Monitoring Board Releases Report, Seeks Comment On IFRS Foundation Governance
Feb. 7, 2011
On Feb. 7, 2011 the Monitoring Board of the International Financial Reporting Standards Foundation released its report on the IFRS Foundation's Governance. (See press release, report.) The Monitoring Board seeks comment on the fourteen recommendations included in the eport, and raises questions about three additional areas, including a general request for comment. The sixty-day comment period (referred to as the 'consultation period') ends on April 8.
Three recommendations directed at the IASB:
1. Undertake concrete efforts to improve identification of candidates to ensure IASB membership from diverse geographical and professional backgrounds in order to provide for further objectivity and impartiality of the decision-making process, while maintaining professional competence and practical experience as the primary qualifications.
2. Separate the roles of the IASB Chair and the CEO of the Foundation to safeguard the independence of the standard-setting process led by the IASB Chair and to avoid undue conflicts of interest as the CEO of the Foundation manages all the other aspects of the Foundation’s functions, including IASB oversight.
3. Consider clearer division of responsibility between staff dedicated to the IASB’s operations and staff dedicated to the Foundation’s administrative and oversight functions.
Two recommendations directed at the IFRS Foundation Trustees:
1. Continue to review the diversity of geographical and professional background of the Trustees so as to provide for objectivity and impartiality of the decision-making process.
2. Devise formal procedures and clearer criteria for the nomination of candidates and appointment of Trustees accountable to the stated objectives for the IFRS Foundation.
Nine recommendations directed at the Monitoring Board:
1. Expand the membership to [eleven] members to include more capital markets authorities responsible for setting the form and content of financial reporting in respective jurisdictions, focusing on increased representation from major emerging markets. [Four] new members primarily from major emerging markets would be added on a permanent basis and [two] additional seats would rotate amongst authorities not permanently represented. The use of IFRSs in a jurisdiction and the contribution of the jurisdiction to the funding of the IFRS Foundation should be considered in selecting members. (Note: Figures in square brackets are indicative.)
2. Consider whether any types of decisions taken by the Monitoring Board would justify deviation from the current consensus-based decision-making system.
3. With a view to increasing the involvement of other public authorities and international organizations, consider either: (a) extending the observer status to groups of prudential authorities and international organizations; (b) holding more formalized dialogue with public authorities and international organizations; or (c) establishing an advisory body composed of prudential authorities and international organizations.
4. Enhance publication of written records of Monitoring Board deliberations, increase the use of press releases, and strengthen the exposure of Monitoring Board members’ views to the media and wider audiences.
5. Consider if the Monitoring Board’s current ability to refer matters to the IASB for consideration, requiring feedback, is sufficient, or whether an explicit role should enable the Monitoring Board to place an item on the IASB agenda.
6. Explore possible options to establish a non-voluntary, transparent and stable public funding platform for the Foundation.
7. Enhance the Monitoring Board’s involvement in the nomination of the IASB Chair by enabling the Monitoring Board to provide a set of criteria for selecting potential candidates and evaluate certain candidates on the short list against the criteria during the selection process. Additionally, consider whether the Monitoring Board’s role should also involve consultation on the Trustees’ final decision and/or playing any further roles.
8. As regards other IASB members, explicitly include in the Monitoring Board’s responsibilities consultation with the Trustees as they further develop the framework to ensure proper balance in the composition of the IASB.
9. Explore the possibility of establishing a permanent secretariat for the Monitoring Board.
Three other questions (in addition to questions on the above recommendations):
1. Do you believe that the current arrangements for the standard-setting process adequately ensure the appropriate involvement of all relevant stakeholders and that all relevant public policy objectives are taken into account? Please provide reasons for your agreement/disagreement.
2. Do you agree with the need for regular reviews, and the interval of five years as a benchmark? Should the reviews be aligned with the timing of the Foundation’s mandated Constitution reviews? Please provide reasons for your agreement/disagreement.
3. Do you have any other comments?
Prepared Feb. 7, 2011 by Edith Orenstein, director of Accounting Policy Analysis and Communications, Financial Executives International. This summary does not reflect FEI opinion unless specifically noted above.