The letter, which was signed by IASCF Chairman Gerrit Zalm,

• informs the leaders of G20 countries of the role that the IASB is playing in addressing issues emanating from the credit crisis, and
• outlines steps being taken to enhance the public accountability of the IASCF.

The Trustees wrote the letter because issues of accounting standards and the credit crisis and the governance of the IASB may be on the meeting's agenda. Click to download the Trustees' letter to the G20 (PDF 416k). Here is an excerpt:

Most of the world's developed and emerging economies – including nearly all of the G20 members – have made commitments to IFRSs. The IASB has been actively engaged in promoting common standards over the world and in particular in ensuring convergence among major economies. The success so far achieved should not be compromised by actions that would weaken the independence of the standard-setting process....

My fellow Trustees and I understand the extraordinary circumstances facing policymakers today. Our organisation is committed to acting in an urgent and responsible manner to help restore confidence in financial markets. Broad international adoption of IFRSs, combined with the actions described above, means that the IASB is helping to ensure a globally consistent response on financial reporting issues. We urge the G20 nations to support our efforts in a manner that reinforces the IASB's efforts and the organisation's independence.

The letter reviews IOSCO's work toward high quality global securities regulation, noting that one of the four main areas in which IOSCO has focussed its work is 'international financial reporting standards and the accountability of the standard setter to the community of national authorities responsible for reporting by public companies'. Attached to the letter is a Statement by IOSCO Regarding Accounting Standards and Governance. Click to download IOSCO's letter to the G20 (PDF 98k). Below is an excerpt from the statement on accounting standards.

IOSCO also supports the development and use of robust, internationally accepted, and consistently applied financial reporting standards. To achieve such standards, the standard setting process must be accountable and subject to appropriate consultation. In this regard, IOSCO strongly supports International Financial Reporting Standards (IFRS) as developed by the International Accounting Standards Board (IASB).

The job of developing and maintaining high quality standards that provide transparency to investors relies to a critical extent on independent accounting standards setters, including the IASB. Standard setters will be best able to produce high quality standards if they are able to exercise independent judgment, relying on their skills, experience and due process, without undue political pressure and taking into account the views of all stakeholders. In this light, IOSCO stands ready as a community of capital market authorities to support accounting standards setters in their roles.

At the same time, IOSCO members are those with direct responsibility for protecting investors in our markets. To fulfill this duty, IOSCO members must have a means of ensuring that accounting standard setters are working in the best interests of investors. IFRS is being used in more and more jurisdictions around the world. It is critical for securities regulators that allow or require the use of IFRS in their jurisdictions (or are considering doing so) to maintain a balance between protecting the independence and integrity of the IASB as the standard setter for IFRS, while ensuring that the IASB is accountable for producing standards in the best interests of investors.

ICGN members are largely institutional investors who collectively represent funds under management in excess of US$15 trillion. The ICGN statement expressly rejects any political interference in setting accounting standards:

Accounting standards: There must be no political interference in setting accounting standards. The fair value approach has been blamed for encouraging pro-cyclicality. Investors generally support fair value that delivers a picture of what is actually happening. There are some challenges to address, but abandoning this approach would damage confidence in financial reporting. It is important to recognise that there is a difference between fair value used for reporting and fair value used to measure the need for regulatory capital. Accounting standards also need to be clearer about when off-balance sheet business should be reported.

Click to view the Public Statement on the Global Financial Crisis (PDF 62k).

Paul's article (PDF 226k), which was published in Financial Executive magazine November 2008 issue, reviews the decisions made by the IASB in the past six months to further simplify the IFRS for Private Entities. Those decisions are based on the Board's consideration of:

• the 162 letters of comment on the exposure draft
• the results of field tests of the ED by 116 small companies
• recommendations of the IASB's Working Group on the project
• further staff research since publication of the ED

The article also identifies the remaining steps for completion of the standard and comments on the possibility of using the standard in the United States. The article is copyright by Financial Executives International, and we have posted it on IAS Plus with their kind permission.