The Trustees of the IFRS Foundation, responsible for the governance and oversight of the International Accounting Standards Board (the Board), have today outlined a range of enhancements to ensure the organisation remains fit for a changing world.
The latest review is the fifth to be conducted by the Trustees, and as such focussed on evaluating and refining the current structure and activities of the organisation (including those established as a result of previous reviews), as well as considering the future role of the organisation.
To reach the conclusions outlined in the review, the Trustees conducted an extensive consultation process, with stakeholders encouraged to submit feedback and proposals. The review will see the Trustees oversee the implementation of the following actions:
To further enhance governance and funding arrangements of the IFRS Foundation
- enhanced transparency: the Trustees received broad support for the existing three-tier governance structure, but will take steps to enhance visibility of Trustee oversight of the Board, including making meetings of the Due Process Oversight Committee public;
- geographical balance: change the geographical distribution of both the Trustees and the Board by combining the North American and South American allocations into a single ‘Americas’ category, to allow for even distribution and better representation across the entire region;
- size of the Board: reduce the size of the Board from 16 to 13 members, with the flexibility to appoint a 14th (at-large) member if appropriate; and
- funding: the Trustees received broad support to maintain the current ‘three-pillar’ funding model until the funding regime based on publicly supported financing is fully achieved.
To strengthen the relevance of IFRS Standards
- technology and financial reporting: accelerate work to address barriers to high-quality digital reporting by collaborating with investors, securities regulators and others to ensure the IFRS Taxonomy remains fit for purpose. At the same time, the Foundation will establish a network of experts to provide advice on technological innovation and its impact and relevance to IFRS Standards; and
- remit: retain the existing focus of the Board on for-profit entities, with no expansion at this time to cover either the public sector or the private not-for-profit sector. While the focus of the Board will remain on financial reporting, further work will be done to consider the Board’s future role and work plan within the context of developments in wider corporate reporting.
To support consistent application of IFRS Standards
- resources: while the Board’s focus remains on producing high-quality Standards based on clear principles, there will be an increased emphasis on activities to support the consistent application of IFRS Standards. This includes the realignment of education, implementation support and interpretation activities into a single team;
- programmes: continue to develop additional resources and materials to assist the consistent implementation of major new Standards, including the provision of online resources; and
- enhanced cooperation: continue to develop relationships with securities regulators (for example IOSCO, through the recently updated joint Statement of Protocols) and others to support implementation of IFRS Standards around the world.
Michel Prada, Chair of the Trustees, said:
This latest Trustee review has provided a good opportunity to ensure that we are continually refining and evolving the work of the organisation.
The changes announced today enhance the institutional underpinnings of the IFRS Foundation and equip it to further develop its capability as the world’s accounting standard-setter.
The Trustees have proposed amendments to the Constitution to facilitate the above changes to the governance and funding of the IFRS Foundation. The comment period on these proposed amendments ends 15 September 2016. The Exposure Draft can be accessed here.
The summary of the conclusions on the Review, together with detailed analysis of the feedback during the Review process, called a Feedback Statement, can be found here. Michel Prada, Chair of the Trustees, summarises the conclusions of the review in this video.
Parallel to the Trustees’ review into structure and effectiveness, the IASB has been undertaking a consultation on its future agenda and the conclusions of that review will be published later this year.