COUNCIL MEETING
Brussels, Wednesday 7 October 2009
10:00 – 16:15 hrs
MINUTES
Executive
Hans VAN DAMME
Philip JOHNSON
Jean-Charles DE LASTEYRIE
André KILESSE
Klaus-Günter KLEIN
Petr KRIZ
Anna-Maija SIMOLA
Olivier BOUTELLIS-TAFT
President
Deputy President
Vice-President
Vice-President
Vice-President
Vice-President
Vice-President
FEE Chief Executive
Members
Erich KANDLER
Gisela NAGY
Ruddy DE WILDE
Sandrine VAN BELLINGHEN
Hristo MAVRUDIEV
Theodoros PHILIPPOU
Giuseppe MESSINA
Charlotte JEPSEN
Jouko ILOLA
Jean-Pierre ALIX
Jean-Luc DOYLE
Helmut KLAAS
Judit LADÓ
Noemi DI SEGNI
Laimute KAZLAUSKIENE
Bernard SCICLUNA
Berry WAMMES
Arne FROGNER
Per HANSTAD
Maria RZEPNIKOWSKA
Lubos VANCO
Meta DUHOVNIK
Adela VILA
Dan BRÄNNSTRÖM
Svante FORSBERG
Torsten KLEIBOLD
Martin MANUZI
Austria
Austria
Belgium
Belgium
Bulgaria
Cyprus
Czech Republic
Denmark
Finland
France
France
Germany
Hungary
Italy
Lithuania
Malta
The Netherlands
Norway
Norway
Poland
Slovak Republic
Slovenia
Spain
Sweden
Sweden
Switzerland
United Kingdom
Guests
Robert L. BUNTING
Ian BALL
Michael NIEHUES
IFAC President
IFAC Chief Executive
Chairman of the Ethics Working Party
FEE Secretariat
Henri OLIVIER
Saskia SLOMP
Hilde BLOMME
FEE Secretary General
FEE Technical Director
FEE Director of Practice Regulation
Apologies
José Maria BOVE
Stefano MARCHESE
Lina LEMESSIOU
Judith SKOU
Aidan LAMBE
John GREELY
Pierre KRIER
Óscar FIGUEIREDO
Albert GUNTLI
Vice-President/Treasurer
Vice-President
Cyprus
Denmark
Ireland
Ireland
Luxembourg
Portugal
Switzerland
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1. Introduction
1.1. Apologies and Welcome
(1)
President Hans van Damme opened the meeting at 10.00 hrs by welcoming
participants. He especially welcomed Robert Bunting and Ian Ball respectively
President and Chief Executive of IFAC who will address Council and attend the
morning session. He also welcomed the recently elected President of the Maltese
Institute, Bernard Scicluna, who will replace Simon Flynn in Council for the next two
years.
1.2. Adoption of the Agenda
(2)
The agenda was approved as proposed.
1.3. Approval of the Minutes of Council meetings of 1 July 2009
The minutes of the meeting of 1 July 2009 were approved.
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(3)
The President referred to the Secretary General’s report which was taken as read. He
thanked Council Members from Belgium, Bulgaria, Finland, Hungary, Ireland, Italy,
Lithuania, Malta, Norway, the Netherlands and the UK who have sent country update
reports; he stimulated others to do the same, highlighting the value of sharing such
information.
3.
Presentation by Robert L. Bunting President of IFAC followed by discussion
(4)
IFAC President delivered a presentation covering five main topics:





The profession should speak with one voice;
The profession engages in more policy-making and regulatory dialogue;
Collaboration with the World Bank, the IASB, the G-20 and others;
SME/SMP issues dominate discussions
Diversifying the profession.
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(5)
IFAC begun speaking out to regulators, governments and influencers of all kinds on
issues where accountants have expertise. The best example is IFAC’s contribution to
G-20. It is important to speak with one voice, especially when regional or national
bodies issue position papers affecting global policy. Otherwise, we run the risk of
diluting our messages on the important global issue, and worse, we risk being ignored
rather than being taken seriously.
(6)
IFAC has always relied on collaboration with its Member Bodies, regional
organisations and other acknowledged accountants groups. The World Bank
announced an initiative for a joint venture agreement between IFAC, its Member
Bodies, regional organisations, and perhaps the major firms, to undertake a sustained
effort to develop the accountancy profession in developing countries.
(7)
IFAC believes that SMEs and micro-entities merit special consideration because their
growth is definitely in the public interest. The IFAC President referred to the joint
Survey initiated with the Financial Times, showing that accountants’ involvement in
an SME’s business would significantly and positively influence credit lenders’
position.
(8)
IFAC seeks to speak on behalf of a large constituency. Focusing on the audit is not
enough. We need to look across the entire financial reporting supply chain, especially
if we are successful in establishing ISAs as the global standards. The profession also
needs to make a bold move into sustainability reporting.
(9)
Turning to the future, the IFAC President concluded that the most difficult aspect of
thinking strategically is to avoid “incremental thinking” and the assumption that next
year will be approximately the same as this year. It is important to reinforce the
global voice by speaking forcefully, regionally and nationally on shared and locally
important themes. The profession is well positioned to make a major contribution to
economic recovery and support a sustainable economy. We must be bold in our action
and be prepared to embrace change and to look to the future with confidence and
creativity, he said.
(10)
Philip Johnson observed that there is a major difference for IFAC in dealing with SMP
issues because SMPs are also interested with topics which are not primarily connected
with global standards, for instance taxation. Bob Bunting commented that IFAC
remains committed to its mission as a standard setter; however, it needs to find ways
to better incorporate concerns of SMPs.
(11)
Answering a question of Hans van Damme, Bob Bunting said that he felt a lot of
responsiveness from Member Bodies who have engaged into a dialogue with their
Government on issues IFAC brought up to the G-20.
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(12)
Answering a question of Petr Kriz on IFAC involvement in financial reporting, Bob
Bunting said that SMO7 relates to IFRSs. This includes IFRS for SMEs which is an
important issue for debate.
(13)
On a question of Helmut Klaas related to the SME Review Task Force Consultation,
Bob Bunting said that there is no summary of responses yet. Some quite contentious
issues are involved.
(14)
Pino Messina emphasised that developing relationships with regulators and business
could require additional efforts. Bob Bunting said that the Monitoring Group started a
review of IFAC reform. SMEs/PAIB are discussed: what is their role in creating
transparency on the market place?
(15)
Dan Brannström said that the relevance of audit is subject to debate in many countries:
the profession should look at new ways of reporting. Bob Bunting agreed that we
need to invest in new products but this is not because audit is or may become less
relevant. He referred to a comment of Lynn Turner, former SEC Chief Accountant,
saying that the profession substantially reformed and is much more credible than it
was.
(16)
Olivier Boutellis-Taft observed that there is some scepticism in business circles about
green accounting and that we should all work on that. Bob Bunting answered that
companies get added value from an assurance report on sustainability information to
avoid criticism about lack of objectivity or reliability of the information provided.
(17)
Answering to Berry Wammes, the IFAC President said that the balance of IFAC
activities related to auditors and accountants in business or in the public sector will not
change in the short-term because there is no standard for management accounting. It
is too early to change the strategy on standard setting.
(18)
Jean-Charles de Lasteyrie said that the survey on credit lenders’ position is very
important. These conclusions should be emphasised. Philip Johnson observed that
credit rating agencies often accept unaudited financial statements. Bob Bunting
recognised that accountancy bodies could do a better job on communication.
(19)
Ian Ball confirmed that IFAC will answer IOSCO consultations on auditors. The
IFAC Policy Group will consult with Member Bodies on the issue.
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(20)
The IFAC President commented on the challenging strategy of the Nominating
Committee to maintain proper balance between large and small Member Bodies,
additionally to many other criteria. He confirmed the support of GAA and of the
Edinburgh Group to IFAC.
(21)
Martin Manuzi drew the attention to the work of IPSASB. He said that growing
public deficits attract a lot of attention in the EU. Bob Bunting answered that the
crisis is an opportunity to emphasise the need for better reporting in the public sector.
Discussions are going on with the PIOB on oversight of IPSASB. IFAC also has close
contacts with INTOSAI. Ian Ball added that IMF is looking more closely at IPSAS.
Many people would welcome external oversight on IPSASB.
(22)
President Hans van Damme warmly thanked the President and the Chief Executive of
IFAC for their presentation and answers to questions. He invited them to stay in the
meeting for other issues on the agenda which are also directly relevant to IFAC
activities. He also reminded Council members that he regularly attends the IFAC
Board meetings as an observer; FEE Member Bodies can always draw his attention to
issue that he should address on this occasion.
4. Ethics
(23)
President Hans van Damme reported that the Discussion Paper on Integrity and
Professional Ethics discussed in the previous meeting has been approved by the
Executive. He welcomed Michael Niehues, Chairman of the Ethics Working Party
who delivered a presentation on the Code of Ethics for Professional Accountants.
(24)
Michael Niehues gave an overview of the Code of Ethics drawing attention to changes
in Section 290 on auditor independence. He highlighted the split between
audit/review and other assurance services. He mentioned the new definition of PIE
and key audit partner. He also commented on client mergers and acquisitions and on
documentation. He reviewed prohibited non-assurance services, especially in PIE
audits.
(25)
Erich Kandler asked what is the status of payroll services. Michael Niehues answered
that it must be treated as bookkeeping services, consequently prohibited in PIEs.
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4.1. Approval of a Project proposal to update the October 2004 FEE Paper: EC
Recommendation on Statutory Auditor’s Independence in the EU and comparison
with the Independence Sections of the IFAC Code of Ethics for Professional
Accountants – Considerations on the Implementation of the Framework Approach.
(26)
Michael Niehues recalled the FEE Comparison between the EC Recommendation and
the Code of Ethics in 2004. He explained why it would be useful to update this study.
It is relevant because of the IFAC-SMO4, the reference to the Code in the EC’s 2007
Consultation on Third-Country Auditors, ISA 200-220 and ISQC1. There are also
needs/concerns to be met in the profession, as well as on investors’ and regulators’
sides. FEE should stay in the driver’s seat.
(27)
President Hans van Damme said that the project will require significant energy and
resources. It is however necessary, even if we can only reach agreement to identify
potential problems and avoid difficulties comparable with what we have seen on ISAs.
(28)
Noemi Di Segni asked whether national rules should also be considered. Michael
Niehues answered that this is challenging but in the tables, it may be possible to have
a third column available to add national comments. We should further reflect on a
possible solution.
(29)
Jean-Charles de Lasteyrie said that the Code is indeed the basis. However in France,
many people want to have the possibility to apply more stringent rules. It will be very
difficult to develop a single solution. Anyway, the study is helpful to identify grey
areas and discuss them.
(30)
The President concluded that Council is supporting the project. The Working Party
needs first to seriously consider the chances to arrive at an acceptable outcome in a
reasonable time.
5. Auditing
5.1. EC Consultation on ISAs – follow up
5.2. Assurance services other than audit - follow up on the FEE survey
5.3. Policy update (Art.47 SAD, IAASB CAG, summary report on the consultation
paper on ownership, IOSCO consultation)
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(31)
Deputy President Philip Johnson provided Council with an update on developments
concerning ISAs since the July Council. He commented on the IAASB Staff Paper on
Proportionality of Application of ISAs and the APB Practice Note 26 on Smaller
Entity Audit Documentation. Philip Johnson reported on the publication of the FEE
Survey on the Provision of Alternative Assurance and Related Services across Europe
and the IAASB CAG mixed views on the revision of ISAE 2400. He also reported on
developments concerning the implementation of Article 47 SAD on access to audit
working papers: the EC issued a draft decision on adequacy of Canada, Japan and
Switzerland competent authorities. The US PCAOB is provisionally not included due
to the absence of reciprocity.
(32)
He reported that IOSCO issued three documents for consultation. One relates to the
work of the Auditing Working Party. Another falls in the area of the Company Law
and Corporate Governance Working Party. The third should be commented on by the
Qualification and Market Access Working Party.
(33)
Berry Wammes observed that the period to respond in the consultation is only six
weeks, which is too short. Bob Bunting indicated that he understands IOSCO are
considering an extension of the consultation period.
(34)
Hans van Damme believes that FEE should provide responses. Philip Johnson
supported this proposal and added that Member Bodies should also be aware of these
IOSCO consultations and consider responding. The timetable would however not
permit a discussion of the final responses in Council.
(35)
Council decided that the Executive should finalise and approve the responses and that
the draft should be circulated for comments to Council members.
(36)
Vice-President André Kilesse reported that the European Commission published a
summary report of responses received in the consultation on ownership and control of
audit firms. He said that IOSCO is now launching a similar consultation. The
Qualification and Market Access Working Party which prepared the response to the
EC Consultation already discussed the IOSCO paper and concluded that no new
element needs to be included in the response.
(37)
As for the other above-mentioned consultations, Council confirmed that these fall
under the general delegation to the Executive and agreed that the Executive approves
the response to IOSCO on the basis of the comment letter addressed to the European
Commission on the same issue.
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6. FEE Paper on Assurance on Corporate Governance Statements – progress report
(38)
Erich Kandler reported that the Company Law and Corporate Governance Working
Party and the Auditing Working Party have reached an agreement on the FEE
Discussion paper on Auditor’s Role regarding Providing Assurance on Corporate
Governance Statements. He briefly presented the scope of the paper, the existing
requirements in the Directives and the survey of current practices in Member States.
There is a diversity of EU practices to increase the degree of confidence of users of
corporate governance statements. The Executive Summary is not finalised yet.
Furthermore, the document has been put to IAASB to avoid serious objections from
them at a later stage. Since there is no time pressure, the paper could come back in the
December Council.
(39)
Deputy-President Philip Johnson emphasised the importance of the Paper for the
profession. The Executive Summary can be brief because the paper itself is short. It
is a discussion paper focusing on raising awareness.
(40)
The President asked whether it could not be more effective to release the paper sooner
to be more effective in raising awareness. Erich Kandler added that Institutes should
already be well aware through their contribution to the paper.
(41)
Svante Forsberg proposed Council to approve the Discussion Paper so that it can be
finalised by the Executive in November if possible. The proposal was supported by
other members.
(42)
The President thanked the Working Parties for bringing this difficult but important
work to conclusion. They should now consider how to communicate so that it reaches
statutory auditors in the field.
(43)
Council approved the FEE Paper on Assurance on Corporate Governance Statements
subject to comments of IAASB and asked the Executive to finalise the presentation.
7. Financial Reporting
7.1. Policy Update
7.2. Financial Instrument Provisioning
(44)
President Hans van Damme updated Council on developments before and on the
occasion of the G-20 Pittsburgh meeting in relation to financial reporting. He attended
the IFAC preparatory meeting in London in July and especially commented on IFAC
Recommendations. He also reported on the FEE policy papers on convergence.
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(45)
Vice-President Petr Kriz reported on the preparation of a joint FEE/EFRAG paper on
“Impairment of Financial Assets - The expected loss model”. He asked whether the
approval of this paper would fall under the general Delegation to the Executive, which
was agreed by Council. Another paper will be issued by FEE alone on definitions of
provisioning and reserving. Council also agreed that the Executive finalises this
technical paper
(46)
Petr Kriz commented on the developments concerning financial supervision. The
European Commission has now issued its proposals on financial supervision
architecture. The most difficult issue remains however cross-border supervision.
Helmut Klaas added that resolution plans and cross-border crisis management is also a
key issue.
(47)
Petr Kriz reported on the IASCF Constitution Review. Proposals for enhanced public
accountability are released for public consultation until 30 November. He also
commented on developments concerning IAS 39 with references to the EC
Stakeholders meeting and the FEE comment letter to EFRAG and IASB on ED
Financial Instruments: Classification and Measurement. Sir David Tweedie made a
presentation to ECOFIN and the European Parliament ECON Committee and
committed the IASB to amending the standard before year’s end in order to make
voluntary early application possible.
(48)
President Hans van Damme reported on EFRAG developments, especially the first
meeting of the new Supervisory Board and the call for candidate technical experts.
(49)
Hans van Damme also reported that the European Parliament and Council continue
their work on the proposed Directive on Micro-Entities. The Legal Affairs Committee
could adopt its report on 20 November.
(50)
Bernard Scicluna observed that the IFRS for SMEs issued by IASB is much better
than the draft. The President agreed with the statement and he added that the positive
reaction of IASB to comments received is not a guarantee for the future.
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8.
Governance
8.1.
Presidents’ meeting in Lisbon
(51)
Vice-President Jean Charles de Lasteyrie reported on the organisation of the
Presidents’ meeting in Lisbon. The main theme of the meeting is “the future of the
profession in 2020”. There is a need to anticipate changes if we want to be able to
make a proactive contribution. Based on group discussion and brainstorming, the
objective is to collectively generate and discuss a list of issues and actions for future
consideration in view of better strategic planning. We will have two guest speakers:
Nenad Pacek, President of Global Success-Advisors and Carlos Tavares, ViceChairman of CESR.
8.2.
Feedback report on MEPs meeting organised by ECG
(52)
Chief Executive Olivier Boutellis-Taft reported on the ECG event in the European
Parliament. It was an opportunity for fruitful discussion with some MEPs. Ms.
Sharon Bowles appeared to be close to positions defended by FEE, which was not the
case of all MEPs. German MEP Klaus-Heiner Lehne declined the invitation and
seems quite difficult to access; possible Member Bodies’ help in this respect would be
welcomed. A lot of attention was on the financial crisis and financial supervision.
The FEE Policy Statement on dynamic provisioning was well received. MEPs
showed also a lot of interest for sustainability issues. There is clearly more appetite
for information from MEPs of smaller jurisdictions.
(53)
Olivier Boutellis-Taft also reported on two papers issued recently:


“7 Key Objectives for 5 Decisive Years”;
The Joint Statement with BusinessEurope and other European Associations of the
financial sector “Towards Financial Stability and Sustainable Growth”.
8.3.
Follow up of discussion regarding FEE SME-SMP activities
(54)
President Hans van Damme explained that the Executive decided to assess the work
done by FEE in the area of SME/SMP because there was a feeling that we should be
more efficient in this field which is identified as a top priority. This is however a
difficult exercise. The President will come back to Council with further proposals at a
later stage.
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8.4.
Interim Financial Statements
(55)
Council received a report from the Secretary General on interim financial statements.
9.
Conferences and Events
(56)
The President reported on the FCM Conference. This was an interesting event. Small
countries, especially in the Balkans are especially interested in assistance from larger
and well developed professional Institutes. Some of them are very small.
(57)
An announcement of the SME/SMP Congress in Venice (15-16 April 2010) should be
issued shortly, although the programme is not yet fully developed.
(58)
A conference will be organised by the Public Sector Committee jointly with the
Institute in Cyprus in March 2010.
(59)
It would be difficult to organise a conference on audit regulation until a new
Commissioner is appointed and some difficult issues are solved for instance on
alternative assurance engagements.
(60)
The FEE Tax Day organised on 1 October was a great success. Vice-President Philip
Johnson said that the CCAB believes that it was an important demonstration of the
ability of FEE to be influential in other areas than financial reporting and auditing.
11. Close
(61)
The President thanked Council Members for their constructive participation to the
meeting which was closed at 16.15 hrs.
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