Nicolas Véron: IFRS sustainability requires further governance reform
15 December 2009
Véron writes that a broader strategic readjustment on the part of the IASCF is necessary if the Foundation hopes to regain the support of the global investment community. The Foundation must make itself more responsive and accountable to the investment community.
This Policy Contribution reproduces the text of a letter sent by Senior Fellow Nicolas Véron to Gerrit Zalm, the Chairman of the International Accounting Standards Committee Foundation (IASCF) in response to the Foundation's public consultation on Part 2 of its Constitution Review.
Véron writes that a broader strategic readjustment on the part of the IASCF is necessary if the Foundation hopes to regain the support of the global investment community, its most crucial group of stakeholders. The Foundation must make itself more responsive and accountable to the investment community, a requirement that has become more urgent due to the crisis.
The following main ideas are presented in Véron’s paper:
• The foundation that oversees the setting of International Financial Reporting Standards (IFRS) has proposed minor changes to its statute or ‘Constitution’, some of which are to be welcomed.
• But a broader strategic readjustment is necessary if the drift that has seen IFRS lose some of the support it enjoyed from the global investment community, its most crucial group of stakeholders, is to be reversed.
• The Foundation should through its oversight bodies empower and appropriately represent the global investment community.
• ‘Convergence’ as currently practiced, ie an attempt to harmonise IFRS with US accounting standards, should be downgraded from its current priority status. Not doing so entails the risk of compromising standards quality from the point of view of users of financial information. High standards quality, rather than ad hoc harmonisation, is the condition for eventual IFRS adoption by the US, Japan, and other jurisdictions that still use national standards.
• The Foundation’s Trustees need to significantly increase their level of presence and engagement in public debates about accounting and interaction with policymakers.
© Bruegel
