Trustees were generally supportive, but were concerned that some technical matters became very political, and maintaining the independence of the IASB when faced with such a situation might be difficult.

The Trustees approved the proposed terms of reference:

• The Procedures Committee will assume responsibility for managing and maintaining this dialogue with the IASB.
• Two or three members of the Procedures Committee will meet twice annually with the IASB in London during a closed administrative session.
• To ensure that a wide range of relevant issues are addressed, the members of the Procedures Committee attending the meeting with the IASB will consult with the other Trustees for topics in advance of the meetings with the IASB.
• The IASC Foundation secretariat should prepare an agenda for the meeting following consultation between the IASB Chairman and the Procedures Committee Chair.
• The IASC Foundation secretariat will circulate minutes of the meetings to the other Trustees.
• The Trustees attending the meeting with the IASB will make a formal report to the full Trustees in public session at the next meeting of the Trustees.

Developing 'measures of effectiveness' in oversight

The Trustees discussed how they might measure [demonstrate] their effectiveness in exercising oversight of the activities of the IASB. An important foundation to the discussion was a letter (or report) from the European Commission to the Trustees that apparently gave the Commission's views on various aspects of the IASC Foundation's activities. This paper was not available to Observers and thus it is difficult to put some of the comments made in context.

Neutrality

The Trustees agreed that the best way for the IASB to ensure that an IFRS is neutral was through a thorough consultation process, by which a sustainable accounting solution was achieved. However, the consultation should not result in a biased result – the accounting standard should still report economic phenomena in a neutral and truthful manner.

Field research

The Trustees agreed to work with the Board to develop a workable, cost-efficient approach to undertaking field research. Field research was a collective phrase for both field tests (in which a draft standard is applied 'as if effective', which involves systems changes, etc) and field visits (which are more informal and qualitative). It was agreed that 'impact assessments' were beyond the capability of the IASCF and should not be considered.

There was lots of concern expressed that the IASCF were being asked to entertain matters that would blur the dividing line between oversight and intervention.

The Chairman noted that the fact that an accounting standard was costly to implement was not a good enough reason not to issue the standard. However, it was important to get the substance of the standard right. As an example, he noted that standards on post-retirement healthcare benefits were costly to implement, but it was the right thing to do.

Communicating

The Trustees supported a suggestion that the IASB experiment with providing a 'feedback statement' that would accompany a new standard. The statement would be more detailed than the Basis for Conclusions that accompanies an IFRS, and would bring together the staff analysis of issues, views of constituents (including comment letters and the SAC), and the results of field research, together with the Board's resolution of those issues. It is likely that this idea will be developed further before it is tested at the IASB.

Reporting on the oversight responsibility

The IASC Foundation's annual report will contain a report from the Trustees on their oversight activities.

Procedures Committee

 The Trustees agreed to expand the Procedures Committee from five to seven members.

Report from the IASB Chairman

The IASB Chairman Sir David Tweedie presented a report of the IASB's activities and the status of its projects. These activities are reported in detail on IASPlus.com. However, there were some interesting items to note.

Business combinations

The IASB and the FASB continue to disagree on two significant issues – the measurement of non-controlling interest ('minority interest') and the accounting treatment for step acquisitions. The problem with non-controlling interest is that the IASB wants an exception from fair value on the basis of undue cost or effort, whereas the FASB does not. With respect to step acquisitions, the IASB has decided on one of at least five methods in use currently but it was proving a hard sell. The problem was that the alternatives were equally unpalatable.

Sir David was candid when he said that the IASB did not have the votes to approve a standard at present.

Conceptual Framework

Sir David acknowledged that the issue of stewardship needed to be addressed. It was apparent that the Boards had not explained their decisions effectively and that many constituents had misinterpreted what they had written. The FASB and IASB had never intended 'decision usefulness' to imply prospective usefulness only. They did mean useful for retrospective assessments too. It was also apparent that constituents did not have a clear idea of what was implied by 'stewardship' either. A Trustee noted that an effective and meaningful resolution of this issue is vital if supporters of the stewardship concept in financial reporting were not to be left 'perpetually dissatisfied'.

Leases

It seems likely that the IASB will ask the major accounting firms to review the 'draft standard' developed by the G4+1 in 1998 to determine whether the principles in it could be audited, and then ask IOSCO whether such a standard could be enforced effectively.

The IFRS reporting assertion

The Trustees discussed the background to the draft proposed amendment to IAS 1 with respect to reporting compliance with IFRSs. The draft proposed amendment had been prepared at the suggestion of the International Auditing and Assurance Standards Board, whose constituents are increasingly being asked to report on financial statements prepared in accordance with 'IFRS as adopted in...'. IOSCO has subsequently raised concerns. It thinks that IAS 1 is fine as it is and sees nothing to be gained in lending legitimacy to 'IFRS clones'. However, there is a clear political problem in many jurisdictions, one both of law and sovereignty over accounting standards. Many corporations and securities acts require reporting in accordance with local GAAP, so the local standard setter is obliged to issue IFRSs as local GAAP, even though it is identical to IFRSs.

No conclusions were reached, but the Trustees were made aware of the problems being faced by IFRS preparers, their auditors, and regulators.

Report from the Chairman of the Standards Advisory Council (SAC)

The SAC Chairman gave a brief report of the February SAC meeting, noting that the Council had also discussed the IFRS reporting assertion in much the same terms as the Trustees.

Most of this session concentrated on efforts of the Council to measure its effectiveness. It is proving a matter of increasing frustration for Council Members and the Chairman in particular. However, as the Council brings together constituents with a variety of backgrounds, experience and views, and is advisory in nature, developing a measure of 'effectiveness' is proving elusive.

The Trustees discussed this for some time, but noted that the diversity of opinion around the Council is a sign of strength, not a weakness. However, the challenge for the Council was to determine (i) how it provides valuable input to the IASB; and (ii) how the IASB demonstrates that it has taken the Council's views into consideration. The resolution of both issues would require the SAC and the IASB (and the Trustees) to develop a clear understanding of their expectations of the Council, since the IASB is the Council's primary 'user'. Effectiveness could only be measured if there is clarity about expectations.

The Trustees encouraged the SAC Chairman to work with the IASB 'sooner rather than later' and report to the Trustees as soon as possible. The SAC brings together high-calibre people, and it is important that the resource the Council represents is used appropriately.