Finding a balance between the
independence of the International Accounting Standards Board and
the accountability of its oversight body was one of the messages to
emerge from an International Accounting Standards Committee
Foundation constitution review round table recently. Carolyn Canham

The trustees of the International Accounting Standards Committee
(IASC) Foundation have sped up the process on two issues raised in
their current five-year review. The foundation plans to finalise
decisions on the creation of a monitoring group and the composition
of the International Accounting Standards Board (IASB) by October,
so changes can be implemented by the start of next year.

Four round table were held as a final check with stakeholders
before the foundation drafts its recommendations. Participants
included representatives from firms, national standard setters,
securities regulators, investor groups, the World Bank and the
International Monetary Fund (IMF).

Unanimous support emerged at the round table for the creation of
the monitoring group, which would oversee the governance and
accountability of the IASC. However, the exact duties and
composition of the group were brought into question.

Consensus emerged that the IASB retain its independence and
avoid becoming politicised. Concerns were raised about the level of
involvement of the monitoring group and the foundation was asked to
set clear parameters. Paul Lee, a member of the UK-based Corporate
Reporting Users’ Forum, summed up a common perception: “I
acknowledge the political necessity of setting this up. However, I
am nervous there may be an expectation it would have influence over
the IASB and the IASB’s agenda, and that would be troubling.”

Christian Krohn, director of regulatory policy for the
Securities Industry and Financial Markets Association, said it was
crucial the IASB remains completely independent in setting
accounting standards and disclosure requirements and that the
process is not susceptible to political interference, commercial
interests and regional or national bias.

The IASC’s current proposal has the monitoring group comprised
primarily of securities regulators, however some participants
suggested other stakeholders should be included.

UK Financial Reporting Council chief executive Paul Boyle
described the group as a curious mix of international, regional and
national standard setters. “I would like you to articulate the
principles on how they were selected,” Boyle asked.

Committee of European Securities Regulators (CESR)
representative Javier Ruiz said CESR would like to be represented
in the monitoring group. Michel Maila from the International
Finance Corporation suggested regulators from the banking and
insurance sectors should be included.

IASC Foundation chair Gerrit Zalm maintained that stakeholders
such as investors must be involved but not within the monitoring
group. “It is purely for public accountability, so it should only
be public officials,” he said. Zalm warned additional participants
would bring the monitoring group to ten members, which “for a lean
group is already a bit fat”.

Expanding the IASB

The proposed changes to the composition of the IASB would add
two new board members – bringing the total to 16 – and ensure
geographical diversity (see below).

There was some vocal criticism to extending the board’s
membership to 16, with many stakeholders suggesting 14 was already
too many to work efficiently. Institute of Chartered Accountants in
England and Wales financial reporting committee chair Kathryn
Cearns said she found the prospect of 16 members quite troubling.
Cearns warned increasing membership could seize up the decision
making process and open the possibility of “options creeping in”,
weakening the standard setting process.

Zalm stood firm on the proposed increase to 16 members, saying
it would allow for geographic reach and flexibility.

The proposed geographic spread of board members was also
criticised, with participants warning it could prevent the most
suitably qualified candidates being selected. Leo van der Tas,
global technical director of IFRS services for Ernst & Young,
said: “It is logical to have some sort of geographic spread so
people know they are being heard, but quality comes first, and then

There were, however, several voices in support of a
geographically-balanced membership. European Financial Reporting
Advisory Group chair Stig Enevoldsen defended having board members
with diverse backgrounds so they could understand the various
nuances and transactions around the world. International
Organization of Securities Commission’s (IOSCO) Sophie Baranger
said the proposed composition of the IASB had evoked concern among
some IOSCO regions, citing South America, Africa and the Middle

The IASC also suggested flexibility regarding part-time IASB
members. At present, two of the 14 members must be part-time,
however the draft proposal recommends there could be between zero
and three. Mazars & Guerard partner Michel Barbet-Massin called
for part-time members to be retained to ensure recent, or current,
technical experience on the board.

Proposed composition of a 16-member board

• Four members from North America
• Four members from Europe
• Four members from the Asia/Oceanic region
• Four members from any area, subject to maintaining overall
geographic balance
Note: The IASC Foundation proposes this be the normal, not
mandatory, composition of the board

Source: IASC Foundation
Proposed composition of monitoring group

• The responsible member of the European Commission
• Managing director of the International Monetary
• Chair of the IOSCO emerging markets committee
• Chair of the IOSCO technical committee; or the vice-chair or
designated securities commission chair in cases where either the
chair of an European Union securities regulator, commissioner of
the Japan Financial Services Agency (JFSA), or chair of the US
Securities and Exchange Commission (SEC) is the chair of the IOSCO
technical committee
• Commissioner of the JFSA
• Chair of the US SEC
• President of the World Bank
Source: IASC Foundation