At its November 1999 meeting in Venice, the IASC board unanimously approved a resolution supporting a proposed new structure for international accounting standards setting. The task of converting the proposal into a fully operational system was referred to the Strategy Working Party, whose preliminary report was exposed for comment in 1999. In the views of many (such as the AICPA, FASB, and SEC), that earlier proposal failed to design the kind of infrastructure necessary to reasonably assure high-quality international standards.
"We have achieved what we have dreamt of for a long time," IASC Chair Stig Enevoldsen said. "We have reached agreement on a proposed structure that will take IASC a giant step in the direction of being the global standards setter. The proposal has broad support not only from our board, but from several national standards setters, leading professional accountancy bodies, and the Council of the International Federation of Accountants."
SEC Chief Accountant Lynn Turner threw the full support of the SEC behind the proposal. In a prepared statement, Turner acknowledged that the IASC "has taken an important step by supporting an approach that focuses on the public interest, especially the interests of investors in capital markets, as the linchpin for its restructuring." Turner went on to express support for the proposal because of its geographic "representativeness," its requirement for technical competence on the part of board members, and its environment free from outside political influence.
"Ultimately, final acceptance of the restructured IASC [by the SEC] will depend on the selection of high-quality trustees and board members," Turner said.
The New Structure
The proposed structure has the following main features: IASC would be established as an independent organization, such as a foundation. The organization would have two main bodies, a board of trustees and a standards-setting board, as well as a Standing Interpretations Committee and a Standards Advisory Council. The trustees would appoint the board members, exercise oversight, and raise funds, whereas the board would have sole responsibility for setting accounting standards. Additional key features include the following:
Nominating Committee. To begin implementation of the new structure, a nominating committee would be appointed by the IASC board to select the initial group of trustees. This nominating committee would comprise between five and eight individuals of distinction selected to act in the public interest. The nominating committee would choose one of its members as chair.
Trustees. The board of trustees would comprise 19 individuals with diverse geographic and functional backgrounds. The trustees would appoint the members of the board, the Standing Interpretations Committee, and the Standards Advisory Council. Trustees would be appointed so that initially six would be from North America, six from Europe, four from Asia/Pacific, and three from any area, as long as geographic balance is maintained. IFAC would suggest candidates to fill five of the 19 trustee seats, and international organizations of preparers, users, and academics would each suggest one candidate. The remaining 11 trustees would be "at-large," in that they would not be selected through the constituency nomination process. Once the initial trustees were selected, the existing trustees would be responsible for the selection of subsequent trustees to fill vacancies as they arose. The same procedures would be followed as for the initial trustee appointments, including consultation with the relevant constituency organizations where the vacancy arose upon the retirement of a trustee appointed as a result of such consultation.
Board. A new board comprised of 14 individuals--12 full-time members and two part-time members--would replace the current board. The foremost qualification for board membership would be technical expertise, and the trustees would exercise their best judgment to ensure that any particular constituency or regional interest does not dominate the board. To achieve a balance of perspectives and experience, a minimum of five board members would have a background as practicing auditors, a minimum of three would have a financial statement preparation background, a minimum of three would have a financial statement user background, and at least one member would have an academic background. Several (but no more than seven) of the 14 board members would be expected to have direct liaison responsibility with one or more national standards setters. The publication of a standard, exposure draft, or final Standing Interpretations Committee interpretation would require approval by eight of the board's 14 members.
Standards Advisory Council. A new Standards Advisory Council would provide a formal vehicle for groups and individuals having diverse geographic and functional backgrounds to advise the board and, at times, to advise the trustees.
Standing Interpretations Committee. The Standing Interpretations Committee would continue in its present form.
The IASC board plans to vote on resolutions necessary for formal amendment of its constitution at its March meeting in São Paulo. The changes require approval by the member bodies of IASC, more than 140 professional accountancy bodies in more than 100 countries. Member bodies will vote on the proposal in May.
It is expected that the proposed structure would take effect January 1, 2001.
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