The monitoring body of the IFRS Foundation has said convergence must not be a substitute for adoption of IFRS in the push towards one set of global accounting standards.
In its strategic review of the IFRS Foundation, the IFRS Trustees reaffirmed the commitment to their vision of IFRSs, as developed by the International Accounting Standards Board (IASB), saying the standards should be adopted in their ‘entirety and without modification’.
This affirmation is poignant because one of the main focuses in the first decade of the IASB has been convergence, particularly with US GAAP although the Trustees assume there will be a positive response on adoption from the US and other large economies such as Japan soon.
The Trustees state that ‘failure to make such commitments’ may result in the strategy being re-reviewed subsequently leading to changes to the Trustees and the IASB composition.
Another important recommendation is for the Foundation to work with national and international market and audit regulators, accounting standard-setters, regional bodies and accountancy bodies to find out ‘where adoption of IFRSs is incomplete or where there is divergence from the full set of IFRSs as issued by the IASB’.
The Trustees also called for the Foundation to work towards gaining a better understanding of how standards are being implemented around the world to improve the quality of the IFRSs.
The IFRS Foundation Monitoring Board then underlined the importance of the standard setter’s independence, with regards to accounting standard-setting and the selection of board membership especially on the back of much political pressure in the years since the financial crisis, in its governance review.
However, the Monitoring Board said there was opportunity for ‘improved communications and procedures in relation to the IASB agenda and chairmanship without infringing on its independence’ to ensure selections will position the IASB to fulfil capital markets’ demands for high quality standards.
“We strongly believe that the measures identified herein will further improve the current governance mechanism while enhancing transparency of its performance. We hope that increased accountability will be reflected through stakeholders’ confidence in the standard-setter and hence IFRSs.” IFRS Foundation Monitoring Board acting chairman Masamichi Kono said.
The two monitoring bodies reaffirmed their commitment to continue to work closely “for a full implementation of the ideas contained in this joint package”.