The International Accounting Standards Board (IASB) sets accounting principles that are effectively law in over 100 countries but has been criticised for being aloof and slow to respond to policymaker concerns during the financial crisis. Its rules will form the bedrock for one set of global standards by mid-2011 as called for by the G20 group of leading nations to improve transparency for investors and cut red tape for companies.
“These changes, which are aimed at enhancing public accountability, stakeholder engagement and operational effectiveness, complete the second part of the.... constitution review,” the IASB said in a statement.
Pressure on the IASB has pitted accountants – who say financial statements should be a snapshot health check on a company – against policymakers who see a financial stability role for accounting rules such as smoothing out losses at banks.
Industry officials welcomed the announcement to enshrine a principles-based approach to setting rules -- a nod to critics in Europe who feared the board was moving towards a more prescriptive US style of standard setting.
The IASB announced several key changes from 1 March including:
The revised constitution says convergence of IASB rules with those used in the United States and elsewhere is a strategy aimed at promoting the adoption of the IASB’s rules and not an objective in itself.
IASB rules will be based on “clearly articulated principles”.
Investors are specifically identified as the target audience for financial information.
All rule changes must undergo due process and a new emergency procedure is introduced for accelerating reforms. Reform can only be speeded up in exceptional circumstances with approval of at least 75 per cent of the IASB’s trustees.
The IASB constitution is changed to allow for the appointment of two vice chairs for the board and its trustees.