Two of the four U.S. representatives on the International Standards Accounting Standards Board will represent investors, beginning this summer.
IASB’s trustees announced this week that they have appointed new members Patrick Finnegan, director of the financial reporting policy group at the CFA Institute Centre for Financial Market Integrity, and Patricia McConnell, former senior managing director of equity research at Bear Stearns. Both will join IASB full time on July 1.
On top of helping set international financial reporting standards, the new members will have a lot to contend with: the ongoing work to converge the rules of IASB and its U.S. counterpart, the Financial Accounting Standards Board; the continuing talks over whether the financial crisis has created a need for changes to financial reporting; pressure to make changes by opponents of fair-value accounting; questions over the IASB’s independence; and rhetoric about whether the United States should adopt IFRS before the convergence work is completed.
Finnegan and McConnell replace retiring members Mary Barth, a Stanford University accounting professor who had been on the board part time, and Tom Jones, former CFO of Citicorp.
The appointments are in line with a new strategy to have better user representation on the board, according to IASB spokesman Mark Byatt. “They are both highly regarded analysts,” he said.
With Finnegan, IASB is getting someone who has kept a close eye on the board since he joined CFA nearly a year ago. He has been providing the perspective of users of financial statements to standard-setters and regulators on behalf of the research and policy organization. He was formerly with Moody’s Investors Service and Deloitte & Touche.
CFA criticized FASB’s trustees last year for reducing FASB from seven board members to five. The research and policy organization told the board at the time that a smaller FASB would “compromise” its outreach and questioned whether the move would diminish investor representation on the board. In contrast, IASB has 15 members, four of whom represent North America.
One particular hot-button issue Finnegan will likely have to address is fair-value accounting, if IASB’s constituents continue to press the board for changes. Finnegan has criticized the widespread belief that mark-to-market accounting is largely to blame for the financial crisis and has voiced support for the rule’s merits. “I don’t think financial reporting could be held accountable for judgments of these large financial organizations that took these risks,” he said at a New York State Society of Certified Public Accountants event last year.
As for McConnell, she has also defended fair-value accounting in past interviews with CFO magazine while acknowledging that the rules aren’t perfect. She was once a member of IASB’s predecessor, the International Accounting Standards Committee. McConnell was with Bear Stearns for 32 years.
IASB’s trustees have only recently begun to consider geographic location when choosing IASB members. Earlier this year, the trustees agreed to expand IASB from 14 to 16 members, and to formalize guidelines to ensure members are geographically diverse by July 2012. IASB will then include four members from the Asia/Oceania region, four from Europe, four from North America, one from Africa, one from South America, and two appointed from any area.