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IASCF Constitution Review 2008-2010

IASCF Constitution Review 2008-2010

[MATCHED] November 2007: IASCF Trustees announce strategy to enhance governance

On 7 November 2007, the Trustees of the International Accounting Standards Committee Foundation (IASCF), the oversight body of the IASB, announced proposals to enhance the organisation's governance arrangements and reinforce the organisation's public accountability. The Trustees will begin a series of consultations with key stakeholders on these proposals in the build up to the Constitution Review, which is scheduled to start in 2008. Click for IASCF News Release (PDF 55k).

 

  • Establish a formal reporting link to official organisations: The Trustees should establish a link to a representative group of official organisations, including securities regulators. This body would approve Trustee appointments and review Trustee oversight activities, including the adequacy of the annual funding arrangements as well as the overall budget.
  • Develop a multi-layered, multi-faceted approach to accountability beyond the formal link to official organisations: The Trustees should intensify and deepen their engagement with key stakeholder groups and develop mechanisms for the Trustees to receive input outside formalised procedures. This would necessarily include mechanisms for meeting with official organisations and policymakers and private sector institutions. Furthermore, such accountability would require consideration of the role and structure of the Standards Advisory Council in the organisation's accountability.
  • Create a mechanism for public input to the Trustees outside regularly scheduled meetings with specific stakeholder groups: The Trustees should establish enhanced mechanisms for input from interested parties who wish to comment on the IASC Foundation's and the IASB's policies, processes, and procedures.
  • Continue efforts towards a sustained, broad-based funding regime: Having already significantly broadened the funding base through the new approach adopted in 2006, the Trustees should continue their work to broaden the funding base further.

[MATCHED]November 2007: Proposed new body to monitor the IASCF and IASB

On 7 November 2007, the European Commission, the Financial Services Agency of Japan, the International Organization of Securities Commissions (IOSCO), and the US Securities and Exchange Commission jointly proposed the creation of a new monitoring body within the governance structure of the IASC Foundation. This body would meet regularly with the IASCF Trustees to:

  • Review and comment on the IASB's work programme.
  • Participate in - and have final approval in the selection of - IASCF Trustees.
  • Review the Trustees' oversight activities.

Click to download the Joint Statement (PDF 72k). An excerpt:

 

The IASB, which is overseen by the IASC Foundation Trustees, is an independent standard setter committed to developing, in the public interest, a single set of high quality, understandable, and enforceable global accounting standards. The IASC Foundation Trustees have scheduled a review of the Foundation's Constitution to begin in 2008. The authorities responsible for capital market regulation propose to utilize the opportunity of the Constitution Review to put forward, in collaboration with the IASC Foundation, certain changes to strengthen the Foundation's governance framework, while emphasizing the continued importance of an independent standard-setting process.

Central to this effort is the establishment of a new monitoring body within the governance structure of the IASC Foundation to reinforce the existing public interest oversight function of the IASC Foundation Trustees. The creation of such a monitoring body would serve to complement the Trustees in its representation of the interest of the global investor community, thereby enhancing public confidence in IFRS.

One key objective is to have the monitoring body meet regularly with IASC Foundation Trustees to discuss, review and comment on the IASB's work program. We expect the IASC Foundation and IASB Chairmen will also engage with relevant public authorities. The monitoring body would, together with the IASC Foundation Trustees and in consultation with the trustee appointments advisory group, participate in the selection of Trustees. The monitoring body would also be responsible for the final approval of Trustee nominees and would have the opportunity to review the Trustees' procedures for overseeing the standard-setting process and ensuring the IASB's proper funding.

February 2008: IASCF proposals for a monitoring board, enlarged IASB

In November 2007, the Trustees of the IASC Foundation (IASCF), under which the IASB operates, announced proposals to enhance the organisation's governance arrangements and reinforce the organisation's public accountability (see Above). Those proposals included creation of a 'monitoring group' of representatives of official organisations, including securities regulators, that would approve Trustee appointments and review Trustee oversight activities, including the adequacy of the annual funding arrangements as well as the overall budget. Subsequently, the trustees began a series of consultations with key stakeholders on those proposals in the build up to the Constitution Review, which is scheduled to start later this year. At their meeting on 29-30 January 2008, the Trustees reached the following further conclusions regarding the Constitution Review (click for Press Release (PDF 67k):

  • An accelerated consideration of a monitoring group: The Trustees will accelerate consideration of their proposals on the size, composition and mandate of a monitoring group with the goal of reaching conclusions in the second half of 2008. Initial proposals will be published for comment in the second quarter of 2008.
  • A proposal to expand the IASB to 16 members: At the same time, the Trustees will propose a gradual expansion of the IASB to 16 members. While maintaining the existing Constitutional criteria for selecting members of the IASB, the Trustees will consider whether the Constitution should also explicitly ensure a minimum geographical balance.
  • An extended consultation process on other Constitutional matters: The Trustees intend to publish in the first half of 2008 a discussion document inviting comments and suggestions on other elements of the Constitution. The Trustees will attempt to conclude the broader review of the Constitution by the end of 2009.

The Trustees plan to broaden their discussions with stakeholder groups on both the specific proposals above and on the review of the Constitution more generally.

[MATCHED]February 2008: Fast-track for proposed IASCF monitoring group, enlarged IASB

At a meeting of the Standards Advisory Council on 14 February 2008, IASCF Trustee Antonio Vegezzi and IASCF Director of Operations Thomas Seidenstein reported that the Trustees intend to fast-track their consideration of two issues:

  • Creation of a 'monitoring group' of representatives of official organisations, including securities regulators, that would approve Trustee appointments and review Trustee oversight activities
  • Expansion of the IASB to 16 members from the present 14.

Accordingly, they expect to publish formal proposals for public comment some time during the second quarter of 2008. They also reported that the remainder of the Constitution Review will get under way in third quarter 2008 and is expected to take about two years.

[MATCHED]April 2008: IASC Foundation launches 2008 Constitution Review

On 8 April 2008, the Trustees of the International Accounting Standards Committee Foundation, under which the IASB operates, announced the process for the 2008 Constitution Review. They also completed proposals, to be published shortly, to:

  • Create a 'monitoring group' of representatives of official organisations, including securities regulators, that would approve Trustee appointments and review Trustee oversight activities
  • Expand the IASB to 16 members from the present 14, and provide for geographical balance

The remaining issues will be dealt comprehensively beginning with a consultation document in the second half of 2008. The Trustees expect to complete the review by the end of 2009. The Trustees have formed a Constitution Committee to guide the review, though decisions rest with the Trustees as a whole. That committee includes: Gerrit Zalm, Chairman of the Trustees; Philip Laskawy, Vice Chairman of the Trustees; Bertrand Collomb; Samuel DiPiazza; Aki Fujinuma; Pedro Malan; and Antonio Vegezzi. Click for Press Release (PDF 63k).

 

April 2008

Publication of proposals concerning public accountability and IASB size/geographical diversity - the first track of the Constitutional Review. Comment period to end on 31 July.

April-August 2008

Trustees to meet interested parties to discuss proposals on the first track

September 2008

Constitution Committee to develop proposals to present to full Trustees, based upon analysis of comment letters and other input on the first track proposals.

October 2008

Trustees to conclude the first track of Constitution Review at their Beijing meeting. Changes to take effect for 1 January 2009.

October or November 2008

Trustees to publish a discussion document inviting views on other issues to be incorporated as part of the Constitutional Review - the second track of the Constitution Review.

October 2008-January 2009

Trustees to meet interested parties to discuss the second track of the Constitution Review.

February 2009

Trustees to develop list of issues and the Constitution Committee to develop proposals.

April 2009

Trustees to publish other constitutional proposals on issues identified.

April 2009-October 2009

Trustees to hold a series of meetings on proposals, possibly including public round-table discussions.

October-November 2009

Conclusion of the Constitutional Review.

[MATCHED]May 2008: IASCF Trustees will hold round-table on constitution proposals

On 12 May 2008, the IASC Foundation Trustees Announced(PDF 55k) that they are going to hold a public round-table discussion in advance of issuing their proposals on Phase 1 of the IASCF 2008 Constitution Review. Phase 1 is addressing whether to:

  • Create a 'monitoring group' of representatives of official organisations, including securities regulators, that would approve Trustee appointments and review Trustee oversight activities
  • Expand the IASB to 16 members from the present 14, and provide for geographical balance

Details of the public round-table have not yet been announced. In announcing the round-table, the Trustees released an updated timeline for the Constitution Review (the previous timeline is immediately above):

 

March-April 2008

Trustees developed proposals and document for the Constitutional Review.

May-June 2008

Trustees to meet interested parties to discuss proposals before publication of document on the first part.

June 2008

Publication of proposals on public accountability and IASB size/geographical diversity - the first part of the Constitution Review. Comment period to end in August or September 2008.

June 2008-August 2008

Trustees to continue to meet interested parties to discuss proposals on the first part.

September 2008

Constitution Committee to develop proposals to present to full Trustees, based upon analysis of comment letters and other input on the proposals in the first part.

October 2008

Trustees to conclude the first part of the Constitution Review at Beijing meeting. Changes to take effect for 1 January 2009.

October or November 2008

Trustees to publish a discussion document seeking views on other issues to be incorporated as part of the Constitution Review - the second part of the Constitution Review.

October 2008-January 2009

Trustees to meet interested parties to discuss the second part of the Constitution Review.

February 2009

Trustees to develop list of issues and the Constitution Committee to develop proposals.

April 2009

Trustees to publish other constitutional proposals on issues identified.

April 2009-October 2009

Trustees to hold a series of meetings, possibly including public round tables, on proposals.

October-November 2009

Conclusion of the Constitution Review.

[MATCHED]June 2008: IASCF constitution roundtable set for 19 June 2008

The Trustees of the IASC Foundation will meet with a range of interested parties on 19 June 2008 to discuss their initial proposals to revise the IASC Foundation Constitution. The roundtable will be held from approximately 9:30 am to 3:30 pm at the Renaissance Chancery Court Hotel, London. Click here for the Trustees' Draft Proposals(PDF 153k), which will serve as the basis for the discussions. The two main proposals are whether to:

  • Establish a formal link to key public institutions by creating a 'monitoring group' of representatives of official organisations, including securities regulators, that would approve Trustee appointments and review Trustee oversight activities.
  • Expand the IASB to 16 members from the present 14, and provide for geographical balance. Geographical balance would mean that normally there would be four IASB members from each of North America, Europe, and the Asia/Oceania region, plus four others appointed from any area, subject to maintaining overall geographical balance.

Individuals or organisations that want to participate in the 19 June roundtable are asked to email their expressions of interest to Tamara Oyre, IASCF Assistant Corporate Secretary, at toyre@iasb.org by Friday 13 June 2008. Those who cannot participate in the roundtable are invited to send written submissions by 9 June 2008.

[MATCHED]June 2008: Securities regulators support creation of an IASCF monitoring group

The world's securities authorities - represented by IOSCO, as well as the European Commission, the Japan Financial Services Agency and the US Securities and Exchange Commission, the securities authorities in the world's three largest capital markets - welcome the proposal to create an IASC Foundation Monitoring Group. That proposal is part of the 2008 Constitution Review currently being conducted by the IASCF. A Joint Announcement(PDF 34k) by the securities regulators said:

We are pleased at the progress being made in advancing interaction between securities authorities and the IASCF. The increased adoption and use of IFRS in capital markets around the world necessitates strengthening the accountability of the Foundation to the authorities responsible for setting financial disclosure requirements by public companies. In organizing the upcoming roundtable, the Foundation acknowledges the need to create a mechanism for interaction between securities authorities and the IASCF that approximates the historical relationship between securities authorities and national standard setters. This, in turn, will enable securities authorities that allow or mandate the use of IFRS to discharge their mandates relating to investor protection, market integrity and capital formation effectively.

[MATCHED]June 2008: Notes from IASCF constitution roundtable 19 June 2008

The Trustees of the IASC Foundation met with a range of interested parties on 19 June 2008 to discuss their initial proposals to revise the IASC Foundation Constitution. The roundtable was held from approximately 9:30 am to 3:30 pm at the Renaissance Chancery Court Hotel, London. Click here for the Trustees' Draft Proposals(PDF 153k), which served as the basis for the discussions. The two main proposals are whether to:

  • Establish a formal link to key public institutions by creating a 'monitoring group' of representatives of official organisations, including securities regulators, that would approve Trustee appointments and review Trustee oversight activities.
  • Expand the IASB to 16 members from the present 14, and provide for geographical balance. Geographical balance would mean that normally there would be four IASB members from each of North America, Europe, and the Asia/Oceania region, plus four others appointed from any area, subject to maintaining overall geographical balance.

Four sessions of discussions were held during the day. At each, between six and eight constituents were invited to give opening remarks; Trustees present responded; and then a more unstructured conversation followed. Participants in each session raised similar issues; consequently, these notes summarise the discussions by topic rather than by session.

 

Monitoring Group

To provide a formal link between public authorities and the IASC Foundation/IASB, the Trustees will propose that a Monitoring Group be established. This Monitoring Group would participate in the Trustees appointment process and approve the appointment of Trustees; and review and provide advice to the Trustees on their fulfilment of the oversight responsibilities set out in the IASCF Constitution. The initial composition of the Monitoring Group is proposed to be:

  • (a) the responsible member of the European Commission,
  • (b) the managing director of the International Monetary Fund,
  • (c) the chair of the IOSCO Emerging Markets Committee,
  • (d) the chair of the IOSCO Technical Committee (or vice chair or designated securities commission chair in cases where either the Chair of an EU securities regulator, Commissioner of the Japan Financial Services Agency or Chair of the US Securities and Exchange Commission is the chair of the IOSCO Technical Committee),
  • (e) the commissioner of the Japan Financial Services Agency,
  • (g) the chair of the US Securities and Exchange Commission, and
  • (f) the president of the World Bank

All participants supported establishing the Monitoring Group. Some saw it as an essential safeguard because, when a jurisdiction adopts IFRSs, it essentially surrenders its sovereignty over accounting standards. At the same time, some people expressed concern that there would be an increase in the 'politicisation' of the work of the IASB. Consequently, many commentators addressed the Monitoring Group's terms of reference, and in particular whether it should be permitted to propose candidates for nomination as Trustees. Participants were concerned that Trustees should continue to be independent and not beholden to securities regulators.

While agreeing that it is essential that securities regulators be represented on the monitoring group, some commentators expressed concern about the absence of other market regulators such as banking, insurance, and pension supervisors. In addition, some participants noted that the proposed monitoring group does not include a regulator directly involved with non-publicly accountable entities (SMEs) - for which the IASB is developing a separate IFRS.

Some commentators suggested that, in assessing the proposal, it would be helpful if the Trustees set out their rationale for the proposed composition of the Monitoring Group.

The IASCF Chairman stated in one session that to change the composition of the Monitoring Group 'will lead to quite a few complications, especially if you want to limit the number of people in the Monitoring Group'.

Monitoring Group's mandate

While supporting the creation of the Monitoring Group, many participants in the roundtables said that it must be clear that the IASCF Trustees are responsible for governance of the IASCF and the IASB. Many felt this should be made explicit in the proposals issued for comment.

Almost all participants wanted to ensure that the Monitoring Group did not, in any way, compromise or impair the IASB's independence, especially the ability to set the technical agenda. Some participants felt that the proposals had gone far enough to provide such assurance. In particular, proposed Constitution paragraph 19(c) was singled out for criticism by several participants:

...The Monitoring Group shall have the authority to request meetings with the Trustees or separately with the chairman of the Trustees (with the chairman of the IASB as appropriate) about any area of work of either the Trustees or the IASB. These meetings may include discussion of, and any IASC Foundation or IASB proposed resolution of, issues that the Monitoring Group has referred for timely consideration by the IASC Foundation or the IASB.

Some participants were concerned that this could involve the Monitoring Group directly the governance of the Foundation and the IASB. Because some of the agencies represented on the Monitoring Group are political, participants expressed concern that the IASCF and the IASB must not be politicised.

Some suggested that the Monitoring Group should be viewed as an 'audit committee', and it must avoid getting involved in operational aspects of the entity and avoid conflicts of interest. In their view, the Monitoring Group should monitor the Trustee appointment process and approve actual appointments, but it should be precluded from nominating Trustees directly.

In addition, some commentators expressed concern that the Group's role in providing 'advice' to the Trustees on the discharge of their oversight role could lead to regulatory influence on the IASB and, in particular, the technical agenda.

Trustee Appointments Advisory Committee

Views were mixed on this issue. Some participants thought that the Appointments Advisory Committee still had an important role (presuming that the Monitoring Group could not nominate Trustees) in identifying and proposing candidates for appointment to the Trustees. Others thought it was unnecessary and that the Trustees' committees could discharge this function. Many were indifferent.

Expanding the membership of the IASB and requiring an explicit geographical component

Almost all participants expressed concern that an explicit geographical component in the composition of the IASB would compromise the required technical competence and other criteria for Board membership. These fears were made forcefully; in spite of repeated assurances from Trustees present that the Criteria for IASB Membership in the Constitution were not at issue.

Many participants expressed concern that requiring an explicit geographical component could lead to Board members being seen to represent constituencies, rather than the global capital market participants, etc. Geographical representation at the Trustee level was necessary and accepted; it was not necessary at the IASB level. The current principle in the IASCF Constitution that the Board not be 'dominated by any particular constituency or geographical interest' was sufficient. With respect to voting requirement, many thought that a supermajority should be required-some wanted a 66% or even higher majority.

As to size, many participants were concerned that, at 14 members, the IASB was already at the upper limits of operational effectiveness. Expanding the Board to 16 members could run the risk of slowing down projects and fragmenting the Board, forcing it to work in sub-groups and reaching sub-optimal decisions. The IASCF Chairman did not seem to be concerned, hinting that sub-groups were not a bad thing. This comment was not welcomed by participants and did not build confidence in the outcome.

Others supported expanding the Board, noting that it would help in the Board's liaison responsibilities.

Other issues raised

Several constituents raised significant concerns about the way in which the IASB's agenda, especially with respect to the Memorandum of Understanding was being conducted-in particular that no opportunity for debate on the priorities and timescales set had been afforded constituents at large. One participant called this lack of consultation 'a disgrace'.

Next Steps

The IASCF Trustees will consider the submissions made at their meeting in Washington DC in July 2008 (public session on 8 July 2008). It is expected that the proposals will be published for public comment in mid-July 2008 with comments due in mid-September 2008.

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

[MATCHED]July 2008: IASCF publishes constitution review proposals for comment

On 21 July 2008, the Trustees of the IASC Foundation published, for public comment, proposals arising from the first part of their 2008 review of the IASC Foundation's Constitution. The proposals address two issues - a new Monitoring Group for the IASCF and the size and geographical composition of the IASB:

 

  • Monitoring group.The IASCF Constitution would be amended to establish a formal link between the IASCF and a new Monitoring Group comprising representatives of public authorities and international organisations that have requirements for accountability to public authorities. The Monitoring Group would have the responsibility of approving the selection of IASCF Trustees. The Trustees would also report to the Monitoring Group regularly to enable it to address whether and how the Trustees are fulfilling their role set out in the Constitution. A Memorandum of Understanding will be agreed between the Monitoring Group and the Trustees describing the interaction of the Monitoring Group with the Trustees. Under the proposal, the initial members of the Monitoring Group would be:
    • the responsible member of the European Commission,
    • the managing director of the International Monetary Fund,
    • the chair of the IOSCO Emerging Markets Committee,
    • the chair of the IOSCO Technical Committee,
    • the commissioner of the Japan Financial Services Agency,
    • the chairman of the US Securities and Exchange Commission, and
    • the president of the World Bank.
  • IASB size and composition.The proposal would expand the IASB from 14 to 16 members by not later than 1 July 2012. Up to three members could be part-time. Approval of IFRSs and EDs would require 10 affirmative votes (9 if there are fewer than 16 IASB members serving). The proposal would also adopt new guidelines regarding the geographical diversity of the members of the IASB. The required geographical split of the IASB would be:
    • four members from the Asia/Oceania region,
    • four members from Europe,
    • four members from North America,
    • one member from Africa,
    • one member from South America, and
    • two members appointed from any area, subject to maintaining overall geographical balance.

Comment deadline is 20 September 2008. The Trustees expect to reach final decisions on this part of the Constitution Review at their meeting in Beijing on 9-10 October 2008. The changes would take effect from 1 January 2009. Click for Press Release (PDF 52k). You can download the proposal from www.iasb.org. The second part of the Constitution Review, covering other aspects of the IASC Foundation's Constitution, will begin after the Trustees' October 2008 meeting. The Trustees will publish a further discussion document inviting respondents to suggest topics for consideration by the Trustees. Consultations will be held during the course of 2009, with changes taking effect from 1 January 2010.

[MATCHED]September 2008: Our views on the IASCF constitution review proposals

In September 2008, Deloitte submitted a Letter of Comment (PDF 176k) on the IASCF Discussion Document Review of the IASC Foundation Constitution: Public Accountability and the Composition of the IASB: Proposals for Change. Below are excerpts from our letter:

We believe that in a number of areas the need for urgent action has meant that the Trustees may not have developed fully the detailed operations of the revised structure, or at least have not articulated these clearly in the proposals. Consequently, they are potentially ambiguous.

Monitoring group: We support the creation of a monitoring group as a way of creating a direct link between the IASC Foundation and very senior levels of official institutions with a legitimate interest in accounting standard-setting and transparency in financial reporting. However, the role of the monitoring group should be more clearly defined than it is in the discussion document.

IASB size and composition: With respect to the proposals affecting the IASB directly, we are not inclined to support increasing the size of the IASB from 14 to 16 members, but are willing to support such an increase to accommodate more part-time members. We do not believe that the Trustees have presented a convincing case to increase the size of the IASB and are concerned that the current size of 14 members is at the extreme upper end of operational efficiency. Nor do we support the introduction of any geographical formulation, quotas or other such limits.

[MATCHED]December 2008: IASCF seeks comments on Constitution review

On 8 December 2008, the Trustees of the International Accounting Standards Committee Foundation (IASCF) issued for comment a discussion document on the second part of the five-yearly review of the IASCF Constitution. The document addresses constitutional issues that were not covered in the first part of the review, such as:

  • whether the section of the constitution dealing with governance of the Foundation, which now mentions only the IASCF, should also refer to the new monitoring group proposed under part 1 of the Constitution Review
  • geographical mix of Trustees
  • effectiveness of Trustee oversight activities
  • funding arrangements
  • the IASB's agenda-setting procedures
  • the IASB's existing due process procedures
  • the possible need for 'fast track' due process procedures
  • principles-based approach to standards
  • whether the IASB should set standards for for not-for-profit entities and the public sector
  • procedures and composition of the Standards Advisory Council

Comments are due by 31 March 2009. The Trustees expect then to continue their consultations in a series of round-table meetings to encourage further debate and comment from stakeholders around the world. The Trustees plan to conclude the second part of the review at their meeting in October 2009. The amendments to the Constitution would take effect on or after 1 January 2010. Click for:

[MATCHED]January 2009: IASCF forms Monitoring Board, enlarges IASB

The IASC Foundation Trustees have announced important amendments to the IASCF Constitution effective 1 February 2009, including formation of a Monitoring Board and expansion of the IASB from 14 to 16 members. The Trustees approved the changes at their meeting in New Delhi, India, on 15 and 16 January 2009. The changes are the result of the first part of the IASCF Constitution Review 2008-2009. The second part of the review is currently ongoing (see story immediately above). Among the changes:

 

Monitoring Board

  • A Monitoring Board (MB) of public authorities has been formed. The goal is to enhance public accountability of the IASC Foundation while not impairing the independence of the standard-setting process. (During the Trustees' deliberations and due process leading to these Constitution changes, this body has been referred to as the 'Monitoring Group' rather than 'Monitoring Board'.)
  • The MB will initially comprise the relevant leaders of the European Commission, the Japanese Financial Services Agency, the US Securities and Exchange Commission, the Emerging Markets Committee of IOSCO, and the Technical Committee of IOSCO. The chairman of the Basel Committee on Banking Supervision will be a non-voting observer.
  • The MB will participate in the Trustee nomination process and approve appointments to the Trustees.
  • The MB will have oversight responsibilities in relation to the Trustees and their oversight of the IASB's activities, in particular the agenda-setting process and the 'IASB's efforts to improve the accuracy and effectiveness of financial reporting and to protect investors'.
  • The MB 'may refer accounting issues to, and will confer regarding these issues with, the Trustees and the IASB Chair'. The MG may request a meeting with 'the Chairpersons of the Trustees and the IASB'.
  • 'If the IASB determines that consideration of the issue(s) identified by the IASCF Monitoring Board is not advisable or that the issue(s) cannot be resolved within the time frame suggested by the Monitoring Board, the Trustees should:
    • Call on the IASB to undertake all reasonable efforts to consider issue(s) in a manner that is consistent with the public interest, taking into account the protection of investors.
    • Call on the IASB to explain its position through the Trustees regarding the IASB's position on the issue(s); and
    • Promptly notify the IASCF Monitoring Board of the IASB's position.
  • The IASCF has released the Memorandum of Understanding related to the Monitoring Board. This is in process of being signed by all parties.

International Accounting Standards Board

  • The IASB will increase from 14 to 16 members (with up to 3 part-time members) by 2012. To ensure a broad international diversity, by July 2012 there will normally be:
    • four members from the Asia/Oceania region;
    • four members from Europe;
    • four members from North America;
    • one member from Africa;
    • one member from South America; and
    • two members appointed from any area, subject to maintaining overall geographical balance.

Click for:

March 2009: Deloitte response to IASCF Constitution Review Part 2

Deloitte Touche Tohmatsu submitted a letter of comment in response to the invitation to comment from the IASC Foundation on the Review of the IASCF Constitution: Identifying Issues for Part 2 of the Review (PDF 165k). Among the ideas expressed in the letter:

 

  • 'Principles-based' standards. The Constitution should require that "the IASB should develop financial reporting standards that are based on 'clear principles'. We would use the phrase 'clear principles' in the Constitution in preference to 'principles-based', for which there is no consensus on what that phrase means".
  • IASB due process.The IASB should amend its Due Process Handbook to require the IASB to:
    • give constituents an opportunity to comment on the IASB's agenda and relative priorities
    • substantively redeliberate a preliminary view included in a discussion paper if there is a substantial un-orchestrated level of opposition to it
    • make a preliminary assessment of the practical and cost/benefit consequences of a particular approach before committing itself to that approach
    • conduct field tests when a proposal would change current practice in an untested way
  • Fast track changes to standards. We do not support creating a separate 'fast track' procedure for changes to IFRSs
  • Standards for not-for-profit entities and public sector entities. The IASB's primary function at present is 'private sector' financial reporting standards. We believe that this responsibility remains appropriate and should not change at this time. The IPSASB should be encouraged to continue to develop public sector standards based on IFRSs. In due course, although not as a current priority, the IASB should address issues in financial reporting by not-for-profit entities.
  • Collaboration. The Constitution should not be amended to encourage or require IASB collaboration with any specific organisations. The Constitution already permits such collaboration, and the IASB has been doing so quite successfully with a range of organisations.
  • Monitoring Board. The Constitution should be amended to incorporate several of the principles set out in the Memorandum of Understanding between the IASCF and the new Monitoring Board - specifically that the MoU does not alter the terms of the relationship between the Trustees and the IASB; nor does it alter the Trustees' responsibilities as described in the Constitution.
  • Standards Advisory Council. The Trustees develop criteria that will allow them to assess how effectively the IASB engages with and responds to the Standards Advisory Council.
  • Funding. We are firmly in favour of a principle that those parties who use the IASC Foundation 'works' (IFRSs and related documents) should bear the burden of funding the IASC Foundation's standard-setting activities. We believe that this is best left in the hands of local financial market regulators, who in turn should be responsible for raising the money from their constituents, including but not necessarily limited to preparer companies.
  • IASCF openness. 'Many of the criticisms being levelled at the IASCF and the Trustees in particular stem from a lack of transparency and understanding around what they do and how they do it. We encourage the Trustees to prepare a document that explains their operating procedures and how they exercise their oversight functions.'
  • IASCF CEO. We favour appointing a CEO of the IASCF, one who is not a member of the IASB or the IASB/IFRIC staff

[MATCHED]June 2009: IASCF plans round-tables for Constitution Review Part Two

The Trustees of the IASC Foundation have today announced the following dates for public round-table discussions relating to the second part of the 2009 Constitution Review:

  • London, 9 September 2009
  • New York, 6 October 2009
  • Tokyo, 21 October 2009

The purpose of the round-table discussions is to provide another way, in addition to the formal comment processes, to seek a range of views from interested parties about possible changes to the IASC Foundation's Constitution. The IASC Foundation will post the relevant discussion document at a later date. Part One of the constitution review, concluded in January 2009, resulted in formation of an IASCF Monitoring Boardand expansion of the IASB from 14 to 16 members. Issues being addressed in Part Two of the review include:

  • whether the section of the constitution dealing with governance of the Foundation, which now mentions only the IASCF, should also refer to the new Monitoring Board adopted under part 1 of the Constitution Review
  • geographical mix of Trustees
  • effectiveness of Trustee oversight activities
  • funding arrangements
  • the IASB's agenda-setting procedures
  • the IASB's existing due process procedures
  • the possible need for 'fast track' due process procedures
  • principles-based approach to standards
  • whether the IASB should set standards for for not-for-profit entities and the public sector
  • procedures and composition of the Standards Advisory Council

July 2009: Discussion IASCF Constitution review at 7 July 2009 IASCF Trustees meeting in Amsterdam

The IASCF Trustees reviewed the staff proposals for changes to the IASCF Constitution. These had been previewed during the meeting with the Monitoring Board on 6 July. The Trustees agreed that the Invitation to Comment would propose the following changes to the Constitution:

  • Section 1 (Name): that the name of the organisation be changed from the IASC Foundation to the IFRS Foundation; and that the IASB be renamed the International Financial Reporting Standards Board.
  • Section 2 (Objectives): that the Objectives include in (a) 'to develop, in the public interest, a single set of high quality, understandable, and enforceable and globally-accepted global accounting standards...'. No reference to principles-based is needed in the Constitution, that reference in the IASB's Due Process Handbook was thought sufficient.
  • Section 2 (Sectors and Consultation): the Trustees concluded that, for the period under review, the scope of the IASB's responsibility should not be expanded to other sectors (such as public sector accounting standards or not-for-profit entities). However, they did agree that the Constitution should be explicit that the IASB may and should consult with those bodies with a legitimate interest in financial reporting standards (not national standard-setters alone).
  • Section 3 (Governance): the position of the Monitoring Board in the governance structure of the organisation will be acknowledged in paragraph 3 of the Constitution and elaborated in sections 18-23. Section 3 would be amended to state that the governance of the organisation rests 'primarily' with the IASCF Trustees and other governing bodies as the IASCF shall appoint.
  • Sections 6 and 10 (Trustees): there will be specific mention of Africa and South America in the geographical distribution requirements for Trustees (leaving two 'at large' seats); and the Constitution should provide for at least two vice-chairmen.
  • Section 15 (Trustees' oversight of the IASB's agenda): the Trustees are to be consulted in the 'exceptional circumstances' in which the IASB is considering having an exposure period of less than 30 days (the shortest period permitted by the Constitution).
  • Section 30 (IASB): there should be two vice-chairmen of the IASB; the Trustees will consider whether the roles of the IASB Chairman and the CEO of the IASCF should be separated.
  • Section 32 (terms of IASB members): terms should be set at an initial term of 5 years renewable once for a further 3 years, unless the member is a potential chairman or vice-chairman, in which case the renewal would be for a further 5 years. (Flexibility on this matter was urged by many around the table; there was also considerable discussion of transitional arrangements for existing renewable appointments.)
  • Section 37 (IASB agenda setting): the required consultation with the IASCF Trustees and the SAC remain, decisions remaining with the IASB absolutely (no changes to the Constitution would e necessary). However, the IASB's Due Process Handbook would be amended to note that comments from constituents would be invited during this period (the agenda candidates and relative priorities are in publicly-available documents). It is likely that the onus would be on constituents to respond to these documents and they would not be the subject of a formal request for views.

Some Trustees noted that the Trustees' needed to be responsive to constituents' concerns about their oversight activities. This need was not something to be addressed in the Constitution itself, but elsewhere (Deloitte's comment letter recommended that the Trustees develop their own Handbook, describing their responsibilities and how they discharge them). The Constitution Committee is aware of the stress in this area and is likely to address it once the Constitution review is concluded.

The IASCF staff noted that they hoped to have the proposals issued by early August 2009 allowing for a three month comment period. It might be possible to analyse comments and propose final amendments to the Constitution at the January 2010 Trustees' meeting, or the April 2010 meeting at the latest. Round-table discussions during the exposure period are being arranged and will take place in London, New York and Tokyo. At each round-table, at least three members of the Trustees (the Chairman and some members of the Constitution Committee) will attend. 'Local' Trustees, if available, were also encouraged to attend. In addition, individual Trustees will interact with constituents in their own jurisdictions.

[MATCHED]September 2009: IASCF Proposals for constitution changes - part two

On 9 September 2009, the Trustees of the International Accounting Standards Committee Foundation (IASCF), the oversight body of the IASB, published for public comment proposals that form the second part of a two-part review of the IASC Foundation constitution. The objectives of the proposals are to enhance the governance of the organisation, improve the involvement of stakeholders with a broad range of perspectives in both developed and emerging markets, and make operational improvements.

 

  • Change of name of the IASC Foundation to the IFRS Foundation and the IASB to the IFRS Board
  • Replace all references to 'accounting standards' with 'financial reporting standards' throughout the constitution
  • Clarify the objectives of the organisation, in particular:
    • Clarify the need to take account of emerging economies and, as appropriate, the special needs of small and medium-sized entities, and
    • Not to broaden the scope to cover standards for public and not-for-profit entities
  • Clearly acknowledge the role the Monitoring Board now plays in the governance structure of the organisation
  • Formally recognise Africa and South America in the composition of the Trustees by requiring one Trustee from each of those two regions
  • Establish a procedure for an accelerated due process in exceptional circumstances
  • Provide for appointing up to two vice-chairmen for both the Trustees and the IFRS Board
  • Amend the length of a possible second term of the IFRS Board members to ensure appropriate turnover, as follows:
    • Board members would be appointed initially for a term of five years, with the option for renewal for a further three-year term. This will not apply to the Chairman and Vice-Chairman, who may be appointed for a second five-year term.
    • The Chairman or Vice-Chairman may not serve for longer than ten consecutive years.
  • Expressly provide that the IASB must consult the Trustees and the SAC when developing its technical agenda

Comments are requested by 30 November 2009. Click for:

[MATCHED]September 2009: Notes from IASCF constitution roundtable

The IASC Foundation held the first of the Roundtables on Part 2 of its Review of the Foundation's Constitution in London on 9 September. Gerrit Zalm, IASCF Chairman, chaired the sessions, accompanied by IASCF staff and Sir Bryan Nicholson, IASCF Trustee. Presented below are the preliminary and unofficial notes taken by Deloitte observers at the roundtable. Upcoming constitution roundtables are New York, 6 October 2009, and Tokyo, 21 October 2009.

Consistent themes

Several participants noted the great strides made by the IASCF and the IASB to improve its governance, structures, consultations, and other operational aspects of its activities, but noted that perceptions of the organisation were still often negative. The Trustees and the IASB needed to do all things necessary to reverse these perceptions. The amendments proposed by the Trustees could lay the foundations of such a shift in perception.

The participants expressed broad agreement with the majority of the proposals. Five areas were consistently highlighted.

Agenda setting

Participants want the Trustees to be bolder and require a formal public consultation, not necessarily annually but regularly, on the IASB's agenda and priorities. The SAC, even in its latest incarnation, is not able to represent all constituents. Consequently, to ensure that the IASB's agenda and the priority it assigns to the projects on it have the support of as many constituents as possible, public consultation is necessary. In the words of one participant, the IASB should make as much effort over setting the agenda as over the standards themselves.

The importance of establishing 'feedback mechanisms' on the IASB's agenda-setting activities that were, and were seen to be, an effective engagement with constituents, was mentioned by almost all participants.

Participants and Trustees expressed the hope that such a process could be developed without becoming overly bureaucratic.

IASB's Due Process

Many participants suggested that the IASB should be required to provide feedback to constituents, especially the SAC, about how it used the comments it received on agenda proposals and formal consultation documents, not only where the Board accepted arguments, but as importantly why it did not accept those who disagreed with the proposal or offered an alternative approach. This feedback was seen by many as essential to maintaining the IASB's legitimacy as a responsible and responsive independent standard-setter.

Participants recommended that the IASB be required to undertake a substantive redeliberation of an issue in the face of a substantial, unorchestrated level of opposition to a principle. In addition, the IASB should be encouraged to conduct field tests of proposals that are controversial or change existing practice in an untested manner.

Fast-track Due Process

This was the topic that received the most comment. While some, including the European Commission representative, supported constitutional language to facilitate it, many were opposed. Those who were opposed noted that the current 30-day due process was the bare minimum that constituents, especially representative organisations, could reasonably be expected to consult and formulate a thoughtful response to a proposal. Others saw it simply as unnecessary and likely to be open to abuse.

IASCF Oversight

Most participants thought that the constitutional provisions for IASCF oversight of the IASB were sound, but that the operational aspects of those provisions (benchmarks, etc) should be documented properly so that constituents could make their own judgements about whether the Trustees (and Monitoring Board) were actually providing appropriate robust oversight of the IASB.

Funding

Many participants, while acknowledging that the IASCF had a difficult task negotiating with so many different jurisdictions and regions, noted that the IASCF needed to establish a sustainable funding regime as quickly as possible. Adequate funding helped to insure independence, while a lack of independence brought with it the danger of retreating from due process. While noting the European Commission's proposal for EU-level finding, participants noted that such funding might not be as desirable (or sustainable) as funding from preparer companies and users of the financial statements.

Other issues

  • Some participants commented on the proposals for IASB members' terms: while most accepted the '5 years + 3' proposal, some urged that flexibility was more important subject to an overall maximum term (as now). There was a worry that experience could be lost and that there could be disruption to the standard-setting activities as a result.
  • Some participants thought that the IASCF's relationship with the Monitoring Board was still unclear and should be clarified. The Trustees had stated that it was separate from or outside the IASCF 'envelope' and yet the operations of the IASCF and the Monitoring Board seemed to contradict that statement.
  • Many participants supported the possibility to appoint up to two vice-chairmen for each of the IASCF and IASB, seeing that this would help with the outreach activities of both parts of the organisation.
  • Some participants wanted a stronger statement in the Constitution about the role and interest of prudential regulators in the activities of and standards issued by the IASB. However, other participants were equally strongly of the view that the investor community should be recognised as the primary user group. Prudential regulators have extra powers that enable them to obtain additional information from entities - a power not available to investors. However, participants agreed that there should be dialogue between the IASB and prudential regulators and others with legitimate interests in financial reporting standards.
  • There were varying degrees of enthusiasm for the change of name, with some seeing it as vital and others mostly irrelevant.

[MATCHED]November 2009: We comment on IASCF Constitution proposals

On 9 September 2009, the Trustees of the IASC Foundation (IASCF) published for public comment Proposals to Change the IASCF Constitution arising from the second part of their two-part review of the IASCF Constitution. The objectives of the proposals are to enhance the governance of the organisation, improve the involvement of stakeholders with a broad range of perspectives in both developed and emerging markets, and make operational improvements. Deloitte has submitted a Letteer of Commeont on Part 2 of the Constitution Review: Proposals for Enhanced Public Accountability (PDF 77k).

 

We think that the Trustees' proposals with respect to consultation on the IASB's technical agenda and priorities do not go far enough. In our view, the Constitution should require the IASB to consult formally with constituents on a regular basis about the topics on its technical agenda and the relative priorities that have been assigned to those topics. The comment period must give constituents a realistic opportunity to comment on these matters.

We also recommend that the positions of IASB Chair and Chief Executive Officer of the IASC Foundation be separated. The IASCF and the IASB are under increasing public scrutiny from many jurisdictions and it is vitally important that there be no conflict of interest (real or perceived) between the roles of IASB Chairman and the chief executive of its oversight body.

We do not support the proposal to allow the Trustees, in exceptional circumstances, to authorise a shorter due process period. In order to maintain its credibility as an international standard-setter, the International Accounting Standards Board must expose all proposals for a period of time that affords all constituents a reasonable opportunity to understand, digest and comment on the IASB's proposals. As explained in Appendix A, our view is that permitting anything less than 30 days cannot be said to be proper 'due process'.

Finally, we have concerns about the operations and output of the International Financial Reporting Interpretations Committee. We do not wish to see the IFRIC become an urgent issues group, but we think that there are issues that could be addressed efficiently by the IFRIC, but which - because of the Constitution's mandate for the IFRIC and the operating procedures documented in the IFRIC's Due Process Handbook - are referred to the IASB for action. In Appendix B we offer some suggestions about how the IFRIC's role and mandate could be reformed to make better use of the Committee.

[MATCHED]February 2010: IASCF Trustees complete Constitution Review Part 2

The Trustees of the IASC Foundation, the oversight body of the IASB, have comleted part two of the 2008-2010 Constitution Review - announcing a number of changes aimed at enhancing public accountability, stakeholder engagement, and operational effectiveness. The changes include:

  • Introduction of three-yearly public consultations on the IASB's technical agenda: In addition to consulting the Trustees and its advisory council annually on the existing and future agenda, the IASB will undertake a three-yearly public consultation on its future technical agenda.
  • Emphasis on adoption of IFRSs: The Constitution will emphasise that convergence is a strategy aimed at promoting and facilitating the adoption of IFRSs, but is not an objective by itself.
  • A commitment to a 'principle-based' approach: The Constitution will call for IFRSs 'based upon clearly articulated principles'.
  • Specific designation of investors: The new Constitution specifically identifies investors as a target audience for financial information (in addition to other participants in the world's capital markets and other users of financial information).
  • A requirement for due process and the introduction of an emergency procedure: The Constitution will include a provision for an accelerated due process only in the most exceptional circumstances and only after approval by at least 75 per cent of the Trustees.
  • Creation of vice chairs for both the Trustees and the IASB: The new Constitution will establish the possibility of two vice chairs for both the Trustees and the IASB. This will both ease the burden on the chair, and give the option of wider geographical distribution in the leadership.
  • Improved language to account for a broad range of stakeholders, both by type and location: The Constitution will note the need to 'take account of, as appropriate, the needs of a range of sizes and types of entities in diverse economic settings'.
  • Reduction in duration of possible second term of IASB members to ensure practical experience: While the Constitution will still permit the possibility of a second term for IASB members, the Trustees have reduced the second term from five years to three for IASB members not serving as the chair or a vice chair.
  • Names in use across the organisation to be streamlined: The names in use across the organisation will be more closely aligned with the standards. The IASC Foundation will become the IFRS Foundation, as soon as the practical arrangements can be made. The interpretations committee and advisory council will be known as the IFRS Interpretations Committee and IFRS Advisory Council, respectively. Stakeholders supported retaining the name of the IASB, and the Trustees concurred.

The changes take effect 1 March 2010. Click for IASCF Press Release (PDF 109k).

[MATCHED]March 2010: Constitution changes take effect

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At their meeting in Brazil on 26 and 27 January 2010, the Trustees of the IASC Foundation approved changes to the Foundation's Constitution. Those changes took effect on 1 March 2010. Click here for Details of the Various Constitution Changes. One of the changes was to rename three groups in the organisation to be more closely aligned with the standards (IFRSs), as follows:

  • The IASC Foundation has become the IFRS Foundation
  • The International Financial Reporting Interpretations Committee is now the IFRS Interpretations Committee
  • The Standards Advisory Council is now the IFRS Advisory Council

Click here for Revised Constitution.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.