Trustees Announce Strategy to Enhance Governance - Report on Conclusions at Trustees Meeting
06 November 2007
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The Trustees of the International Accounting Standards Committee (IASC) Foundation, the oversight body of the International Accounting Standards Board (IASB), today announced, following a strategy review over recent months, proposals to enhance the organisation’s governance arrangements and reinforce the organisation’s public accountability. The Trustees will begin a series of consultations with key stakeholders on these proposals in the build up to the Constitution Review, which is scheduled to start in 2008.
The announcement regarding governance is one of a series of conclusions that the Trustees reached at their meeting on 31 October-1 November held in New York. Details of the enhanced governance proposals and other Trustee decisions are described below.
Governance proposals aimed at enhanced public accountability
Following the last Constitution Review completed in July 2005, the Trustees initiated a number of reforms to improve confidence in the standard-setting process. The Trustees approved amendments to the due process of the International Accounting Standards Board (IASB), increased Trustee engagement with external parties, improved and clarified their oversight responsibilities, and implemented a programme aimed at establishing a broader funding.
With more than 100 countries now using or in the process of adopting International Financial Reporting Standards (IFRSs), the Trustees commenced a strategy review earlier this year in anticipation of the Constitution Review. The Trustees’ objective in launching the review was to begin considering enhanced ways to strengthen public accountability and to fulfil their commitment to the public interest.
To demonstrate clearer public accountability, the Trustees have now adopted the following proposals as a result of their strategy review:
- Establish a formal reporting link to official organisations: The Trustees should establish a link to a representative group of official organisations, including securities regulators. This body would approve Trustee appointments and review Trustee oversight activities, including the adequacy of the annual funding arrangements as well as the overall budget.
- Develop a multi-layered, multi-faceted approach to accountability beyond the formal link to official organisations: The Trustees should intensify and deepen their engagement with key stakeholder groups and develop mechanisms for the Trustees to receive input outside formalised procedures. This would necessarily include mechanisms for meeting with official organisations and policymakers and private sector institutions. Furthermore, such accountability would require consideration of the role and structure of the Standards Advisory Council in the organisation’s accountability.
- Create a mechanism for public input to the Trustees outside regularly scheduled meetings with specific stakeholder groups: The Trustees should establish enhanced mechanisms for input from interested parties who wish to comment on the IASC Foundation’s and the IASB’s policies, processes, and procedures.
- Continue efforts towards a sustained, broad-based funding regime: Having already significantly broadened the funding base through the new approach adopted in 2006, the Trustees should continue their work to broaden the funding base further.
The Trustees will begin discussions with key stakeholder groups, including those from the securities regulatory community and other official bodies, regarding the proposals and elements to implement these proposals.
In announcing the enhanced governance strategy, Philip Laskawy, Chairman of the Trustees, stated:
The use of IFRSs is growing throughout the world, and we are getting closer to our ultimate objective of having a single set of high-quality financial reporting standards used worldwide. My fellow Trustees and I strongly believe that the independence of the standard-setting process and the ongoing convergence work of the IASB have been essential in making this success possible. At the same time, the IASC Foundation, as an independent private sector body, is a unique organisation in the field of international cooperation. We believe that our proposals for enhanced governance are essential in demonstrating our continued commitment to public accountability and the public interest.
Gerrit Zalm, incoming Chairman of the Trustees and former Deputy Prime Minister and Finance Minister of the Netherlands, added:
I welcome the enhanced governance strategy that the Trustees agreed upon as an important step in addressing challenging issues related to public accountability. One of my leading priorities as Chairman will be to engage interested parties in the Trustees’ strategy in order to reach a well thought-out and broadly supported Constitution Review. As Finance Minister, I recognised the important role that IFRSs and an independent international standard-setter could have for European and global capital markets. The progress of IFRSs throughout the world has gathered pace, and the organisation must continue to adapt to meet this new reality.
Trustees address funding, convergence, and other oversight issues
In addition to agreeing to a strategy for enhanced public accountability, the Trustees reviewed a number of issues related to their responsibilities:
- Broad-based funding regime: The Trustees assessed the efforts that have been made to establish a broad-based and sustainable regime for 2008, according to the principles agreed in 2006. To date, the Trustees have achieved multi-year financing commitments of more than £12 million of a £16 million annual target.
National funding schemes (either through a levy or national payment) are in place in a number of countries (such as Australia, the Netherlands, New Zealand, and the United Kingdom). Broad-based voluntary programmes in other jurisdictions (such as China, France, Germany, India, Japan, Korea, Luxembourg, South Africa, and Switzerland) are in place or are already agreed. In other countries where fundraising efforts are continuing and are approaching an advanced stage, such as the United States, the Trustees are committed to establishing a broad funding base. The result of these ongoing efforts will bring the sources of funding from less than 200 organisations in 2005 to several thousand by 2008.
The Trustees will enhance their communications on funding arrangements by providing greater information regarding country-specific programmes on the IASC Foundation’s Website and on levels of financing in the annual report.
- Commitment to convergence, MoU: The Trustees reviewed the IASB’s current work programme and items being considered as additions to the IASB’s agenda. The Trustees reiterated their support for continuing the convergence work programme described by the February 2006 Memorandum of Understanding between the IASB and the US Financial Accounting Standards Board (FASB), noting that the future work is largely focused on areas in which the objective is to develop a new world class international standard.
The Trustees asked the IASB to report, at the next Trustees’ meeting, on the IASB’s conclusions regarding agenda additions.
- Expansion of IFRIC to 14 members: The Trustees approved a proposal to expand the membership of the International Financial Reporting Interpretations Committee (IFRIC) from 12 to 14 members in order to broaden IFRS expertise on the committee. The Trustees will publish the revised Constitutional language and an advertisement for new members shortly.
- Review of feedback statements, impact assessments: The Trustees’ Due Process Oversight Committee (formerly the Procedures Committee) will review the IASB’s first feedback statements and impact statements before publication. The Due Process Oversight Committee also reported on its recent meeting with the IASB and indicated that it will schedule regular meetings with the IASB.
Trustee and IASB appointment matters
After consultation with the Trustees’ Appointments Advisory Group on issues related to the Trustee selection, the Trustees announced the following:
- Mr Laskawy, the current Chairman of the Trustees, will become Vice Chairman of the Trustees, when Mr Zalm assumes the chairmanship in January 2008. As previously agreed, Bertrand Collomb will stand down as Vice Chairman at year end and will remain as a Trustee.
- Jeffrey Lucy, former Chairman of the Australian Securities and Investments Commission and incoming Chairman of the Australian Financial Reporting Council, will join the Trustees for a three-year term, beginning January 2008.
- Kees Storm, former Chairman of AEGON, will resign from the Trustees at the end of the year due to other commitments. The Trustees will initiate a public search for his successor shortly.
- The Trustees will consult the Trustees Appointments Advisory Group as part of the Trustees’ efforts to fill the two other Trustee vacancies, created by the retirements of Roberto Teixeira da Costa and William McDonough.
- The Trustees’ Nominating Committee will begin a new search to fill the vacancy on the IASB.
In commenting on Mr Laskawy’s appointment as Vice Chairman, Mr Zalm stated:
I am delighted that Phil Laskawy will serve as Vice Chairman during an important period for the organisation. Under Phil’s tenure as Chairman, the IASC Foundation made significant progress on issues of governance, funding and due process, and his continued presence on the Trustees will help us advance these issues further. I am looking forward to working with Phil in the coming months.
Regarding Trustee appointments, Mr Laskawy added:
We are delighted to welcome Jeffrey Lucy to the Trustees. We also appreciate all of the work that our departing Trustees—Richard Humphry, William McDonough, Malcolm Knight, Kees Storm, and Roberto Teixeira da Costa—have undertaken for the cause of IFRSs.
For press enquiries:
Mark Byatt, Director of Corporate Communications, Telephone: +44 (0)20 7246 6472; email: mbyatt@iasb.org
Sonja Horn, Communications Adviser, Telephone: +44 (0)20 7246 6463; email: shorn@iasb.org