Open discussion with IASCF Trustees Chairman

Gerrit Zalm, the Chairman of the IASC Foundation addressed the Standards Advisory Council during the closing session of their February 2008 meeting. In his first appearance before the SAC as Chairman, he called the task of the IASB a 'romantic project' – a project of high ideals that was now achieving reality. The achievements of the IASB brought with them severe challenges, ones that had to be addressed in the Strategy Review.

He noted that relations with the European Parliament had been poor, but that efforts at the Trustee, Board and Staff level had contributed, and continue to contribute, to improving relations, better communication and a better mutual understanding of each others' positions and priorities. The removal of the EU 'carve-out' in IAS 39 was high on his wish-list and there are on-going efforts at several levels within the EU to achieve this.

Sustainable funding was a primary concern-as noted yesterday at the session devoted to the Strategy Review-both to the Trustees and the SAC. Private sector funding was open to criticism as it could be perceived as buying influence. A levy system was already in operation in Italy and the UK and this was seen as the best alternative; but it was for each jurisdiction to decide how best to raise the finds, which entities to levy, etc. As such, a final agreement on levies is still 'on the horizon'.

Finally, he noted that the integrity and authority of the IASB was a paramount concern of the Trustees. The success of the private-sector IASB was testament to the wisdom of keeping standard-setting out of the hands of government. However, the IASB had to acknowledge that it was, in effect, setting law in many jurisdictions and that law-makers in those jurisdictions have a legitimate interest in the work and decision-making process of the IASB. The challenge for the Trustees will be to maintain the delicate balance between private-sector neutrality and independence and the interests of governments.

In an open session with the SAC, Mr Zalm heard many suggestions and opinions about how the Trustees, SAC and IASB could respond to these and other challenges. Against the background of the Strategy Review, it was noted by SAC members that the success of the IASB was about to face a significant challenge: how would the United States react to the transition to IFRS? The FASB derived its authority from the US Securities and Exchange Commission's devolution of its standard-setting powers to the FASB. The presence of the SEC would be a significant challenge for the Trustees as they maintained the 'delicate balance' mentioned by Mr Zalm between competing IFRS constituents.

All of this suggests that much is riding on the composition of the proposed Monitoring Group and its ability to represent the integrity, neutrality and authority of the IASCF and IASB.

Discussions about Four IASB Agenda Projects

The SAC held a series of discussions with IASB and FASB staff on three projects nearing the issue of a discussion paper. FASB staff discussed the FASB Preliminary Views document Financial Instruments with the Characteristics of Equity and introduced the proposed questions to be included in the IASB's wrap-around Invitation to Comment. An IASB member noted that this topic was inextricably linked with other IASB projects, including parts of the Conceptual Framework, financial instruments, insurance, and liabilities (IAS 37).

The IASB staff presented an overview of a forthcoming discussion papers Reducing Complexity in Reporting Financial Instruments and Post-employment Benefits.

All three of these papers are expected in the first half of 2008 and this meeting was the last opportunity for the SAC to offer advice on the questions to be included in the various Invitations to Comment.

Regarding the proposed IFRS for Small and Medium-sized Entities, the IASB staff reviewed the project activities since issuance of the Exposure Draft in February 2007. Staff also presented a preliminary list of the most significant issues that have been raised in the letters of comment. These topics formed the basis of a lengthy SAC discussion.

2008 Constitution Review

Two proposals – creation of an IASCF monitoring group and enlarging the IASB from 14 to 16 members – will be 'fast-tracked', with a comment document to be issued in the second quarter of 2008. See our News Story of 15 Feb 2008.

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