Someone to Watch over Me: IASB Asks for an Overseer

The chairman of the International Accounting Standards Board wants an oversight committee to quell fears about global standards.

The International Accounting Standards Board contends that it needs a committee to oversee its actions and make sure it represents the public interest. IASB chairman David Tweedie told CFO.com editors on Thursday that the board will officially announce its plan for putting together the group, and give further details next week.

The creation of such a committee could help quell the anxiety felt within some European countries and companies that the new global accounting standards being developed jointly by the IASB and the U.S.-based Financial Accounting Standards Board don’t represent their interests. The IASB’s European constituents are currently proposing local or industry-specific exceptions to International Financial Reporting Standards, known as “carve-outs.” “They feel slightly disenfranchised…[wondering] what this group is doing floating around in global space just sticking laws onto us?” said Tweedie.

Although he didn’t say specifically how such a monitoring system might work, the IASB chairman said it could function similarly to the Securities and Exchange Commission’s oversight of FASB. The committee could maintain equanimity over the varying interests represented on the standards board and could act as an “endorsement mechanism” or a “second check” to ensure that it operates in the public interest, according to Tweedie.

Such a system could satisfy those European companies and lawmakers who fear that the close ties between the IASB and FASB could result in the exportation of America’s complex, rules-based system to their countries. Tweedie acknowledged that some also fear the SEC could become a global regulator. The IASB and any potential oversight committee wouldn’t function as an international securities enforcement agency, he said.

Currently the IASB is trying to eliminate the carve-out from the IFRS so that the goal of having the IFRS and U.S. GAAP converge into a “single, quality set” of global accounting standards is reached, said Tweedie. One of the most controversial carve-outs is the European Commission’s change to IAS 39, a standard on hedge accounting. European standard-setters also came close this year to changing IFRS 8, which covers reporting business segments.

“We are actually working to get rid of that carve-out,” asserted Tweedie, noting that the differences over IAS 39 amount to a mere seven paragraphs of the 2,000 pages of rules. The hedge-accounting carve-out in Europe is largely a matter of semantics, as some banks believe they can hedge under the IFRS and others do not. “We need to clarify the words,” declared Tweedie.

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