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IASCF constitution review: a time to support independent standard setting and academic representation.

In November 2003, the Trustees of the International Accounting Standards Committee (IASC) Foundation initiated an intensive constitutional review. (1) The IASC Foundation Constitution specifies operating procedures for both the Foundation and the International Accounting Standards Board (IASB). (2) Revisions, eliminations, and enhancements to the provisions of the constitution resulting from this comprehensive review will form the foundation of IASB for the next generation of standard setters.

If high-quality global accounting standards are to be achieved, it is crucial that, under the revised constitutional provisions, IASB continue to operate within a structure that ensures independence, adequate due process, and sufficient technical capabilities (i.e., the foremost qualification for membership remains "technical expertise"). Accordingly, we strongly encourage members of the International Accounting Section of the American Accounting Association (AAA), and other members of the accounting academic community, to provide thoughtful feedback on the issues being reviewed by the Trustees Constitutional Review Committee and to speak in strong defense of independent standard setting.


Representing step one of the review process, Identifying Issues for the IASC Foundation Constitution Review (3) was issued in late 2003. The purpose of this consultation paper was to seek public comment regarding issues that require the attention of the Constitution Review Committee and the other Trustees. Responses to the preliminary Invitation to Comment were due February 11, 2004 and are available on the IASB website for public review. After reviewing the feedback on the consultation paper, the Constitutional Review Committee will issue an official Invitation to Comment. (4)

Identifying Issues for the IASC Foundation Constitution Review indicates that important issues to be reviewed by the Trustees will include but are not limited to:

* Should the constitution include a specific objective addressing the special challenges facing small- and medium-sized entities (SMEs)?

* Should a largely fixed geographical distribution continue to be specified for the Trustees?

* Should the distribution of professional backgrounds specified for the Trustees be modified?

* Should the number of IASB positions be reduced from 14 to make the Board more workable?

* Should the two part-time IASB positions be eliminated in recognition that the workload of board members is heavy and requires substantial time for consultation with interested parties?

* Should the requirement that the IASB include a particular distribution of professional backgrounds be relaxed in light of the desirability of attracting the best qualified individuals?

* Does the current formal liaison "partnership" seem important for ensuring convergence? Should consideration be given to liaison with emerging economies, not currently represented by the existing liaison relationships?

* Are the current procedures and composition, in terms of numbers and professional background, of the Standards Advisory Committee satisfactory?

While all of the above issues deserve careful consideration by the academic community, we believe those issues associated with ensuring the IASB's independence and especially the requirements that at least one accounting academic be represented on both the Trustees and the IASB merit special consideration.


Given the constitutional provisions under review by the Trustees, it is possible that the IASB of the future may not include academic representation. For example, the current constitution requires that at least one of the nineteen Trustees and at least one of the fourteen Board members have an academic background. If these requirements are eliminated, particularly if coupled with a reduction in the number of Board members and/or elimination of the part-time Board positions, it may be less likely that an academic will be appointed to the Trustees and the Board. Hence, the academic community is encouraged to support retaining the constitutional requirement that at least one academic be appointed to both the Trustees and Board. Further, we encourage our readers to request that the constitution be modified to require that these positions be held by accounting (5) academics.


Recent events highlight the tremendous urgency of maintaining the current structure that enables the IASB to function as an independent decision making body. (6) If the IASB alternatively operates within a structure where the Board is pressured by political entities to introduce compromises when developing new standards, the result would be a decrease in transparency and quality of information. As recently stated by Volcker, Chair of the Trustees of the IASB Foundation:
   ... to put the matter most pointedly ... if ... political
   authorities ... seek to override the decisions of the competent
   professional standard setters--including those of the IASB ...
   accounting standards will inevitably lose consistency, coherence
   and credibility, weakening the fabric of the international financial
   system." (IASB 2003, 1)

Regarding selection of Board members, the constitution holds that "the foremost qualification for membership shall be technical expertise," not geographical representation. The preservation of this requirement is crucial in order to maintain an independent board committed to the views set forth in the IASB Framework. To best meet the needs of global capital markets, International Financial Reporting Standards (IFRS) should be based on providing transparent, high-quality information. Standards should not be negotiable. As stated in International Accounting Standard Setting: A Vision for the Future (FASB 1999, 5):
   ... sacrificing quality for convergence of focusing on arriving at
   consensus rather than the best possible solution ... does a
   disservice to the consumers of financial reporting ... and
   undermines the credibility and efficiency of global capital markets.

In summary, we encourage members of the International Accounting Section of AAA to provide feedback to the Constitutional Review Committee. The academic community should let our voices be heard to ensure the IASB of the future includes academic representation and to support maintenance of an independent international accounting standard setting process.

(1) The Trustees are required to review the constitution every five years. One item under consideration is whether this requirement should be changed to every ten years.

(2) A copy of the constitution is on the IASB website (

(3) A cop of the consultation document is available on the IASB website (

(4) The Invitation to Comment will likely be issued during Spring 2004.

(5) As allowed by the constitution in its present form, the current academic seat on the Trustees is held by an individual whose background is not accounting.

(6) See for, example, Dombey and Parker 2004 and Bruce 2004.


Bruce, R. 2004. Global harmony hangs in the balance: Europe and the US face critical decisions in the face of business lobbying against common standards. Financial Times (February 23): 1.

Dombey, D., and A. Parker. 2004. European threat to convergence. Financial Times (February 18): 28.

FASB. 1999. International Accounting Standard Setting: A Vision for the Future. Norwalk, CT: FASB.

IASB. 2003. Trustees chairman defends independent standard setting. IASB Insight (July): 1.
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Title Annotation:Editorial
Author:Street, Donna L.; Behn, Bruce K.
Publication:Journal of International Accounting Research
Article Type:Editorial
Date:Jan 1, 2004
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