An introduction from Michel Prada, the newly appointed Chairman of the IFRS Foundation Trustees.
It is an honour and a privilege for me to be appointed Chairman of the Trustees of the IFRS Foundation. In accepting this responsibility, my thoughts turn first to my predecessor and good friend, Tommaso Padoa-Schioppa, who sadly passed away a year ago. A former Chairman of the Italian Commissione Nazionale per le Società e la Borsa (CONSOB) and founding father of the first grouping of European securities regulators; the Federation of European Securities Commissions (FESCO), Tommaso served both his country and Europe at the highest level before he joined the IFRS Foundation.
We both participated in the Financial Crisis Advisory Group (FCAG), which assisted the IASB and the US-based FASB. During this time I was once again impressed by his competence, by his deep understanding of the complexities of our task and by his clear vision of the way forward. While I shared most of his ideas, I am under no illusions about how challenging it will be for me to be a successor to such a visionary.
As a former securities regulator, working with the Trustees will be a welcome and unique opportunity, not least because I have been actively involved right from the beginning in the inception and development of global financial reporting standards. I chaired the Technical Committee of the International Organization of Securities Commissions (IOSCO) when we decided, on the occasion of our annual meeting in Sydney in May 2000, to endorse the “core standards of the IASC” for cross-border listings. This decision fostered the process of restructuring of that organisation, the establishment of the IFRS Foundation, of the Trustee body and of the IASB.
This reform was fully supported by the international community of financial regulators, first of all by the US Securities and Exchange Commission, which was then chaired by Arthur Levitt. Under Arthur’s leadership and together with a group of fellow securities regulators, we proposed the composition of the first group of Trustees, which was chaired by Paul Volcker, an outstanding and highly respected personality.
This was the beginning of a success story, with highs and lows, intense debates if not indeed rows, because it appears that accounting, sometimes considered as a rather dull technique of the registration of financial events, is indeed closer to philosophy, because it deals with value and time, two fundamental concepts for economic and financial activities.
Today, IFRSs have become the internationally accepted standard for high quality financial reporting. They are recognised by most major economies, starting with the EU in 2005, and have contributed hugely to the transparency and comparability of financial information for listed companies. This is a remarkable achievement for which the standard setters involved, and those who supported them, should be highly commended.
In paying tribute to this achievement, one should not deny the challenges that remain ahead of us, be they of a technical or political nature, and the significant work that is still to be done. The ongoing financial crisis should not slow down our collective effort towards global accounting standards. On the contrary, and consistent with the strategic orientations that have been advocated by the G20 leaders, recent market turmoil shows how important it is to deliver sound, transparent and consistent information to market participants in order for them to make informed decisions. Uncertainty and ambiguity are fundamentally detrimental to efficient markets and to sound risk management, which can trigger irrational and herd-like behaviours.
I therefore find it both challenging and exciting to be part of this undertaking. When I joined the club of financial regulators, I became convinced that consistent, clear and understandable international accounting standards, properly implemented, are, together with other tools, a key component of fair and efficient markets; a component that contributes to provide investors, as well as other market participants and stakeholders, with a faithful presentation of an entity’s financial position and performance.
I am well aware that my role as Chairman of the Trustees is not to step into the field of technicalities. That is rightly the domain of the IASB, as the independent standard-setting authority of the Foundation. The Trustees are there to provide the IASB with the resources it needs, to oversee the quality and efficiency of the standard-setting process and to defend the independence of the IASB, which is key to the quality and credibility of the standards. The Trustees, as senior figures from around the world, are also well positioned to help the IASB to further develop friendly, open, fruitful and continuous co operation with other organisations that contribute to the healthy functioning of the financial system.
I should, at this point, mention the recent and welcome development of the International Valuation Standards Council, of which I am proud to have chaired the Board of Trustees for the past three years and that has established excellent working relations with the IASB in the field of valuation of all sorts of assets.
I will also commit myself to the collective effort of promoting the goal of the global adoption of IFRSs as issued by the IASB. This includes the process of convergence, which is a tool for dealing with transition towards full adoption rather than being an end point in itself. This is clearly of the essence when considering the relationship between the IASB and the US-based FASB. While one can appreciate the challenges faced by the largest economy in the world when considering the possibility of fully endorsing the global standards in a strategic domain, huge progress has already been achieved in that direction and work continues.
Managing the delicate balance between independence, legitimacy and public accountability is a complex task in which the Trustees have to play a major role. I shall, therefore, ensure that the Trustees have effective dialogue with the Monitoring Board, which represents the views of major public authorities in charge of financial markets regulation, and also with the global and regional institutions that deal with macro and micro prudential supervision of financial markets and that cooperate under the auspices of the G20 and of the Financial Stability Board.
Finally, I am glad to work once again with Hans Hoogervorst, now Chairman of the IASB. Hans is an extremely dynamic, competent and skilled leader with whom I have worked in a friendly and effective way in the past, within IOSCO, the Committee of European Securities Regulators (CESR), the FCAG and the NYSE Euronext Committee of Securities Regulators.
The ongoing crisis should not be an excuse to go “back to the old way of doing things”. It should lead us to draw lessons on what has happened and to improve the global system. Accounting is the language of business and we must urgently complete the move towards global consistency in this language.
It is therefore with great enthusiasm that I shall commit myself, together with my fellow Trustees, to promoting the vital work carried out by this organisation and to being ambassadors around the world for the goal of high quality global financial reporting standards.