IASC Trustees Overhaul Constitution

The trustees of the International Accounting Standards Committee Foundation, which oversees the International Accounting Standards Board, have announced a series of changes to their constitution, including an emphasis on adoption of International Financial Reporting Standards over convergence.

“The constitution will emphasize that convergence is a strategy aimed at promoting and facilitating the adoption of IFRS, but is not an objective in itself.”

In a letter responding to a Financial Times article, IASC Foundation chairman Gerrit Zalm later clarified this statement. “The trustees of the IASC Foundation strongly support the work plan that the IASB has established with the U.S. Financial Accounting Standards Board, which will reduce the differences between and improve IFRS and U.S. standards,” he wrote. “By reducing differences and thereby reducing any cost of transition, convergence will ‘promote and facilitate’ the possible adoption of IFRS.”

Other changes in the constitution include creating vice chairman positions for both the IASC Foundation trustees and the IASB. This would probably occur after the term of the current IASB chairman, Sir David Tweedie, expires next year. The move is intended to ease the burden on the chairman and offer the option of wider geographical distribution in the leadership.

Other changes include conducting a public consultation on the IASB’s technical agenda every three years, a commitment to a principles-based approach, and the identification of investors as a target audience for financial information.

There is also now a requirement for due process in emergency procedures. 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 percent of the trustees. The IASB came under pressure during the financial crisis to quickly revise fair value accounting standards to respond to complaints that mark-to-market standards were forcing sudden write-downs in the value of banks’ assets.

In addition, the IASC Foundation will be renamed the IFRS Foundation, while the interpretations committee and advisory council will be known as the IFRS Interpretations Committee and IFRS Advisory Council, respectively. However, the trustees and other stakeholders decided to retain the name of the IASB, instead of renaming it as the IFRS Board.