IFRS Foundation Calls for Nominees for Accounting Standards Forum

The IFRS Foundation, which oversees the International Accounting Standards Board, invited nominations for membership in its Accounting Standards Advisory Forum on Friday as it moves toward a more multilateral way of setting accounting standards with involvement from more parts of the world than the U.S. and Europe.

Amid continuing uncertainty over whether the U.S. Securities and Exchange Commission will ever ratify use of International Financial Reporting Standards by U.S. companies and a prolonged convergence process that has taken more than a decade to harmonize IFRS with U.S. GAAP, the IASB and the IFRS Foundation have proposed the new forum as a way to satisfy demands by other countries to play a greater role in developing IFRS. The U.S. Financial Accounting Standards Board is likely to have a representative on the new forum so it can continue to play a role in developing standards after the bilateral convergence process comes to an end (see IASB Plans to Give FASB Leeway to Join New Accounting Standards Forum).

In a statement summarizing the feedback to its proposals, the IFRS Foundation made a key concession that would allow representatives from countries that have not yet explicitly endorsed IFRS, like the U.S. and Japan, to have representatives on the new forum.

The IFRS Foundation issued a call for nominations for seats on the new forum on Friday, inviting candidates for membership in the Accounting Standards Advisory Forum. The document sets out the membership criteria and other factors that the IFRS Foundation will take into account in selecting the members of the forum, along with proposed Terms of Reference, along with a Memorandum of Understanding .

The ASAF will be chaired by the IASB and have 12 other members, with a geographical balance giving three seats to representatives from the Americas, three seats to Europe, one seat to Africa and two seats to the world at large.

The IFRS Foundation has also published a feedback statement analyzing the comments it received in response to its public consultation paper entitled “Invitation to Comment: Proposal to Establish an Accounting Standards Advisory Forum.” The consultation paper outlined proposals to create the Accounting Standards Advisory Forum, which would include national accounting standard-setters and regional bodies associated with accounting standard-setting. The proposed creation of this group follows one of the main recommendations of the February 2012 report Strategy Review 2011 by the Trustees of the IFRS Foundation.

The responses to that consultation revealed a high level of support for establishing the ASAF as a means of securing a more streamlined and effective dialogue between the IASB and the global accounting standard-setting community. The feedback statement can be accessed on the IFRS Foundation’s website.

One of the major sticking points for the U.S. was a proposal that the members of the ASAF should commit to promote endorsement and adoption of IFRS. FASB had noted in its comment letter that the decision lay with the SEC, and not with the U.S. accounting standard-setters (see FASB Parent Supports New Accounting Standards Forum). The Accounting Standards Board of Japan has also not yet committed to IFRS.

In the feedback statement, the IFRS Foundation acknowledged this objection. “There were also a number of responses questioning how the commitments related to jurisdictions that had not committed to IFRS adoption,” it said. “One respondent questioned what the consequences are of not making ‘best efforts’ and other respondents requested clarification in the document on whether non-IFRS jurisdictions could become members and how the commitments could be matched to them. Another respondent went on to emphasize that participation by FASB and ASBJ is essential to international co-ordination and it is also important to recognize adoption of IFRS in their country is not exclusively within the control of standard-setters. It was highlighted that limited participation was not helpful to the ASAF and membership should be premised on obtaining the best and most useful feedback possible with the risk that the current commitments could result in members that are eligible to sign the MoU but are not best placed to be contributors.”

In response to such objections, the IFRS Foundation said it would respect the independence of ASAF members and recognize that they operate under their own specific national mandates, and undertake “not to undermine or compromise the existing legal rights and obligations of the ASAF members within their respective jurisdictions.” Specifically, the focus of the ASAF would be on “discussing major technical issues related to the IASB’s standard-setting activities, rather than the application and endorsement/adoption of standards.”

“I would like to express my thanks for the extremely thoughtful feedback provided in response to our proposals,” IFRS Foundation chairman Michel Prada said in a statement. “We have taken that feedback on board and today seek nominations for membership of the ASAF. The ASAF has an important role to play in our work to establish IFRS as the global language of financial reporting. Strengthening and streamlining our cooperation with members of the global standard-setting community will help us to deliver standards of the highest quality.”

The closing date for nominations for the ASAF is Feb. 28, 2013. The IFRS Foundation said it would consider all eligible candidates for selection and proposes to discuss shortlisted nominations with a range of relevant regional and other bodies. The IFS Foundation trustees will then approve the final membership of the ASAF. Subject to the progress of the selection process, the IASB has tentatively scheduled the first meeting of the ASAF for April 2013.