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June 13 — The International Accounting Standards Board would be reduced from 16 to 13 members under a proposal of the IFRS Foundation Trustees.
The board currently operates with 14 members.
The June 10 proposal is part of an exposure draft (ED) that the foundation, which oversees IASB operations, published to overhaul its constitution following a review the trustees conducted on the foundation's structure and effectiveness.
The assessment marked the foundation's fifth such review since its creation in 2001.
Other changes to the foundation's constitution proposed in the ED include:
The proposed constitutional revisions comprise “a range of enhancements to ensure the organisation remains fit for a changing world,” the foundation said in a June 10 statement.
The trustees issued a request for views (RFV) in July 2015 to solicit comments on its direction and operations in the coming years (11 APPR 15, 7/17/15), and comments were accepted through Nov. 30, 2015.
All told, the foundation received 97 comment letters from national standard setters, accounting firms and organizations, regulators and other constituents.
The trustees also garnered feedback on the RFV at 11 outreach events over the past year.
“Responses were mixed regarding the proposal to reduce the size of the Board to 13 members,” according to an 82-page summary of comment letters that the foundation issued in tandem with the ED.
A majority of respondents agreed, however, that IASB should be smaller than the 16-member board currently specified in the constitution, the comments summary said.
The trustees affirmed a proposal in the RFV that if the board were reduced to 13 or 14 members, the votes of nine members would be needed to approve publication of a standard or an interpretation.
The ED would allow the foundation to add a fourteenth, at-large member to the board “if appropriate,” Trustees Chairman Michel Prada said in a video posted June 10 on the foundation's web site.
The ED calls for combining IASB's North American and South American membership into a single ’Americas' category.
Combining these categories “would eliminate the confusion around whether countries like Mexico or other Central American countries should be classified as North American countries or South American countries,” the trustees said.
If the trustees reduce IASB membership to 13, this would leave the board with four members each from the Americas, Asia-Oceania and Europe, along with one member from Africa and a potential at-large member.
The plan also would set the foundation's geographical distribution as six members each from the Americas, Asia-Oceania and Europe, one member from Africa and three at-large members.
In addition, “the Trustees are proposing to remove the sentence in the Constitution that refers to two Trustees normally being senior partners of prominent international accounting firms,“ the ED said.
The foundation has tentatively decided against expanding IASB's remit to encompass standard setting for either the public sector or the private not-for-profit sector, an approach that a majority of respondents to the RFV favored.
In keeping the board's responsibilities focused on for-profit entities, the foundation left the door open to expanding IASB's scope to include financial reporting standards for private not-for-profits.
“The Trustees believe that this issue should be considered again as part of their next review of strategy and effectiveness,” the comments summary noted.
The foundation has proposed holding most meetings of its Due Process Oversight Committee, which assesses the foundation's performance against benchmarks of effectiveness, in public sessions.
This would further bolster the foundation's transparency, the trustees said.
Respondents to the RFV broadly supported the foundation's strategy to foster consistent application of IFRS, trustees reported.
“Inconsistent application of the Standards undermines the benefits of the Standards and damages the IFRS brand,” the comments summary said.
The foundation said it planned to enhance consistent IFRS application by merging its staff responsible for implementation, adoption support and education efforts into a single team.
The new team's agenda will “include activities that support the maintenance of existing Standards in the light of inappropriate diversity in accounting practice,“ the trustees said.
Looking ahead, the foundation intends to evaluate:
The trustees acknowledged the challenges in pinpointing which technological innovations might have major effects on standard setting and what course they might take.
In response, “the Trustees agree that the Foundation and the Board should formalise how they track technological developments, including establishing a network of experts to provide advice on technological issues and their potential impact on the Standards,” the comments analysis said.
Though the foundation for now has decided not to expand IASB's purview beyond for-profit entities, it will consider whether the board should broaden its overall objectives.
“While the focus of the Board will remain on financial reporting, further work will be done to consider the Board's future role and work plan within the context of developments in wider corporate reporting.” the comments summary said.
The trustees also plan to tackle problems in translating IFRS from English into other languages.
This could involve seeking input for its EDs on the use of certain terms that could prove tough for non-native English speakers to translate or understand.
A recent preliminary study by the Australian Accounting Standards Board and the Korea Accounting Standards Board, for instance, found that lack of consensus on the meanings of terms of likelihood used in IFRS poses problems in interpreting international standards (12 APPR 03, 2/12/16).
The foundation is accepting comments on the ED through Sept. 15, 2016.
“The Trustees plan to consider the feedback to the ED and complete this review of structure and effectiveness at their meeting in October 2016,” the comments summary said.
IASB is carrying out a parallel consultation on its activities for 2017-2021 and aims to release its conclusions this year (12 APPR 10, 5/20/16).
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The ED is available at http://src.bna.com/fRO.
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