governance and board
The International Accounting Standards Board (IASB) could
change its governance structure and board composition in the coming
12 months, according to chairman David Tweedie. In a frank
interview, Tweedie also revealed the IASB would have done things
differently had it been afforded more time to properly redevelop
and roll out IFRS.
The head standard setter predicts a monitoring body
could soon be set up, possibly composed of securities regulators
and major financial institutions such as the World Bank, to monitor
the activities of the International Accounting Standards Committee
Foundation trustees. The trustees are responsible for making IASB
board appointments, funding arrangements and tackling governance
issues. A monitoring body has also been mooted by the International
Organization of Securities Commissions and several regulators, such
as the US Securities and Exchange Commission, as a means of
injecting transparency into the role of the trustees.
The current governance structure was modelled on that of the US
Financial Accounting Standards Board, but with one notable
difference. “What we missed out [on] was that in America, above the
[FASB] trustees is the SEC, which is ultimately responsible,”
Tweedie said, while adding that IASB governance is still widely
recognised as being transparent. “We don’t have that [oversight]
and that’s what the concern is and I think it’s legitimate. What
the trustees have proposed is that sitting above us we have some
monitoring body to make sure the trustees are doing their job. They
have the right to veto if they don’t like an appointment or things
like that.”
Improved funding
Another IASB concern often expressed by regulators
has been the board’s funding structure. Tweedie said this has
improved over the past few years and funds are being levied from
listed companies in most countries in proportion to the size of
their GDP.
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By GlobalData“We reckon next year there will be close to 10,000 companies paying
as opposed to 200 three years ago. So the funding has changed and
ideally the best thing is levying all stock exchanges, therefore
it’s fair,” he said.
Another likely change to the IASB, which Tweedie flagged, is the
composition and size of the board. When it was formed in 2001, the
aim was to recruit the top global technical experts, often from the
more developed professions such as those in the US and UK. But due
to the rapid spread of IFRS, which has now reached 109 countries,
there is a desire to make board representation more global.
Tweedie said: “Now we’re in a different situation in which we’ve
got people saying wait a minute, at the moment we’re five
Europeans, and four North Americans, that’s nine out of 14, and
five for the rest of the world. I think there will be pressure to
reduce the European and North American contingent, maybe even
increase the size of the board. We could start seeing a minimum
from Asia and Oceania, North America and Europe… that’s how it
should be.”
Tweedie said there could soon be a need to increase the size of the
IASB’s work force and introduce regional branches, especially if
the US comes on board with IFRS.
Not enough time
Although the rapid spread of IFRS globally has been
viewed by some financial commentators as a success, Tweedie told
TA he would have preferred more time for the IASB to
redevelop standards instead of “a scissor and paste job” on the set
of 34 standards it inherited from its predecessor. The rushed
schedule was partly the result of the European Commission requiring
listed companies to use IFRS by 2005.
“If it happened that in 2001 I had been given a free run to 2008,
we wouldn’t have had 109 countries using the standards, but we
would have a good set of standards. I had no option, but if I did I
would have said ‘give us five or six years to sort this out’ and
that would have been good,” he said.
Tweedie described some of parts of IFRS as embarrassing, including
IAS 39 Financial Instruments, a “nightmare of a standard” he voted
against. Next year the IASB will focus on improving this standard,
as well as a discussion paper that tackles accounting problems
associated with the liquidity crisis.
