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February 25, 2014

IASB to reopen constitutional review in 2015

The International Accounting Standards Board (IASB) will be subject to a review of its internal structure in 2015 in light of the challenges and priorities imposed by an evolving standard-setting scenario, the IFRS Foundation has announced.

The IFRS Foundation, the IASB’s oversight body, said that factors such as the introduction of "more sophisticated IASB outreach and stakeholder engagement programmes, as well as the end of the convergence programme", make necessary the constitutional review.

In particular, the IFRS Foundation will seek feedback on the appropriate size of the IASB. In that respect four of the IASB’s 16 members are due to complete their terms in 30 June 2014.

Two of them, Amaro Luiz de Oliveira Gomes and Patrick Finnegan, have now been reappointed for second five-year terms respectively.

The other two are Jan Engström, who is not eligible for reappointment, and Patricia McConnell, who didn’t want to be considered for a second term.

IASB of 14 membersThe IFRS Foundation said it will postpone these appointments, "in order not to predetermine the outcome of the 2015 review" and the IASB will work with 14 members in the interim period.

In 2008 the International Accounting Standards Committee (IASC) Foundation, now the IFRS Foundation, started a review which involved expanding the number of IASB members from 14 to 16 and ensuring geographical diversity.

Back then, there was some criticism regarding the extension of the board’s membership to 16, with many stakeholders suggesting 14 was already too many to work efficiently.

The then Institute of Chartered Accountants in England and Wales financial reporting committee chair Kathryn Cearns said the prospect of 16 members was "quite troubling" for two reasons.

First, the potential of seizing up the decision making process. And second, the possibility of "options creeping in" making standards weaker.

During the previous constitutional debate there were also concerns over the proposed geographic spread of board members, which could prevent the most suitably qualified candidates being selected.

Ernst & Young (currently EY) global technical director of IFRS services Leo van der Tas said at the time that it was logical to have some sort of geographic spread so people know they are being heard. But "quality comes first, and then representation," he said.

IFRS Foundation Trustees chairman Michel Prada, said in a statement this week that the decision to consider the optimum size of the IASB as part of the 2015 constitutional review "reflects changes to the international standard-setting landscape and a maturing of the IASB and its various advisory and consultative mechanisms."

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