Review by the Chairman
Activities during the year
The FRP can only hear cases if matters are referred to it by ASIC or lodging entities. No matters were referred to the FRP during the period.
Though the FRP received no referrals during the period, the presence of the FRP may have acted as a strong incentive for companies to meet their financial reporting obligations. ASIC has noted that it has identified a number of cases to refer to the FRP, but when approached by ASIC about the referral, companies have agreed to amend their accounting practices.
During the period, the FRP conducted a strategic review of its operations. The FRP considered the possibility of expanding its functions from the resolution of disputes to the surveillance of financial reporting practices in the market. A memorandum of understanding between ASIC and the FRP setting out such arrangements was considered as part of this process.
FRP members have considerable experience and knowledge of financial reporting matters and it was noted that they could add significant value to the regulation of financial reporting in Australia by becoming involved in financial reporting surveillance.
However, these potential benefits were ultimately outweighed by the significant potential for duplication with the work of ASIC and the possibility of perceived conflicts between the FRP's impartial dispute resolution function and involvement in market supervision.
Mr Paul Shannon resigned from the Chairmanship and the Panel during the period. Mr Shannon had been Chairman of the Panel since its inception, and I thank him for his contribution to the development of the FRP. The Chairman of any new body faces any number of risks and challenges. The fact that he was prepared to meet them head on is a testament to his personal drive and professional integrity.
Outlook for 2009-10
The adverse economic and market conditions which were manifest during 2007‑08 have continued through most of 2008‑09, placing sustained pressure on Australian companies and accounting practices.
ASIC has announced its surveillance priorities for financial reports which relate to the 2008‑09 financial year. Areas of interest continue to include asset impairment, off‑balance sheet arrangements, fair value measurement, financial instrument disclosures and the going concern assumption. These priorities reflect the financial market conditions facing Australian companies.
The FRP's main focus for 2009‑10 will continue to be ensuring that it is ready to resolve any disputes emanating from ASIC's current surveillance program. In particular, the FRP will be working to ensure continued communication with key stakeholders.
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