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Trustees announce strategy to advance review of constitution

11 February 2008

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The  Trusteesof the International Accounting Standards Committee (IASC) Foundation, the oversight body of the  International Accounting Standards Board (IASB), today announced a strategy for the review of the IASC Foundation’s  Constitution. The Constitution sets out the organisation’s governance arrangements.

The decision is one of a series of conclusions that the Trustees reached at their meeting on 29 and 30 January held in Rome, Italy. Details of the enhanced governance proposals and other decisions are described below.

An accelerated review of governance arrangements aimed at enhanced public accountability

The Trustees considered the significant progress made in 2007 towards the objective of establishing International Financial Reporting Standards (IFRSs) as the single globally accepted set of accounting standards.

In November the US  Securities and Exchange Commission (SEC) removed the requirement for non-US companies reporting under IFRSs as promulgated by the IASB to reconcile their financial statements to US generally accepted accounting principles (GAAP). The US SEC also issued a Concept Release raising the question of whether US companies should be able to use IFRSs as well.

With the SEC’s decision the US joins the expanding number of countries that accept the use of IFRSs. Following the adoption of IFRSs by the European Union and countries elsewhere around the world in 2005, a number of other countries decided in 2007 to establish time lines for the acceptance of IFRSs in their domestic markets or to accelerate convergence of national standards with IFRSs. Among those are Canada, India and Korea, all of which will adopt IFRSs by 2011. In Brazil listed companies will have to comply with IFRSs from 2010, and convergence of Japanese GAAP and existing IFRSs in use is expected by 2011. At the beginning of 2007 China introduced a new set of accounting standards that are based on and generally consistent with IFRSs. Altogether, the number of countries that either require or permit the use of IFRSs or are committed to their adoption now stands at over a hundred.

In November 2007, and responding to the growing acceptance of IFRSs, the Trustees announced proposals aimed at strengthening the organisation’s public accountability. Specifically, the Trustees agreed to establish a link to a representative monitoring group of official organisations, including securities regulators. This body would approve Trustee appointments and review the Trustees’ oversight activities, including the adequacy of the annual funding arrangements as well as the overall budget. At their meeting in November, the Trustees agreed to propose this monitoring group as part of the upcoming review of the Constitution.

In Rome, the Trustees reached the following conclusions regarding the review of the Constitution:

  • An accelerated consideration of a monitoring group: The Trustees will accelerate consideration of their proposals on the size, composition and mandate of a monitoring group with the goal of reaching conclusions in the second half of 2008. Initial proposals will be published for comment in the second quarter of 2008.
  • A proposal to expand the IASB to 16 members: At the same time, the Trustees will propose a gradual expansion of the IASB to 16 members. While maintaining the existing Constitutional criteria for selecting members of the IASB, the Trustees will consider whether the Constitution should also explicitly ensure a minimum geographical balance.
  • An extended consultation process on other Constitutional matters: The Trustees intend to publish in the first half of 2008 a discussion document inviting comments and suggestions on other elements of the Constitution. The Trustees will attempt to conclude the broader review of the Constitution by the end of 2009.

The Trustees plan to broaden their discussions with stakeholder groups on both the specific proposals above and on the review of the Constitution more generally.

Trustees address funding, convergence, and other oversight issues

In addition to agreeing on a strategy for enhanced public accountability, the Trustees reviewed a number of issues related to their responsibilities:

  • Continued progress on the IASB’s work programme: The Trustees considered the IASB’s current work programme and items that were recently added to the IASB’s agenda. The Trustees again acknowledged the relevance of completing the programme set out in the Memorandum of Understanding of February 2006 between the IASB and the US Financial Accounting Standards Board (FASB).
  • Enhanced reporting of Trustee activities, funding in the annual report: In addition to a letter from the Chairman of the Trustees regarding the organisation’s performance, the 2007 annual report will include separate sections on the Trustees’ oversight role and achievements and on the funding and long-term financing prospects. The 2007 annual report will also highlight the introduction of post-implementation reviews, feedback statements, and impact assessments as innovations introduced during the past year.
  • Continued commitment to a broad-based funding regime: The Trustees reaffirmed their commitment to establishing a broad-based funding regime and noted that approximately £12.5 million of the £16 million target had been raised. A summary status report is attached in the appendix.
  • Emphasis on building upon the IASB’s initial feedback statement and impact assessments: The Trustees congratulated the IASB on its first effort to develop a feedback statement and impact assessment for the revised business combinations standards. The Trustees recognised that the IASB will continue to refine its procedures and methodology for feedback statements and impact assessments, and the Trustees will work closely with the IASB in this area.

Press enquiries

  • Mark Byatt, Director of Corporate Communications, IASB
    Telephone: +44 (0)20 7246 6472
  • Sonja Horn, Communications Adviser, IASB
    Telephone: +44 (0)20 7246 6463