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Monitoring Board announces final membership criteria and processes for review of existing members and selection of new ones

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01 Mar 2013

The Monitoring Board of the IFRS Foundation today announced the successful conclusion of its assessment approach for the membership criteria of the Monitoring Board. The criteria will be used in the selection of new members and in the periodic review of existing members that will take place every three years. At the same time, the Monitoring Board announced the appointment of Masamichi Kono, current Acting Chair of the Monitoring Board, to serve as its Chairman.

The Monitoring Board's Final Report on the Review of the IFRS Foundation's Governance published in February 2012 identified a number of enhancements to the governance framework including expanding the Monitoring Board’s membership and beginning periodic assessments of the members against membership criteria yet to be developed. The criteria and the assessment processes were finalised at the Monitoring Board’s 6 February 2013 meeting.

The main focus of the membership criteria is the use of IFRSs with some quantitative and qualitative additional aspects:

  • The jurisdiction has made a clear commitment to IFRSs and promotes global acceptance of a single set of high quality international accounting standards. It mandates or permits the application of IFRSs to consolidated financial statements of companies raising capital in its relevant market.
  • The IFRSs to be applied are essentially aligned with IFRSs developed by the IASB.
  • The jurisdiction can be regarded a major market for capital-raising in the global context.
  • The jurisdiction makes financial contributions to the setting of IFRSs on a continuing basis.
  • The jurisdiction has in place and in operation a robust enforcement mechanism.
  • The relevant national or regional standard-setting body actively contributes to the development of IFRSs.

These criteria will be applied in selecting new members. This process will begin in 2013. Candidate not meeting certain criteria, but demonstrating clear commitment to do so can be invited for reapplication.

Additionally, a periodic review of existing members will take place every three years, beginning in 2013. Eligibility of continued Monitoring Board membership will be assessed against the criteria with due consideration of the evolution over time towards full compatibility with all criteria. If an existing member is found not to be fully or materially meeting the criteria, its voting rights could be suspended and at worst its membership could be revoked.

The members of the Monitoring Board currently include the US Securities and Exchange Commission (SEC). Although the application of IFRSs by domestic companies is not permitted in the United States, the SEC does permit application of IFRSs in consolidated financial statements of companies raising capital in its relevant market (foreign private issuers) and the US market is a major market for capital-raising. Behind the EU and Japan is also the third largest contributor to the IFRSF funding, the SEC’s enforcement is robust and the FASB as the national standard-setter continues to be committed to contributing to the development of high-quality IFRSs. The decision whether this means the SEC fully meets the membership criteria rests with the other Monitoring Board members and will have to be taken during the periodic review of the existing members.

Please click for access to the press release on the Monitoring Board website.

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