16th February 2010:

A missed opportunity

In the past several months I have done my best to support the adoption of IFRS as the accounting standard of choice – and the only one suitable to be the single high quality global accounting standard as requested by the G20.  I have done so recognising that IFRS is not perfect (but what is?) but that it is the best we have and that it is pretty good.  I have also recognised that changes will be needed to the governance of the IASB – not least to address concerns in the USA and the EU.
 
I was thus disappointed that the IASCF (the oversight body of the IASB) issued a Press Release earlier this week setting out proposed changes to the governance structure which in many respects seem to me to be too timid.
 
Some of the IASCF’s changes are welcome, in particular the creation of a vice chair for the IASB so that the current role of the chair can be split, but it seems to me this Press Release is seeking to give the impression that all the necessary changes are being made when in my view they are not.  We need a more fundamental review which acknowledges the changes that will be required over the coming years as a number of additional, significant jurisdictions adopt IFRS, and which looks ahead to what a truly global standard setter will require. Further, I think the explanation for the reason for creating a vice chair (to “... ease the burden on the chair, and give the option of wider geographical distribution in the leadership) fails to recognise that the issue is not just one of geography or workload, but also includes the need to have someone who can handle the technical aspects of the role and someone else who can handle the diplomatic/political aspects of the role (ie a Chair and a CEO not a Chair and a Vice Chair).
 
It would be appropriate for the Trustees of the IASCF to state that they know more far reaching governance changes will be needed both to retain the support of existing constituents, and to gain this from those jurisdictions that are looking ahead to the adoption of IFRS.  This, of course, includes the EU and the US, but extends more widely to the many other countries that either have already adopted, or will soon adopt, IFRS.  While there is mention in the Press Release of a review this year for the strategy in the period post June 2011, there needs to be a clear signal that there will be a further overall review of the constitution in the near term.  At the IASCF round table meeting held in London in September of last year, we called for the next review of the constitution to be accelerated to take place well before the next required date.  While the current arrangements do allow for this, I would encourage the IASCF to signal that they will do just that, and that they look forward to actively engaging with the relevant bodies in the US, EU and elsewhere to secure their support for a more fundamental reconsideration of the governance model.

 Global Accounting  Standards & Regulators  2 Comments February 16th, 2010