the IASB thrust into the spotlight as the strength of IFRS has been
tested by the financial crisis. However, reflecting on the year as
a whole, deputy chair Tom Jones tells Carolyn Canham it has been a
time for laying the groundwork for the next big push in the
jurisdictions, including some of the world’s largest, are due to
adopt IFRS or converge it with local standards between 2011 and
2014. And the International Accounting Standards Board (IASB) wants
to be ready.
IASB deputy chair Tom Jones calls the period between now and
2011 the “next big push” and notes there have been many critics of
the tight programme and huge amount of work.
“People say, ‘you cannot do all that and have proper due
process’, but you can,” he argues. “You obviously have to set
priorities and with the right priorities, you can get things done
high quality, quite quickly. That’s the objective.”
The past year has been a time for laying the groundwork for the
run up to 2011.
One such accomplishment that particularly pleases Jones is the
work on the private entities standard.
He says that if the IASB manages to simplify three or four more
issues in January, it will be a terrific standard. Issues that
remain to be simplified include pensions, depreciation,
amortisation and financial instruments. The name is also still in
Another accomplishment Jones is happy with is the slow but
steady progress on insurance accounting.
“Insurance accounting around the world is broken,” he explains.
“The vast majority of people have no clue how insurance companies
account and they all account differently everywhere in the world. I
think the industry needs better, more common standards.
“We are making some progress. There is a lot of interest on the
project and not everybody is supportive but overall many people
welcome that we are addressing the issue.”
Other progress has been on more intractable problems such as
consolidation. Jones explains that while he thinks IFRS 7 is
“pretty good”, the financial crisis has shown it is not good
“There are two issues,” he explains. “One is we need to tinker
around with consolidation and derecognition and some of the
sensitivity stuff in our standards. But, more importantly, we need
to bring US and international standards together because even when
the standards have the exact same objective, if the words are
different we get picked apart.”
Another incentive for meeting the 2011 deadline is the
significant changes that will occur to the IASB board during the
next few years. All original board members will be gone by
“We don’t want these major standards to be finalised when half
the board is brand new and hasn’t had any knowledge of the process,
because they have got to vote and you can’t abstain, that is a ‘no’
vote,” Jones says. “So that is one more reason that we really need
to get a lot of these things done and finished before we have a new
He adds that it is appropriate there will be an entirely new
board following the completion of these major projects, as the
standard setter’s focus will change.
“The work in the first 10 years has been basically getting the
standards into some kind of shape so they can be used, and also to
attract major economies,” Jones explains.
“I think in a sense we will have achieved that in spades because
every major economy will be there.
“The job of the gang in the next 10 years will be to consolidate
that. They won’t be bringing major new economies onto the standards
because they are already there. But they will really need to clean
up, simplify, make it easier and it is a different kind of process,
so it may call for a slightly different kind of crew.”
While 2008 has seen no board member changes, there has been
shifts in the IASB’s senior staff.
Senior director positions were restructured following the
resignation of technical director Liz Hickey, who moved back to New
The restructure included moving former research director Wayne
Upton to the newly-created position of director of international
activities, which includes liaising with the major jurisdictions
that are moving to IFRS.
“We thought we had to pay more senior attention to countries
like China, India and many others who are moving,” Jones says.
He adds that changes within the staff are good because it means
new ideas, youthful enthusiasm and change.
“This is not an industry where you want 20- or 30-year seniority
in setting standards. Standard setting is a job to be done for a
few years and then to move on. And I am a firm believer in that,”
Jones says the past year has been a trial by fire for
international standards. The past few months have also been
something of a trial by fire for the board itself in terms of its
response to pressures arising from the financial crisis.
One issue that has come to the fore has been the balance between
the IASB’s independence and accountability.
On one hand, political leaders have been pressuring the board to
make hasty amendments to standards in response to the crisis; while
other stakeholders have loudly insisted the IASB stick to its due
process and remain free from political pressure.
Jones says it is a very fine balance, adding that what people
understand by independence is different from place to place, so
“there’s always room for a bit of pushing and shoving”.
“Clearly accounting standards cannot be set in any other way
than by an independent board. Standards set by people with an axe
to grind, or set with political objectives in mind, don’t work
because investors would not believe in the results they produce,”
The IASB almost always finds itself in middle ground, with
stakeholders making conflicting demands.
“Nothing we do has 100 percent support. If preparers like it,
you can bet it is not what users want. If users love it, the
preparers are going to object and the auditors are going to say ‘we
can’t audit that’ and the regulators will also have an opinion.
“So at the end of the day, independence is the wisdom to not
ignore real life, but also not to be blown away by someone who says
‘this entire crisis is caused by fair value’.”
Although the fair value debate may not be over, there could be
some positive outcomes already. The IASB’s rush to pass
reclassification amendments to IAS 39 and IFRS 7 cemented its
future commitment to stick to due process. Yet the board has also
recognised political concerns that an accelerated due process may
be needed for urgent matters. The IASB’s oversight body, the
International Accounting Standards Committee Foundation, is
currently seeking comments on this as part of its constitution
“Most countries absolutely understand that you can’t have
standards for accounting written by politicians because it would
never, ever, in a million years work. So maybe we are all a bit
wiser,” Jones adds.
The IASB works closely with standard setters and regulators the
world over, but its relationships with some attract more attention
than others. The US is one particular focus due to the challenges
associated with bringing the world’s largest economy towards
The US is in a transitional stage not only in accounting, but
also in politics, with a new administration taking office in
January. Key appointments still to be made include the chair and
chief accountant of the Securities and Exchange Commission (SEC).
The men currently in those positions, Christopher Cox and Conrad
Hewitt respectively, have been IFRS advocates.
The train is moving
Jones says that changes in
government and within the SEC will likely not have significant
effect on the push to IFRS because it is driven by markets.
“The train is moving and it probably does not make such a big
difference who is in charge or who is making the decision. I think
you are going to find that it is driven by markets and the US is
going to continue moving,” he says.
Jones adds that the IASB’s relationship with the US Financial
Accounting Standards Board is very good.
“They are very co-operative, they share our objectives, we get
on quite well on the whole,” he says.
He describes the board’s relationship with the EC as a
“multi-faceted kind of relationship” and notes the relationship has
become more complex due to the greater role of the European
“Now we talk with the Commission and the Parliament and the
Ecofin and the [European Financial Reporting Advisory Group –
EFRAG],” he adds.
Jones says it is a little unfortunate the IASB and the
Commission did not understand each other better in the past, which
led to issues such as the carve-out in IAS 39.
“It is being used by very few companies, but it exists and that
does detract from the decision Europe made to use IFRS because they
wanted to use international standards. It gives an excuse for
countries to say ‘if Europe can carve out, we can carve out’,”
“There are some unfortunate things from history, but I would say
the relationship has improved.”
The landscape in Europe is set to change again with a move
towards a larger and better-funded EFRAG. Jones welcomes this
“We have always felt it was better for Europe to have a more
unified voice and we support the coming together of the national
standard setters and EFRAG,” he says.
While the financial crisis may have proven a valuable test for
the IASB and its standards, Jones is looking forward to seeing the
end of it.
Looking towards 2009, his first wish is that the economic crisis
begins to ease as it is “keeping everybody’s attention”.
“It is much deeper than we would have predicted a few months ago
and it is very hard for people to focus on changes down the road
when they are dealing with the fire right outside the door,” he
“On the other hand, despite all the doom and gloom, these things
eventually pass, the question is ‘how quickly?’. I think we have to
hope that 2009 sees a bottom to that and the start of an