The Trustees of the IASC Foundation, the oversight body of the International Accounting Standards Board (IASB), today announced important amendments to the organisation’s Constitution, as well as a summary of other agreements reached at the Trustees’ meeting in New Delhi, India, on 15 and 16 January 2009.
- Significant enhancement to the organisation’s public accountability by establishing a link to a Monitoring Board of public authorities
- IASB to be expanded from 14 to 16 members by 2012, with criteria added to ensure geographical diversity
- Enhanced liaison with investor groups
- Constitutional changes directly address G20 recommendations
- Free availability of core standards through the public website.
In 2007 the Trustees conducted a strategic review of the IASC Foundation, which included discussions with relevant public authorities. This review addressed the issue of public accountability and the composition, geographical diversity and the size of the International Accounting Standards Board (IASB). There was extensive public consultation, including round-table discussionsthroughout 2008 on the proposals emerging from the strategic review. These proposals were exposed for public comment in July 2008. Over 70 responses from organisations and individuals were received, and these generally supported the proposal on public accountability.
Establishing a link to public authorities
The constitutional changes represent significant enhancements to existing governance arrangements. Underpinning the organisation’s structure is the internationally accepted principle that global accounting standards should be developed by an independent IASB. The IASB reaches conclusions following a transparent and open due process that considers the views of all stakeholders. An independent and geographically diverse body of Trustees oversees the IASB. Under the constitutional changes, the Trustees themselves will be publically accountable to a Monitoring Board of public authorities.
This basic approach to the architecture of governance is similar to that in place in many national jurisdictions for accounting standard-setters. The consultation process revealed strong and consistent support among investors and other stakeholders on the need to maintain, within agreed due process, the independence of the IASB’s decision-making. At the same time, stakeholders understood the need to establish a formal linkage to public authorities, where none was previously defined, and strongly encouraged the organisation’s efforts to enhance its public accountability. All the Monitoring Board members also supported the independence of the IASB’s decision-making within the new governance framework.
The Monitoring Board will comprise the relevant leaders from the Emerging Markets and Technical Committees of the International Organization of Securities Commission (IOSCO), the European Commission, the Japan Financial Services Agency (FSA), and the US Securities and Exchange Commission (SEC). The Basel Committee on Banking Supervision will sit as a formal observer at Monitoring Board meetings.
The Monitoring Board’s main responsibilities are to ensure that the Trustees continue to discharge their duties as defined by the IASC Foundation Constitution, as well as approving the appointment or reappointment of Trustees. It is envisaged that the Monitoring Board will meet the Trustees at least once a year, or more often if appropriate.
The relationship and responsibilities of the participating organisations are described in the Memorandum of Understanding(MoU) developed by the members of the Monitoring Board and the Trustees. The Trustees formally approved the MoU in New Delhi. The formal process of signing the MoU is now under way and should be completed shortly. (The text of the MoU is attached to this press release.)
New guidelines in IASB membership
The Trustees also approved a constitutional change that will expand the IASB to 16 members and provides guidelines regarding geographical diversity. The criteria for IASB membership remains that the ‘main qualifications shall be professional competence and practical experience’. At the same time, in order to ensure a broad international basis by July 2012, there will normally be four members from the Asia/Oceania region; four members from Europe; four members from North America; one member from Africa; one member from South America; and two members appointed from any area, subject to maintaining overall geographical balance.
Concerted effort to liaise more closely with investor groups
The Trustees recognise that the investor community is a key stakeholder in the organisation, but that standard-setting bodies have commonly experienced difficulty in achieving a sufficiently close engagement with investors. To complement the existing contact with investors, there will be regular liaison with the wide range of investor groups now to be represented in the reconstituted Standards Advisory Council(SAC). The IASC Foundation will announce the membership of the reconstituted SAC shortly.
Constitutional changes directly address G20 recommendations
The constitutional changes—the link to public authorities and the new guidelines for IASB membership—directly address the recommendations made by the G20 last November on public accountability and membership of the standard-setting board. The other recommendations related to the standards have all now been separately actioned by the IASB. A comprehensive summary and a recent Trustees’ letter discussing the organisation’s response to the G20 conclusions are available from the public website.
Free availability of standards through the public website
Separately from the constitutional issues, the Trustees, responding to many public requests, agreed that the IASB’s standards, but not the accompanying documents such as the basis for conclusions or implementation guidance, should become available free of charge through the IASB’s website.
Commenting on the constitutional amendments, Gerrit Zalm, Chairman of the Trustees and former deputy prime minister and finance minister of the Netherlands, said:
The Trustees have responded positively on the questions of public accountability and IASB membership. We recognise the need for change in the emerging global framework of standard-setting. The IASB as an independent standard-setter and the Trustees as the oversight body are strengthened by the enhanced governance provided by the link to public authorities through the Monitoring Board. The new arrangements ensure the independence of the IASB within a broader oversight and monitoring system.
- Mark Byatt, Director of Corporate Communications, IASB
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