of accounting standards that require the provision of financial information that:

(i)

allows users to make and evaluate decisions about allocating scarce resources; and

(ii)

assists directors to discharge their obligations in relation to financial reporting; and

(iii)

is relevant to assessing performance, financial position, financing and investment; and

(iv)

is relevant and reliable; and

(v)

facilitates comparability; and

(vi)

is readily understandable; and

(b)

to facilitate the Australian economy by:

(i)

reducing the cost of capital; and

(ii)

enabling Australian entities to compete effectively overseas; and

(iii)

having accounting standards that are clearly stated and easy to understand; and

(c)

to maintain investor confidence in the Australian economy (including its capital markets).

Division 1—The Australian financial reporting system
225 Establishment, functions and powers of the Financial Reporting Council

Establishment

(1)

A Financial Reporting Council is established.

Functions

(2)

The FRC functions are:

(a)

to provide broad oversight of the process for setting accounting standards in Australia and to give the Minister reports and advice on that process; and

(b)

to appoint the members of the AASB (other than the Chair); and

(c)

to approve and monitor the AASB's:

(i)

priorities; and

(ii)

business plan; and

(iii)

budget; and

(iv)

staffing arrangements (including level, structure and composition of staffing); and

(d)

to determine the AASB's broad strategic direction; and

(e)

to give the AASB directions, advice or feedback on matters of general policy and the AASB's procedures; and

(f)

to monitor the development of international accounting standards and the accounting standards that apply in major international financial centres, and:

(i)

to further the development of a single set of accounting standards for world-wide use with appropriate regard to international developments; and

(ii)

to promote the adoption of international best practice accounting standards in the Australian accounting standard setting process if doing so would be in the best interests of both the private and public sectors in the Australian economy; and

(g)

to monitor:

(i)

the operation of accounting standards to assess their continued relevance and their effectiveness in achieving their objectives in respect of both the private and public sectors of the Australian economy; and

(ii)

the effectiveness of the AASB's consultative arrangements; and

(h)

to seek contributions towards the costs of the Australian accounting standard setting process; and

(i)

to monitor and periodically review the level of funding, and the funding arrangements, for the AASB; and

(j)

to establish appropriate consultative mechanisms; and

(k)

to advance and promote the main objects of this Part; and

(l)

any other functions that the Minister confers on the FRC by written notice to the FRC Chairman.

Powers

(3)

As well as any other powers conferred by this Act, the FRC has power to do all things necessary or convenient to be done for or in connection with the performance of its functions.

(4)

Without limiting subsection (3), the FRC may establish committees and advisory groups.

Restriction on powers

(5)

The FRC does not have power to direct the AASB in relation to the development, or making, of a particular standard.

(6)

The FRC does not have power to veto a standard formulated and recommended by the AASB.

226 Establishment of the Australian Accounting Standards Board

(1)

An Australian Accounting Standards Board is established.

Note: Subsection 236B(3) specifies the qualifications needed for appointment to the Board.

(2)

The AASB:

(a)

is a body corporate with perpetual succession; and

(b)

must have a common seal; and

(c)

may acquire, hold and dispose of real and personal property; and

(d)

may sue and be sued in its corporate name.

Note: The Commonwealth Authorities and Companies Act 1997 applies to the AASB. This Act makes provision for reporting obligations (annual report, interim reports and estimates), accounting records, audit, banking, investment of funds and duties of officers.

(3)

All courts, judges and persons acting judicially must:

(a)

take judicial notice of the imprint of the common seal of the AASB appearing on a document; and

(b)

presume that the document was duly sealed.

227 AASB's functions and powers

Functions

(1)

The functions of the AASB are:

(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; and

(b)

to make accounting standards under section 334 of the Corporations Law for the purposes of the national scheme laws; and

(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; and

(e)

to advance and promote the main objects of this Part.

Note 1: The standards made under paragraph (b) are given legal effect by the Corporations Law. The standards formulated under paragraph (c) do not have legal effect under the Corporations Law itself but may be applied or adopted by some other authority.

Note 2: See section 224 and sections 228 to 233 for the framework within which the AASB is to formulate and make accounting standards.

(2)

In carrying out its functions under paragraphs (1)(a) and (d), the AASB must have regard to the interests of Australian corporations which raise or propose to raise capital in major international financial centres.

Powers

(3)

The AASB has power to:

(a)

engage staff and consultants; and

(b)

establish committees, advisory panels and consultative groups; and

(c)

receive money contributed towards its operating costs; and

(d)

do anything else that is necessary for, or reasonably incidental to, the performance of its functions.

Manner of making and formulating standards

(4)

Without limiting paragraph (1)(b) or (c), the AASB may make or formulate an accounting standard by issuing the text of an international accounting standard. The text of the international accounting standard may be modified to the extent necessary to take account of the Australian legal or institutional environment and, in particular, to ensure that any disclosure and transparency provisions in the standard are appropriate to the Australian legal or institutional environment.

Manner of participating in the development of international standards

(5)

Without limiting paragraph (1)(d), the AASB may distribute the text of a draft international accounting standard (whether or not modified to take account of the Australian legal or institutional environment) for the purposes of consultation.

Constitutional basis

(6)

This Part confers functions and powers to the extent to which they are not in excess of the legislative power of the Commonwealth.

(7)

Without limiting subsection (6), this Part confers functions and powers to the extent to which doing so promotes, encourages and facilitates the integration and efficiency of, and investment in, Australia's national economy.

Division 2—Accounting standards
228 Purposive interpretation of standards

Objects of this Part

(1)

In interpreting an accounting standard made or formulated by the AASB, a construction that would promote the objects of this Part is to be preferred to a construction that would not promote those objects.

Note: Section 224 states the main objects of this Part.

Purposes or objects of particular standard

(2)

In interpreting an accounting standard made or formulated by the AASB, a construction that would promote a purpose or object of the standard (to the extent to which it is not inconsistent with the objects of this Part) is to be preferred to a construction that would not promote that purpose or object. This is so even if the purpose or object is not expressly stated in the standard.

229 Generic and specific standards

(1)

Accounting standards made or formulated by the AASB may:

(a)

be of general or limited application (including a limitation to specified bodies or undertakings); and

(b)

differ according to differences in time, place or circumstance.

(2)

In making and formulating accounting standards, the AASB:

(a)

must have regard to the suitability of a proposed standard for different types of entities; and

(b)

may apply different accounting requirements to different types of entities; and

(c)

must ensure that there are appropriate accounting standards for each type of entity that must comply with accounting standards.

230 Comparative amounts

The accounting standards for the preparation of financial reports for a period may require the inclusion in those reports of comparative amounts for earlier periods.

231 Cost/benefit analysis

(1)

The AASB must carry out a cost/benefit analysis of the impact of a proposed accounting standard before making or formulating the standard. This does not apply where the standard is being made or formulated by issuing the text of an international standard (whether or not modified to take account of the Australian legal or institutional environment).

Note: Subsection 227(3) allows the AASB to make or formulate a standard by issuing the text of an international standard. Under subsection (2) of this section, the AASB will have done a cost/benefit analysis of the international standard used in that way.

(2)

The AASB must carry out a cost/benefit analysis of the impact of a proposed international accounting standard before:

(a)

providing comments on a draft of the standard; or

(b)

proposing the standard for adoption as an international standard.

(3)

The AASB has to comply with subsections (1) and (2) only to the extent to which it is reasonably practicable to do so in the circumstances.

(4)

The Minister may direct the AASB to give the Minister details of a cost/benefit analysis carried out under this section. The AASB must comply with the direction.

232 FRC views

In performing its functions, the AASB must:

(a)

follow the broad strategic direction determined by the FRC under paragraph 225(2)(d); and

(b)

follow the general policy directions given by the FRC under paragraph 225(2)(e); and

(c)

take into account the advice and feedback on matters of general policy given by the FRC under paragraph 225(2)(e).

233 International accounting standards

The Minister may give the AASB a direction about the role of international accounting standards in the Australian accounting standard setting system. Before giving a direction under this section, the Minister must receive and consider a report from the FRC about the desirability of giving the direction. The AASB must comply with the direction.

234 Validity of accounting standards

A failure to comply with this Division in relation to the making of an accounting standard does not affect the validity of the standard.

Division 3—Administrative provisions
Subdivision A—The Financial Reporting Council
235A Membership of FRC

(1)

The members of the Council are appointed by the Minister in writing. The Minister may appoint a person by specifying an organisation or body that is to choose the person who is appointed.

(2)

The members hold office on the terms and conditions that are determined by the Minister.

(3)

The Minister must appoint one of the members to be Chairman of the Council. The appointment must be in writing. The Council may appoint one of its members to be Deputy Chairman of the Council.

235B Annual report

(1)

As soon as practicable after 30 June in each year, and in any event before 31 October, the FRC must give the Minister a report on:

(a)

the operations of:

(i)

the FRC and its committees and advisory groups; and

(ii)

the AASB and its committees, advisory panels and consultative groups; and

(b)

the achievement of the objects set out in section 224;

during the year that ended on 30 June in that year.

(2)

The report must include details of any change to the AASB's priorities or business plan that was made as a result of action taken by the FRC.

(3)

The Minister may grant an extension of time in special circumstances.

(4)

The Minister must table the report in each House of the Parliament as soon as practicable.

(5)

If the FRC is established during the last 3 months of a year ending on 30 June:

(a)

the FRC is not required to prepare an annual report for that year; and

(b)

the period from the time of establishment to the end of that year must be dealt with in the next annual report.

(6)

If the FRC is established during the first 9 months of a year ending on 30 June, the annual report for that year must cover the period from the time of establishment to the end of that year.

235C Procedure

The FRC may determine its own procedural rules (including rules as to notice of meetings, quorum and voting).

Subdivision B—The Australian Accounting Standards Board
236A Procedure

(1)

Meetings of the AASB are to be chaired by:

(a)

the Chair; or

(b)

the Deputy Chair if the Chair is absent; or

(c)

a member chosen by the members present if both the Chair and the Deputy Chair are absent.

(2)

If a meeting of the AASB, or a part of one of its meetings, concerns the contents of accounting standards or international accounting standards, the meeting or that part of it must be held in public.

(3)

The AASB must:

(a)

comply with any directions about its procedure that the FRC gives under paragraph 225(2)(e); and

(b)

take into account the advice and feedback about its procedure that the FRC gives under paragraph 225(2)(e).

(4)

Otherwise, the AASB may determine its own procedural rules (including rules as to notice of meetings, quorum and voting).

236B Appointment of members of the AASB

Appointment of Chair

(1)

The Minister appoints the Chair of the AASB.

Appointment of other members

(2)

The FRC appoints the other members of the AASB. The AASB may appoint one of its members to be Deputy Chair of the AASB.

Qualification for appointment

(3)

A person must not be appointed as a member of the AASB unless their knowledge of, or experience in, business, accounting, law or government qualifies them for the appointment.

Appointment document

(4)

An appointment under subsection (1) or (2) is to be made in writing.

Period of appointment

(5)

The appointment document must specify the period of the appointment (not exceeding 5 years). A member holds office for the period specified in the appointment document and is eligible for reappointment.

Terms and conditions of appointment

(6)

The Chair holds office on the terms and conditions that are determined by the Minister. The other members hold office on the terms and conditions determined by the FRC.

236C Resignation and termination of appointment

Resignation

(1)

A member of the AASB may resign their appointment by giving a written resignation to:

(a)

if the member is the Chair of the AASB—the Minister; or

(b)

in any other case—the Chair of the FRC.

Termination of Chair's appointment

(2)

The Chair is not to be removed from office except as provided by subsection (3) or (4).

(3)

The Minister may terminate the appointment of the Chair of the AASB for:

(a)

misbehaviour or physical or mental incapacity; or

(b)

breach of the terms and conditions of their appointment.

(4)

The Minister must terminate the appointment of the Chair of the AASB if the Chair:

(a)

becomes bankrupt; or

(b)

applies to take the benefit of any law for the relief of bankrupt or insolvent debtors; or

(c)

compounds with their creditors; or

(d)

makes an assignment of their remuneration or property for the benefit of their creditors; or

(e)

contravenes section 237.

Termination of ordinary member's appointment

(5)

A member of the AASB (other than the Chair) is not to be removed from office except as provided by subsection (6) or (7).

(6)

The FRC may terminate the appointment of a member of the AASB (other than the Chair) for:

(a)

misbehaviour or physical or mental incapacity; or

(b)

breach of the terms and conditions of the member's appointment.

(7)

The FRC must terminate the appointment of a member of the AASB (other than the Chair) if the member:

(a)

becomes bankrupt; or

(b)

applies to take the benefit of any law for the relief of bankrupt or insolvent debtors; or

(c)

compounds with their creditors; or

(d)

makes an assignment of their remuneration or property for the benefit of their creditors; or

(e)

contravenes section 237.

236D Acting appointments

(1)

The Minister may appoint a person to act as Chair of the AASB:

(a)

during a vacancy in the office of Chair (whether or not an appointment has previously been made to the office); or

(b)

during any period, or during all periods, when the Chair is absent from duty or from Australia, or is for any reason unable to perform the duties of the office.

(2)

The AASB may appoint one of its members to act as Deputy Chair of the AASB:

(a)

during a vacancy in the office of Deputy Chair (whether or not an appointment has previously been made to the office); or

(b)

during any period, or during all periods, when the Deputy Chair is absent from duty or from Australia, or is for any reason unable to perform the duties of the office.

(3)

The FRC may appoint a person to act as a member of the AASB (other than the Chair):

(a)

during a vacancy in the office of member (whether or not an appointment has previously been made to the office); or

(b)

during any period, or during all periods, when the member is absent from duty or from Australia, or is for any reason unable to perform the duties of the office.

(4)

Anything done by or in relation to a person purporting to act under an appointment is not invalid merely because:

(a)

the occasion for the appointment had not arisen; or

(b)

there was a defect in connection with the appointment; or

(c)

the appointment had ceased to have effect; or

(d)

the occasion to act had not arisen or had ceased.

Subdivision C—Confidentiality
237 Confidentiality

(1)

The FRC and the AASB must take all reasonable measures to protect from unauthorised use or disclosure information given to it in confidence.

(2)

For the purposes of subsection (1), the disclosure of information is taken to be authorised if the disclosure:

(a)

is required or permitted by a law of the Commonwealth or a prescribed law of this or any other jurisdiction; or

(b)

is made in order to enable an authority or person in a country outside Australia and the external Territories to perform or exercise a function or power that corresponds, or is analogous, to any of the FRC's or the AASB's functions or powers; or

(c)

is made to a body that sets international accounting standards; or

(d)

is made to ASIC for the purposes of its performance of its functions under national scheme laws.

Subdivision D—Financial matters
238 Application of money

The money of the AASB must be applied only:

(a)

in payment or discharge of the costs, expenses and other obligations incurred by the AASB in the performance of its functions or the exercise of its powers under this Act; and

(b)

in meeting the administrative expenses of the FRC and the committees and advisory groups it establishes; and

(c)

in payment of any remuneration and allowances payable to any person appointed under this Part.