The trustees of the IFRS Foundation, responsible for the governance and oversight of the International Accounting Standards Board (IASB), have outlined plans for changes in its structure and activities, following a review conducted during a ‘challenging’ year with the launch of a three-month consultation
The trustees have pledged to retain the current ‘three-pillar’ funding model, which includes contributions from jurisdictions, entities and organisations around the world, ‘until the funding regime based on publicly supported financing is fully achieved’.
Earlier this year the IASB reported a £1m drop in comprehensive income to £2.7m in 2015, down from £3.7m in 2014.
After criticisms of governance standards at the IASB, trustee oversight of the standard-setter will be strengthened and in future meetings of the due process oversight committee will be made public. The existing three-tier governance structure will remain.
The size of the IASB board will be reduced from 16 to 13 members, with the flexibility to appoint a 14th (at-large) member if appropriate.
The trustees are also proposing dropping quotas for the board by removing the sentence in the constitution that refers to two trustees normally being senior partners of prominent international accounting firms.
There will be a number of changes to the constitution, including combining the morth American and south American allocations into a single ‘Americas’ category, to allow for even distribution and better representation across the entire region.
Parallel to the trustees’ review, the IASB has also been consulting on its own future agenda and the conclusions of that review will be published later this year.
The trustees have proposed amendments to the constitution to facilitate the proposed changes to the governance and funding of the IFRS Foundation.
Masamichi Kono, chair of the IFRS Foundation monitoring board, said earlier this year in his review of ‘a very challenging year’, that the board was ‘quite sensitive’ to comments it spent too much time on organisational matters such as trustee appointments and membership issues, rather than exercising proper public interest oversight over the Foundation’s activities.
The IASB will retain its existing focus on for-profit entities, with the trustees ruling out any expansion at this time to cover either the public sector or the private not-for-profit sector.
The latest review, the fifth such assessment by the trustees, states: ‘While the focus of the board will remain on financial reporting, further work will be done to consider the board’s future role and work plan within the context of developments in wider corporate reporting.’
As part of this, the IASB will now accelerate work to address barriers to digital reporting by collaborating with investors, securities regulators and others to ensure the IFRS taxonomy can match current requirements. The Foundation says it will establish a network of experts to provide advice on technological innovation and its impact and relevance to IFRS standards.
As regards the focus of its activities, the trustees say IASB will be putting more emphasis going forward on activities to support the consistent application of IFRS standards. To support this change of emphasis, there will be a realignment of education, implementation support and interpretation activities into a single team, and IASB will develop more online resources designed to support the consistent implementation of new standards.
Michel Prada, chair of the trustees, said: ‘The changes announced today enhance the institutional underpinnings of the IFRS Foundation and equip it to further develop its capability as the world’s accounting standard-setter.’
The deadline for comment is 15 September 2016.
The Feedback Statement on the July 2015 Request for Views on the proposals is here
