OVERHAUL OF IASC BOARD FALLS SHORT, SAYS FASB
The global financial community now has a set of core international accounting standards. The International Accounting Standards Committee (IASC), through the work of its 16-member IASC Board, did a commendable job in drafting the standards, almost meeting the time frame it had originally established. It is now up to the securities regulators in the member countries to decide the extent to which these core standards will be accepted in cross-border filings. The SEC is in the process of making its evaluation.
The IASC is now considering recommendations to restructure its standards-setting process to bring about convergence between national accounting standards and practices and high-quality global standards. The comment period for the recommendations, which were developed by an IASC strategy working party, ended April 30, 1999.
FASB issued its comment letter on March 11, 1999, a week before an IASC Board meeting in Washington, D.C. At a news briefing, FASB Chair Edmund Jenkins gave the impression that FASB's letter was issued in time so that others might know FASB's concerns prior to issuing their own comments.
FASB was very supportive of the process and objectives of IASC's restructuring, but felt that it did not go far enough. The restructuring calls for a standards development committee, made up of representatives from national standards-setting boards, which would develop standards for acceptance and approval by a 25-member IASC Board. The IASC Board would be comprised of delegates appointed by the IASC member they represented. A 12-member board of trustees, six appointed by constituents of the IASC and six by the board itself, would determine which of the 140 IASC members would be represented on the IASC Board.
FASB wants the IASC to go further and establish a structure very similar to its own. Under FASB's proposal, the development committee would be made up of full-time standards setters that set their own agenda and have the authority to expose and approve the standards. The IASC Board would be advisory only, much like the Financial Accounting Standards Advisory Council is to FASB. Furthermore, the IASC trustees would have full authority to appoint members of the IASC Board and the standards development committee, just as the Financial Accounting Foundation trustees have when appointing FASB members.
FASB makes a compelling argument for moving the restructuring beyond what is recommended. A FASB-like approach would clearly place international standards at a high level and enhance their acceptability. It would take a sizable budget to do so, and the IASC member countries would have to give up some of their authority. But is it worth what some might consider overkill? The restructuring as proposed would be a major leap forward for the IASC.
One aspect of FASB's suggested changes is a must. The working party proposal does not call for permanent members of the IASC Board. FASB suggests that member countries from major capital markets such as the United States should have permanent membership, as is the case with the present IASC Board. *
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