IASB due process
Background
The International Accounting Standards Board (IASB) follows a rigorous open due process. All meetings of the IASB and of the IFRS Interpretations Committee (formerly IFRIC) and its formal working groups are held in public and are usually webcast.
The two key documents which govern the IASB's activities are the IFRS Foundation Constitution and the Due Process Handbook.
Due process steps
Outlined below, in overview terms, are the due process steps followed in the IASB's standard-level projects, i.e. proposed new standards, and amendments to existing standards, and Interpretations developed by the IFRS Interpretations Committee (and ratified by the IASB). These steps are:
- Research programme
- Developing a proposal for publication
- Redeliberations and finalisation
- Post-implementation reviews
Research programme
The IASB's research programme involves the analysis of possible financial reporting problems by collecting evidence on the nature and extent of the perceived shortcoming and assessing potential ways to improve financial reporting or to remedy a deficiency. Also includes the consideration of broader financial reporting issues, such as how financial reporting is evolving, to encourage international debate on financial reporting matters.
National accounting standard-setting bodies and regional bodies associated with accounting standard-setting or regional financial reporting bodies, academics and other interested parties, participate in these activities (this includes through the Accounting Standards Advisory Forum, ASAF). A discussion paper, request for information or research paper may be released, which are designed to elicit comments from interested parties that can help the IASB decide whether to add a project to its standard-setting programme.
Not all matters included in the research programme will proceed to a proposal for a new or modified standard or other pronouncement.
Note: During 2012-2013, a number of changes were made to the IFRS Foundation Constitution and Due Process Handbook. The effect of these changes included moving the 'project agenda decision' to occur after, rather than before, the research process has occurred (although in some active agenda projects a discussion paper may also be issued, e.g. the projects on macro hedging and rate-regulated activities). These changes also clarified that 'maintenance' activities addressing matters narrow in scope do not need to follow all of the more formal project proposal steps.
| Due process steps | When required | Comments |
|---|---|---|
| Publication of a discussion document (e.g. discussion paper, request for information, research paper) | Optional (Constitution s. 37(b); Handbook s. 4.12) | Publication requires a simply majority of IASB members, by way of ballot |
Developing a proposal for publication
Once the IASB has formally decided to add a project to its agenda, it proceeds to the development of an exposure draft. The exposure draft is issued for public consultation and the IASB may also undertake additional outreach activities such as meetings, discussion forums, webcasts and podcasts and roundtable meetings.
| Due process steps | When required | Comments |
|---|---|---|
| Consultation with IFRS Trustees, IFRS Advisory Council, and Accounting Standards Advisory Forum (ASAF) | Mandatory (Constitution s. 37(b); Handbook s. 3.53, 5.2) | The IASB has discretion to initiate narrow scope projects that are part of the general maintenance of standards |
| Project formally added to IASB's agenda | Mandatory (Handbook s. 5.6) | Requires a simple majority vote at a public IASB meeting |
| Establishment of a consultative group for major projects (e.g. expert or specialist advisory groups) | Optional (Handbook s. 3.58) | The IASB must consider a consultative group for each major project and explain when a group is not used, and also inform the DPOC |
| IASB debates and develops proposals in public meetings | Mandatory (Handbook s.6.4) | IASB will consider technical papers prepared by staff and feedback from any discussion documents published |
| Paper presented to IASB summarising steps taken, basis for decisions to not have consultative groups, field work, etc (where applicable) and recommending comment period | Mandatory (Handbook s. 6.6) | This step only occurs once agreement has been reached on technical matters and the exposure draft is then prepared for balloting |
| Publication of an exposure draft (normally including a basis for conclusions and must be accompanied by a press release) | Mandatory (Constitution s. 36, 37(b); Handbook s. 6.16) | Requires a supermajority of IASB members, by way of ballot (requires 9 out of 15 or fewer members, or 10 out of 16 members) |
| Publication of additional materials to support an exposure draft (e.g. podcasts, webcasts, 'snapshot' documents, Q&As, presentations) | Optional (Constitution s. 37(b); Handbook s. 6.17) | The overall communications package reflects the significance of the proposals |
Redeliberations and finalisation
After the publication of an exposure draft, the IASB proceed to consider constituent feedback from the consultative process. In some cases, the IASB may decide to re-expose proposals before proceeding to a finalised pronouncement. Once deliberations have been finalised, the IASB's technical staff will prepare the final standard for balloting and voting on by the Board.
The process may also include the issue of a 'review draft' of the final pronouncement prior to it being finalised. These documents are not part of formal due process but have the purpose of allowing a 'fatal flaw' review.
| Due process steps | When required | Comments |
|---|---|---|
| Exposure draft is open for comment for a minimum period | Mandatory (Constitution s. 37(c); Handbook s. 6.7-6.8) | Normally 120 days, may be reduced to no less than 30 days after obtaining approval from the DPOC. Annual improvements are normally exposed for a minimum period of 90 days. A comment period of less than 30 days requires approval of 75% of the Trustees |
| IASB considers feedback received from consultation process | Mandatory (Handbook s. 6.19; Constitution s. 37(f)) | Feedback determines redeliberation focus priorities, or may result in the project being discontinued |
| IASB considers the need for re-exposure | Mandatory (Handbook s. 6.25) | Re-exposure is not compelled, it is considered where fundamental changes have occurred or where anything new is likely to be learned from re-exposure |
| Additional consultation through field tests, public hearings and roundtable meetings | Optional (Handbook s. 6.21; Constitution s.37(j)-(k)) | The IASB also consults the IFRS Advisory Council and any consultative groups |
| Standard is prepared for balloting | Mandatory (Handbook s 6.23) | Members intending to dissent from the proposals must make their intentions known |
| IASB informs the DPOC of its intention to proceed to ballot stage | Mandatory (Handbook s. 6.24) | The IASB must explain why re-exposure is not considered necessary (where applicable) |
| Publication of standard (normally including a basis for conclusions and must be accompanied by a press release) |
Mandatory (Constitution s. 36, 37(b); Handbook s. 6.37) |
Requires a supermajority of IASB members, by way of ballot (requires 9 out of 15 or fewer members, or 10 out of 16 members) |
| Publication of materials accompanying a standard project summary and feedback statement) | Mandatory for new standards and major amendments (Handbook s. 6.38) | Other non-mandatory materials will also be published such as podcasts, webcasts, Q&As and presentations |
Post-implementation reviews
The IASB must conduct a post-implementation review of each new Standard or major amendment, usually after they have been applied for around two years. This means that the post-implementation review process will commence around 2.5-3 years after the effective date of the pronouncement, but may be deferred in some cases. The post-implementation review process can also be initiated in other circumstances such as regulatory changes or concerns raised by other parties.
