IFRS Foundation eases way for US standards setter to join global forum
The IFRS Foundation’s departure from requirements initially proposed in November could clear the way for the US Financial Accounting Standards Board (FASB) membership in a new global forum of national and regional standard setters.
Promoting the adoption of IFRS will not be a prerequisite for standard setters to participate in a new forum the IFRS Foundation is forming to advise the International Accounting Standards Board (IASB) on technical standard-setting issues.
Documents released Friday showed that the IFRS Foundation is dropping the proposed requirement. This move and other changes in language from the original proposal could facilitate FASB’s participation in the forum.
The changes were formalised as the IFRS Foundation released documents that requested applications from potential participants in the Accounting Standards Advisory Forum (ASAF).
A feedback statement on the IFRS Foundation’s proposal to establish the ASAF described the changes. The foundation is requiring national and regional standard setters that wish to participate in the forum to sign a Memorandum of Understanding (MoU) with the foundation.
In an Invitation to Comment (ITC) released in November, the foundation had proposed that forum participants agree to make their best efforts to promote the endorsement or adoption of IFRS in full and without modification over time. The new document says no such commitment will be required.
The MoU proposal requires participants to agree to support and contribute to the foundation in its mission to develop a single set of high-quality, understandable, enforceable and globally accepted financial reporting standards.
This represents a subtle change from the ITC, which proposed that ASAF members commit to support the mission of global standards itself. The new language asks forum participants to support the IFRS Foundation, rather than its mission of global standards.
The trustees of FASB’s parent body, the Financial Accounting Foundation (FAF), had expressed discomfort with the initial wording in a comment letter. FAF’s letter said global standards are a worthy objective, but not as practical for the immediate future as standards that are “highly comparable.”
In the United States, the decision on whether to adopt or allow public companies to prepare financial statements in accordance with IFRS is in the hands of the SEC commissioners. The SEC has announced no timetable for that decision.
The FAF letter expressed concern that the IFRS Foundation’s original proposal would exclude standard setters from jurisdictions – such as the United States – where the standard setter does not have authority to adopt or endorse IFRS.
Robert Stewart, FAF’s vice president for communications, said in a statement that FAF appreciates the responsiveness the IFRS Foundation demonstrated in revising its proposal.
“As we said in our comment letter, we believe the establishment of the ASAF represents an important opportunity for greater cooperation and collaboration among standard setters,” Stewart said. “We are in the process of reviewing the revised materials, including the proposed new commitments.”
IFRS Chairman Hans Hoogervorst has said he wants FASB to participate in the forum. He had said changes to the language of the proposal could make it possible for FASB’s membership in the ASAF.
The forum will consist of 12 members of national and regional standard setting bodies from across the globe.
—Ken Tysiac (email@example.com) is a CGMA Magazine senior editor.