IASB Loses Autonomy as New Oversight Board is Established
According to a recent article at CFO.com by Marie Leone, the previous autonomy enjoyed by the International Accounting Standards Board has come into question recently, and some of that autonomy has now been removed with the addition of an extra layer of governance. A new oversight board was established recently that will review the IASB and its trustees.
The autonomy of the IASB has come into question in large part due to the IASB’s actions this past November, which saw the board bypass due process to ease fair-value accounting rules in the European Union.
The European Union believed they were receiving unfair treatment because they felt American companies held an unfair advantage due to their different fair value-accounting rules. The EU believed that the IASB rules did not give them the same ability as the American companies to move assets out of the fair-value category. To solve this the EU threatened to pass a law to loosen the fair value rules, without any extra controls.
In order to stop this from happening the IASB caved to the EU’s pressure and quickly issued a rule change in which banks may now reclassify their loans and avoid losses generated by their asset value dropping.
The IASB has admitted that it succumbed to political pressure on this issue, but has since stated that this will not happen in the future. IASB chairman David Tweedie said that the board will take a tougher stance in the future and the IASB and FASB will work in unison to stop politicians trying to affect their processes or change their accounting standards.
A new oversight board has been formed to look at the IASB trustees work, making the board more publically accountable. The monitoring board will be made up of members from the SEC, the International Organization of Securities Commission, the European Commission, and the Japan Financial Services Agency. The Basel Committee on Banking Supervision will observe and send representatives to the IASBs trustee meetings.
The monitoring board will work with the IASB trustees who oversee policies and procedures as well as appointments of members to the IASB. The goal is to move toward one global accounting standard. The current agreement will call for the IASB and the monitoring board to meet once a year, and an annual report will be composed.
Discussion Questions for Comment Section:
- Do you think the IASB can live up to the statement that they will no longer allow political pressure affect their decisions?
- Do you think one global accounting standard is feasible given the different ways in which business is handled globally?
Tags: Accounting, fasb, iasb, oversight
