Notes from the IASC Foundation Trustees meeting

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03 Apr 2009

The Trustees of the IASC Foundation, under which the IASB operates, met in London on 1 and 2 April 2009. Presented below are the preliminary and unofficial notes taken by Deloitte observers at the public portion of the meeting.

The Trustees also held a joint meeting with the new IASCF Monitoring Board on 1 April. Our notes of that meeting are posted separately immediately below.

Notes from the Meeting of the IASC Foundation Trustees - 1 and 2 April 2009

Review of the IASB Work Programme: Progress on Issues Raised by the G20 and Financial Stability Forum

The IASB Chairman reviewed with the Trustees the work of the Board to answer the demands of the G20 and Financial Stability Forum. He outlined that the IASB would work to replace IAS 39 in 'months not years' (perhaps 6-8 months) and was already working closely with the FASB and prudential regulators.

There was broad support from the Trustees on the IASB's intended actions, although some thought that the IASB was being too defensive. In particular, some of the IASB's proposed actions could be seen as radical. What was important was to maintain the commitment to high quality global standards: no more quick fixes.

An underlying concern, and one perhaps for the Monitoring Board to consider, was what would happen if the FASB 'went left' and the IASB 'went right'? International convergence was still the goal, but the two main standard-setters were subject to tremendous pressure in their own markets.

A Trustee noted that 'dynamic provisioning' was an unfortunate term and one that lacked an agreed definition. Were he a Board member, he would not support any loan loss model that allowed for cookie jar reserves. However an approach that allowed for a thoughtful way to provide for losses in the financial statements, that was transparent, and that allowed the possibility of expected losses 'might be a great place to be'.

Sir David thanked the Trustees and noted that the staff was already hard at work on the issue.

Report of the Due Process Oversight Committee

The Trustees received a report from the chairman of the Trustees' Due Process Oversight Committee. The committee will include a summary report in the IASC Foundation's annual report and include a more comprehensive report on its activities on the Foundation's website.

The focus of the committee in 2008 would be, in particular, the standard-setting process at the IASB; and the effectiveness of working groups.

The draft report of the Committee for inclusion in the IASCF's Annual Report was approved.

The Trustees also agreed to issue a Due Process Handbook for the IASCF's XBRL Activities, which will be released in early April for a 90-day public comment period. There was some discussion of the quality assurance (especially 'accounting technical') processes around the IFRS XBRL Taxonomy, especially the extent to which it interprets IFRSs into the financial statements in a particular way, and that technical accounting experts are satisfied that that application is appropriate. This point will receive particular attention of the quality review teams and a report will be made to the July Trustees' meeting.

Trustee Robert Glauber reported on his impressions of the reconstituted Standards Advisory Council. He noted that the SAC wants feedback from the IASB that addresses their comments on the agenda and other issues discussed with it. Trustees noted that, to be truly effective, the SAC needed to be used properly, and to be respected.

Report on the Constitution Review

The IASCF staff presented a draft of the proposed Feedback Statement on Phase I of the Constitution Review. There was no substantive discussion of this document.

The staff noted that the comment period on the opening round of Phase 2 of the review had closed on 31 March. The staff would be analysing the comments and discussing them with the Constitution Committee before bringing recommendations for changes to the Constitution to the July 2009 Trustees' meeting. The review must be completed by 2010. It was intended to hold public roundtables in Asia (Tokyo), the Americas (New York), and London, late in 3Q and during 4Q 2009.

The staff also noted that the Monitoring Board's Charter would be published on 2 April 2009. The staff noted that the Charter required decisions by consensus and that any change to that would probably need Trustee concurrence, even though the Trustees are not a signatory to the Charter (they are a signatory to the Memorandum of Understanding).

IFRS Dissemination Strategy

Sir Bryan Nicholson, chair of the Finance Committee, presented various approaches to implementing the decision made in October 2008 to provide free access to the mandatory elements of IFRSs. The approaches outlined the key issues to be addressed if the IASCF were to provide more of its materials for free.

The decision was closely related to the long-term funding arrangements for the organisation. In 2008, the IASCF recorded a profit of £3.3 million on the sale of publications and related activities, such as licensing the content to others. This is part of the IASCF's overall funding base.

The Trustees noted that, until the stable funding system is in place and fully operational, they probably could not afford to lose significant revenue streams. Therefore, they agreed not to extend free access to non-mandatory elements of IFRS and other materials for the moment. They committed to reconsidering this position in 2011, by which time they will be able to assess the effect of providing free access to the mandatory content.

XBRL Developments

Olivier Servais, the IASCF XBRL Team Leader, presented an overview of developments with respect to the IFRS XBRL Taxonomy. The Trustees approved the 2009 XBRL Taxonomy for issue and it is now public.

The Trustees approved the draft XBRL Due Process Handbook for exposure and this was released on 2 April 2009 for a 90-day comment period.

The XBRL staff also reviewed budgets and other matters, but there was little discussion of these items.

There was more discussion of whether the IASCF should develop 'IFRS Taxonomy Extensions' – additional tags that go beyond the mandatory IFRS requirements (for instance, to disaggregate property, plant and equipment, or address industry-specific line items).

The staff presented a proposal under which they would work with the IASB and the Trustees Due Process Oversight Committee to develop an approach to the issue. This would be presented at the July 2009 Trustees' meeting.

In discussing the proposals, the Trustees were very aware of the delicate balance that they had to achieve: was XBRL a business tool or an official pronouncement? How was it to be branded? In addition, by exploring 'taxonomy extensions', the XBRL was taking the IASB into industry-specific areas – something that the IASB has consistently resisted doing.

Trustees cautioned that care was needed in deciding what to do and how far to go. This needed to balance the desires of securities regulators to have common extensions against concerns about unintended interpretations of IFRSs. This suggested that a shared responsibility approach was most desirable.

The IASCF staff noted that they were already working with IOSCO and others to explore how to make such co-operation operational.

Review of Long-term Funding of the IASC Foundation

The Trustees discussed progress towards a stable long-term funding regime for the IASCF. They noted that if they were to expand their activities to the budgeted £23 million level as planned, the IASCF would face a £6.6 million funding gap (about £4 million if you include publication revenues in the contribution line).

The Trustees discussed the implications of this at some length. One Trustee noted that, with the agreed central funding in the European Union from 2011, there was no certainty that voluntary funding would continue (it would likely not continue in some Member States at least). It was noted that the 'programme funding' did not include the US$8 million contributed by the major accounting networks on an annual basis. Sam DiPiazza noted that the networks were not asking to be relieved of this contribution, but did acknowledge that the networks' contribution impairs the independence of the IASCF.

Sir Bryan Nicholson noted that IFAC's Public Interest Oversight Board takes a very close interest in the allocation of public funds. It is likely that the IASCF's Monitoring Board will do likewise: therefore it is necessary that the Trustees are realistic about raising money. The jump to the long-term funding regime cannot be accomplished in one year. The IASCF will continue to have a mixture of voluntary contributions and programme funding for a while longer, and will need the net proceeds of the sale of publications as well.

The Trustees' finance committee will meet in the near future and will return with further proposals at the July 2009 meeting.

This summary is based on notes taken by observers at the IASCF Trustees meeting and should not be regarded as an official or final summary.


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