The International Accounting Standards Board
(IASB) could be forced to scale back future outreach activities if
more secure funding is not found, warned Gerrit Zalm.

The IASB will run up a deficit to complete its
outreach projects in 2010-11 and Zalm said the back-up plan for
future years could be “rather nasty” due to a shortfall of

Zalm chairs the IFRS Foundation, which
oversees the IASB.

He told a recent IFRS Foundation
monitoring board meeting the foundation has struggled with the
IASB’s budget for 2010-11 because present funding is not enough to
cover the existing work plan, plus additional outreach activities
that have been introduced.


Widespread support

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By GlobalData

The outreach activities have included more
extensive public consultations and round tables and have been
widely welcomed by stakeholders.

“We were able to, through [our] reserves, make
this happen. But at the same time we also know that if the
financing in the long term is not improved, we will have to scale
back the activities,” Zalm said.

Zalm said the biggest gap in financial
contributions to the IASB comes from the US, but there is also a
potential gap in European financing.

The loss of a few big contributors, such as
Lehman Brothers and Bear Stearns, will make the gap from the US
more severe. In 2008, Lehman donated more than £100,000 of the
total US contribution of £1.9m ($2.9m).

The US contribution has traditionally been far
less than Europe’s.

In 2008, Europe’s three largest donors –
Germany, the UK and Italy – combined contributed 25 percent more
than the US. The three countries’ combined GDP in 2009 was equal to
about half the US GDP.

US Securities and Exchange Commission chair
Mary Schapiro (SEC) said the SEC is “working very hard on a short
term and long term stable lasting approach” to the IASB’s funding

“I would ask that the US trustees work
particularly closely with the staff of the SEC to help us come to
some kind of conclusion about how we can fill some of the gaps,”
she said at the monitoring board meeting.


Cool reception

Zalm received a far cooler response from the
EC representative.

Europe’s contributions to date have come from
individual countries and varied widely. For example, in 2008
Europe’s largest economy Germany contributed more then £1m, while
the second largest economy France contributed nothing.

France was expected to begin contributing in
2009, with a levy system supported by the Ministry of Finance
expected to add €1m.

The EU last year adopted a legal basis to fund
the IASB from 2011. This would replace individual country

Zalm said the planned EC contribution of €4m
($5.43m) is based on the budget of 2004-2005, and asked
whether that can be “updated towards the more relevant demand for
money for the coming years”.

But EC Internal Markets and Services
Commissioner Michel Barnier said it is premature to expect an
increased EC contribution.

“First other jurisdictions must make an
additional effort,” he said.

Barnier also warned the funding is not
automatic and must be approved every year both by the European
Council and the European Parliament.

“This is not a formality and I want to work
very closely with the council and the parliament,” he said.


Asian support

Zalm said the IFRS Foundation’s Asian and
Oceania colleagues are very active in getting contributions from
more countries in those regions.

“I think that if we would be able to solve the
American gap and potential European gap, then our financing needs
are far less and we can be more comfortable about the activities of
the IASB with the present uncertainties,” he said.

“We took a bit of a gamble by using our
reserves for 2010 and 2011. Of course we have a contingency plan
there that if the level stays as it is, the organisation can still
survive, but that will mean a real cutting down in activities
compared to what the IASB is doing now.”

Outreach and satellite offices would be the
areas to suffer the most from a lack of finding.

“We can finance outreach activities in 2010
and 2011 because then we run a deficit but we cannot do it if there
is no supplementary funding for the years later,” Zalm said. “So up
until now in our financial planning, there is no satellite, either
in North America, or in Asia, although we wished to have that.

“Before we can decide on that, we need to have
a better funding position. We cannot sell the skin of the bear
before we have shot it. We hope you will help us shoot the bear and
then we can sell the skin and then we can also do these outreach
activities and these satellite activities as we would wish to