The Trustees of the IFRS Foundation, the oversight body of the International Accounting Standards Board, are reassessing its structure and effectiveness.
The foundation’s Constitution requires the trustees to undertake a review of the structure and effectiveness of the organization every five years. Previous reviews in 2005, 2010 and 2012 recommended significant enhancements to the governance, accountability and operational efficiency of the IFRS Foundation and the IASB, while a governance review by the IFRS Foundation Monitoring Board was completed in 2012. The recommendations of all reviews have been implemented.
The review comes at a critical time for International Financial Reporting Standards. The IASB and the Financial Accounting Standards Board are considering a one-year deferral of the effective date of the converged revenue recognition standard that the two boards released last year after more than a decade of work. The two boards have yet to finalize their long-awaited leasing standard, although it is expected to be released later this year, albeit with some key differences between the IFRS and U.S. GAAP versions.
The IASB released IFRS 9, its financial instruments standard last year, while FASB has not yet released its financial instruments standard. A FASB spokesperson said it too is expected to be released by the end of this year. However, the two boards again failed to come to an agreement on some key elements of the standard, including the treatment of credit losses and loan impairments. The European Union has not yet endorsed IFRS 9, as some groups in Europe continue to disagree with the approach that the new standard takes on treating credit losses by banks.
On Tuesday the IFRS Foundation published proposals to further enhance the structure and effectiveness of the foundation and is asking for comments. The 2015 review will focus on three main areas:
1. Ensuring that the relevance of IFRS is maintained: considering the evolving financial, and wider corporate, reporting landscape, as well as potential implications of technological developments for financial reporting;
2. Consistency of the application of IFRS: looking at the IFRS Foundation’s approach to supporting the consistent application of IFRS and whether there is anything more it could, or should, be doing considering the limitations; and
3. Governance and financing: proposing further enhancements, including changes with respect to the size of the IASB.
“Previous reviews have significantly strengthened the public accountability and institutional underpinnings of the IFRS Foundation and the IASB,” said IFRS Foundation chairman Michel Prada in a statement. “Today we are seeking public comment on what further enhancements can be made, and how the IFRS Foundation should respond to an ever-changing reporting landscape. The Trustees welcome all feedback and encourage interested parties to participate in this important review.”
The Request for Views document can be accessed here. The closing date for comments is Nov. 30, 2015.
The IASB plans to issue soon a document for public comment on its Agenda Consultation. Stakeholders can refer to both documents when considering how to respond.
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