IASB answers critics with new constitution

The trustees responsible for overseeing the International Accounting Standards Board (IASB) responded this week to international political pressure with a set of reforms to the body’s governance structure.

The International Accounting Standards Committee (IASC) Foundation has issued a series of proposals following a constitutional review aimed at “enhancing public accountability, stakeholder engagement and operational effectiveness”.

The reform package agreed at the IASC trustees meeting in Brazil at the end of January arrives at a time of unprecedented political upheaval in the world of accounting standards-setting. With G20 ministers lending their support to the creation of a single set of global standards, the IASB has come under fire from both sides of the Atlantic.

The Europeans don’t trust standards that are coming from what appears to be a Big Four/multinational-controlled private sector body to which the SEC is also reluctant to cede power, while the rest of the world harbours doubts about the motives and behaviour of the two major forces in the accounting standards arena.

The IASC Foundation’s constitutional reform proposals include:

• Three-yearly public consultations on the IASB’s technical agenda
• A commitment to a ‘principle-based’ approach
• Accelerated due process procedures “only in the most exceptional circumstances” that will require approval by three-quarters of the trustees
• New constitutional definitions that “take account of, as appropriate, the needs of a range of sizes and types of entities in diverse economic settings”
• Reduced maximum terms of office from 10 years to eight (except for the IASB chair and vice chair
• New organisational names: the IASC Foundation will become the IFRS Foundation, while its interpretations committee and advisory council will be known as the IFRS Interpretations Committee and IFRS Advisory Council, respectively.  However, the IASB will retain its existing name.

The new constitution will take effect on 1 March and the trustees promised to issue a report explaining their conclusions. The next trustee meeting is scheduled for 30-31 March in London.

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