IASC Trustees announce new standard-setting board
The International Accounting Standards Committee («IASC») has announced the appointment of the new International Accounting Standards Board («IASB»). It is that new Board of experienced accounting professionals that will have the responsibility of working toward a single set of high quality accounting standards that national bodies around the world can broadly support.
The successful development of and convergence toward high-quality internationally accepted accounting standards will provide direct benefits to auditors, users, preparers and regulators of financial information and statements. More generally, the availability of common and more reliable financial data should facilitate international investment and reduce the cost of capital worldwide. Accounting costs for multinational firms operating in different jurisdictions will be reduced with the narrowing and eventual elimination of national differences. Regulators will benefit from the greater consistency and quality of information.
The IASC Trustees, chaired by former U.S. Federal Reserve Chairman Paul A. Volcker, is a 19-member oversight body, representing six continents and 14 different countries. The IASC Trustees were appointed in May 2000 by a Nominating Committee composed of leading policy-makers throughout the world chaired by Arthur Levitt, U.S. Securities and Exchange Commission Chairman. The selection of the standards-making Board marks the completion of one of the major tasks of the Trustees.
The Trustees reviewed over 200 candidates for IASB positions. The IASC Constitution mandated that IASB comprise individuals who represent «the best available combination of technical skills and experience of relevant business and market conditions.»
Mr. Volcker emphasized, «The Board has been selected on the basis of experience and high professional qualifications. The Trustees were extremely pleased with the exceptional quality of candidates and believe that the Board truly reflects the best in the field. The decision was reached unanimously, demonstrating the Trustees’ conviction. This group is exceptionally well qualified to ensure we reach the goal of globally accepted standards. The result should bring highly significant economic benefits to both the developed and emerging economies.»
In accordance with the new IASC Constitution, the IASC Trustees appointed twelve of the members to full-time positions, including the Chairman and Vice Chairman, and two to part-time positions. The Board will be led by Sir David Tweedie, whose prospective appointment was announced earlier. Mr. Volcker, on behalf of all of the Trustees, expressed his delight with the willingness of Sir David to accept this responsibility and the warm reception that his appointment has received among interested parties.
In order to encourage cooperation among the new Board and national standard-setters, the Trustees appointed seven of the Board members as official liaisons to national bodies. These liaison Board members will maintain close contact with their respective national standard-setters and will be responsible for coordinating agendas and ensuring that the new IASB and national bodies are working toward the goal of convergence on a single set of high quality standards around the world. Countries with formal liaisons are Australia and New Zealand together, Canada, France, Germany, Japan, the United States, and the United Kingdom. In addition, Board members will have frequent contacts with financial regulators and central banks, private industry, analysts, and academics throughout the world.
Sir David Tweedie, the Chairman of the IASB, remarked, «The mission of the newly-created IASB is simple. In partnership with national standard setters, we will aim to increase the transparency of financial reporting by achieving a single, global method of accounting for transactions – whether in Stuttgart, Sydney, Seattle or Singapore. The potential benefit to the world economy by removing barriers to investment through applying uniform, high-quality standards is enormous. The fact that such eminent professionals are prepared to resign from senior positions in successful careers to back the project is extremely positive. I am delighted to have them as colleagues.»
The Trustees have also emphasized their commitment to achieving a broad and representative balance of perspectives, both professionally and geographically, through the creation of a Standards Advisory Council. The Trustees have advertised worldwide for suitable candidates. The Advisory Council will meet regularly with the IASB to advise the Board on priorities and to inform the Board of implications of proposed standards for users and producers of financial accounts.
Chairman Volcker stated, «The Advisory Council must represent the diverse interests involved in the standard-setting process to ensure that the result is usable and relevant information. The new Advisory Council will be a key vehicle for obtaining advice and fresh thinking.»
The new Board is expected to meet for the first time in April 2001. The names of the Board’s members and brief biographies are:
- Sir David Tweedie, Chairman
Sir David Tweedie served as the first full-time Chairman of the U.K. Accounting Standards Board, with a term from 1990-2000. Before assuming the Chairmanship of the U.K. Board, Sir David was national technical partner for KPMG and has served as a professor of accounting in his native Scotland. He has worked on international standards setting issues both as the first Chairman of the G4+1, a cooperative group among leading standard setters, and as a member of the previous IASC Board.
- Thomas E. Jones, Vice Chairman
As the former Principal Financial Officer of Citicorp and Chairman of the IASC Board, Tom Jones brings extensive experience in standard setting and the preparation of financial accounts for financial institutions. A British citizen, Mr. Jones has worked principally in Belgium, Italy, France, and the United States throughout his professional career. In September 2000 Mr Jones made a visit to Moscow where he addressed the Russian accounting profession at several conferences and seminars and met government officials.
- Mary E. Barth
As a part-time Board member, Mary Barth, an American citizen, will retain her position as a Professor of Accounting at the Graduate School of Business at Stanford University. Among the academic community, she is widely known and has won national awards both as an educator and for her body of scholarly work. Before entering academia, Prof. Barth was a partner at Arthur Andersen.
- Hans-Georg Bruns – Liaison to German Standard Setter
Hans-Georg Bruns has served as the Chief Accounting Officer for DaimlerChrysler and has been head of a principal working group of his home country’s German Accounting Standards Committee. In his role at Daimler-Benz and now DaimlerChrysler, Dr. Bruns was in charge of the task force listing Daimler-Benz on the New York Stock Exchange and was responsible for the accounting issues related to the DaimlerChrysler merger.
- Anthony T. Cope
Tony Cope joined the U.S. Financial Accounting Standards Board in 1993. Prior to that engagement, Mr. Cope, a British citizen, worked as a financial analyst in the United States for 30 years, ultimately becoming Director of Fixed Income Research, Wellington Management Co in Boston. Mr. Cope, as a member of the IASC Strategy Working Party, was closely involved with the organization’s current restructuring, and has served as FASB’s observer to IASC Board meetings for the last five years.
- Robert P. Garnett
Robert Garnett is the Executive Vice President of Finance for Anglo American plc, a South African company, listed on the London Stock Exchange. Mr. Garnett has worked as a preparer and analyst of financial statements in his native South Africa throughout his career and, as an IASB Board member, will reach out to the economies of Southern Africa to improve accounting standards.
- Gilbert Gelard – Liaison to French Standard Setter
Currently a partner at KPMG in his native France, Gilbert Gйlard has extensive experience with French industry. He served as a Deputy CFO with Groupe Hachette from 1973 to 1982 and Deputy Group Controller with Elf Aquitaine from 1982 to 1987. Mr. Gelard speaks eight languages and has been a member of the French standard-setting body (CNC). He served as a member of the former IASC Board. In 1998 Mr Gelard spoke at the first IAS Russian conference in Moscow.
- Robert H. Herz
Robert Herz, as a part-time member of the Board, will continue to be a partner at Pricewaterhouse-Coopers where he has been in charge of technical and professional matters in the United States and in the Americas. Mr. Herz has been a member of several FASB task forces and professional and academic committees and has recently been nominated to become the Chairman of the new Transnational Auditors Committee of the International Federation of Accountants. Though a U.S. citizen, Mr. Herz has also lived in England and Argentina, speaks Spanish, and has worked with many international companies on accounting and reporting matters.
- James J. Leisenring – Liaison to the U.S. Standard Setter
Jim Leisenring has worked on issues related to accounting standards setting over the last three decades, as the Vice Chairman and most recently as Director of International Activities of the U.S. Financial Accounting Standards Board (FASB) in his home country. While at FASB, Mr. Leisenring served as FASB’s observer for several years at meetings of the former IASC Board.
- Warren McGregor – Liaison to Australian and New Zealand Standard Setters
Warren McGregor developed an intimate knowledge of standard setting issues with his work over 20 years at the Australian Accounting Research Foundation, where he ultimately became the Chief Executive Officer. In his most recent position with Stevenson McGregor, a company he co-founded in his native Australia, he has been involved in advising ASEAN nations on adopting high quality accounting standards.
- Patricia O’Malley – Liaison to Canadian Standard-Setter
Patricia O’Malley currently serves as Chair of the Accounting Standards Board of Canada. She has worked on issues related to global standard setting since 1983 and brings vast experience on work with financial instruments. Before joining the Canadian Board, Ms. O’Malley was a Technical Partner at KPMG in her home country of Canada.
- Harry K. Schmid
Harry Schmid brings over 40 years of experience as a preparer of financial statements for Nestle, ultimately becoming Senior Vice President at its headquarters, responsible for corporate reporting. During his professional career and before returning to his native Switzerland, Mr. Schmid lived in Latin America for 17 years and was responsible for finance and control of a Latin American subsidiary. Mr. Schmid speaks four languages (German, French, English and Spanish). He served as a member of the former IASC Board and the Standing Interpretations Committee.
- Geoffrey Whittington – Liaison to U.K. Standard Setter
Geoffrey Whittington is the PricewaterhouseCoopers Professor of Financial Accounting at Cambridge University and formerly served as a member of the UK Monopolies and Merger Commission. In academia, Professor Whittington is widely respected internationally on issues related to accounting and financial statement analysis and has served as a member of the UK Accounting Standards Board in his native England.
- Tatsumi Yamada – Liaison to Japanese Standard Setter
Tatsumi Yamada is currently a partner at ChuoAoyama Audit Corporation (a member firm of PricewaterhouseCoopers) in Tokyo. Mr. Yamada brings extensive experience with international standard setting as a Japanese member of the previous IASC board between 1996 and 2000, of which he became an Executive Committee member in 2000.
* * *
IASC Standards Advisory Council
IASC is an independent private body, currently based in London, formulating, publishing and promoting global accounting standards in the public interest and gaining their universal acceptance. A new Constitution has been agreed, with the governance of IASC residing with nineteen Trustees, under the Chairmanship of Mr Paul Volcker. Fourteen Board members have been appointed to take responsibility for setting the accounting standards.
The Constitution also requires the Trustees to appoint a Standards Advisory Council and the Trustees attach particular importance to the perspective that the Council can bring to the overall effort. The Council is to comprise about thirty members, having diverse geographic and functional backgrounds and the expertise required to contribute to the formulation of accounting standards. It will have the objective of
(a) giving advice to the Board on priorities in the Board’s work,
(b) informing the Board of the implications of proposed standards for users and prepares of financial statements and
© giving other advice to the Board or the Trustees. The Council will normally meet at least three times a year. It is to be consulted by the Board on all major projects and its meetings are to be open to the public.
Members of the Council will normally be expected to be associated with organisations that will meet the costs of their participation in meetings although exceptions may be made for certain individuals.
The Trustees wish to appoint the first members of the Council and they invite applications and nominations, with brief curricula vitae, by 7 February to Mr Kenneth Spencer, Chairman of the Trustees’ Nominating Committee, IASC, 166 Fleet Street, London, EC4A 2DY, United Kingdom, Tel: +44 20 7353 0565, Fax +44 20 7353 0562, e-mail iasc@iasc.org.uk.
IASC Issues Three Revised Standards
The International Accounting Standards Committee (IASC) has recently published limited revisions to three International Accounting Standards; IAS 12, Income Taxes, IAS 19, Employee Benefits and IAS 39, Financial Instruments: Recognition and Measurement. The revisions to IAS 39 are accompanied by consequential changes to IAS 27, Consolidated Financial Statements and Accounting for Investments in Subsidiaries, IAS 28, Accounting for Investments in Associates, IAS 31, Financial Reporting of Interests in Joint Ventures, and IAS 32, Financial Instruments: Disclosure and Presentation. The revisions are set out in a combined publication that will be mailed to IASC subscribers automatically this week.
The revisions address the income tax consequences of dividends, pension plan assets, and technical application issues on financial instruments. The large majority of respondents supported the proposed revisions, which were set out in Exposure Drafts E66, E67 and E68.
James Saloman, IASC Technical Director, explained the only substantive change to the proposals made in the three Exposure Drafts: «The revised definition of plan assets in IAS 19 is broadly similar to the definition proposed in E67. However, in response to comments received on E67, the Board extended the scope of the definition to include certain insurance policies (now described in IAS 19 as qualifying insurance policies) that satisfy the same conditions as other plan assets. These insurance policies have similar economic effects to funds whose assets qualify as plan assets under the definition proposed in E67.»
The limited revisions to the three Standards and other related Standards become operative for annual financial statements covering periods beginning on or after 1 January 2001. Earlier application is encouraged.
IASC invites comments on proposals for accounting for financial instruments and similar items
The International Accounting Standards Committee, together with other members of the Financial Instruments Joint Working Group of Standard Setters (JWG), published on 14 December 2000 for public comment the JWG’s «Draft Standard and Basis for Conclusions – Accounting for Financial Instruments and Similar Items» (the «Draft Standard»).
The document represents the views of JWG members, who are representatives or members of accounting standard setters or professional organisations in ten jurisdictions. Although the Board of IASC has discussed most aspects of the Draft Standard, the views expressed in the Draft Standard do not necessarily reflect the views of the Board. In addition, while written in the form of a draft standard, the document is not an IASC draft standard or exposure draft. IASC is treating the Draft Standard as a discussion paper. An exposure draft may follow, but this will be issued only after further deliberations in light of comments received on the Draft Standard.
The Draft Standard represents an important milestone in the Board’s project on Financial Instruments. The primary objective of the Draft Standard is to reflect, in an enterprise’s balance sheet and income statement, the effects of events on the fair value of the enterprise’s financial instruments, and certain similar items, in the periods in which those events occur. It establishes principles for recognition, measurement, presentation and disclosure of financial instruments and similar items in the financial statements of all enterprises. The proposals would affect existing accounting practice in many areas, including those related to the use of hedge accounting.
A 1997 IASC Discussion Paper examined the major recognition and measurement issues for financial instruments. Among other things, it proposed that all financial instruments should be measured at fair value. In light of comments received on the Discussion Paper, the Board decided to proceed with the project on accounting for financial instruments in two phases:
- A project to meet the urgent need for a standard on the recognition and measurement of financial instruments; and
- A comprehensive longer-term project in partnership with national standard setters.
IASC completed the first phase in December 1998 when it approved IAS 39, Financial Instruments: Recognition and Measurement. IAS 39 represented a move toward the Discussion Paper’s proposal to require fair value accounting for all financial instruments.
To further the longer-term project the Board agreed late in 1997 to participate in the JWG. The Chair of the JWG is a representative of IASC. It is hoped that future work on financial instruments will be carried out together with other standard setters in order to achieve a single method of accounting for financial instruments.
Commenting on the publication, the JWG Chair, Alex Milburn, said: «The Draft Standard proposes some far reaching changes. The large majority of the JWG believe that these will significantly improve financial reporting and can be implemented with appropriate preparation. It is our hope that this Draft Standard will provide the basis for informed comment from interested parties, for rigorous analysis and field testing and, ultimately, for an internationally agreed standard for accounting for virtually all financial instruments and similar items of all enterprises.»
Thomas E Jones, the IASC Chairman who visited Moscow in September 2000, said «Having worked in a multinational bank for many years, I am convinced that the importance of having a global accounting standard for financial instruments can not be overemphasized. This is a clear case of needing global standards for a global marketplace – and when it comes to financial instruments, such as bonds, derivatives and equities, the market truly is a global market.»
IAS and UK GAAP to Converge
On 20 December 2000: The Institute of Chartered Accountants in England & Wales published proposals for a future programme of convergence between UK GAAP and International Accounting Standards. The proposals are included in «The Convergence Handbook», a comparison of IAS and UK financial reporting requirements. The comparison, by former IASC Secretary-General, David Cairns, and Professor Christopher Nobes, one of the two UK representatives on the IASC Board since 1993, was commissioned by the UK Accounting Standards Board (ASB).
The ASB’s intention in asking for a comparison to be made was to reveal in detail the differences between the two sets of accounting requirements to enable the financial community in the UK and the Republic of Ireland to examine these differences and to inform the ASB whether they would wish the domestic requirements to be altered to conform with IASC’s or whether, in their opinion, the national requirements were in some places of a higher quality. In the latter case the ASB would attempt to persuade IASC to change its standards.
IAS 41 – Agriculture Approved
On 14 December 2000 the IASC Board met in London, UK on 11-13 December 2000, when it approved a new standard IAS 41, Agriculture.
IAS 41, Agriculture, prescribes the accounting treatment and disclosures related to agricultural activity and is effective for annual financial statements covering periods beginning on or after 1 January 2003 (earlier application is encouraged). IAS 41 will be published in January 2001.
ICAEW Call for More Use of IAS in Europe
On 12 December 2000 in a response to a consultation on regulation issued by the Committee of Wise Men on the Regulation of European Securities Markets, the Institute of Chartered Accountants in England and Wales stated that the increased use of International Accounting Standards and greater transparency of company information will be needed to underpin the creation of an integrated European Securities Market.
Commenting on the need for an effective and consistent regulatory framework in Europe, the ICAEW stated that it believed that one of the main obstacles to the cross border securities market has been inconsistent enforcement of national accounting and disclosure requirements.