IASC Foundation Constitution Review

25 June 2004

Mr Paul Volcker
Chairman
IASCF
30 Cannon Street
London ED 401 6 XH
UNITED KINGDOM

Dear Mr Volcker

Constitution Review

The Group of 100 (G100) is pleased to comment further on the IASCF Constitution Review. While the G100 will not be participating in the public hearings to be held in Tokyo on 13 July 2004 our comments on the tentative conclusions of the Trustees are outlined below.

1. Whether the objective of the IASCF should refer to SMEs
As indicated in our submission of 16 February 2004 the G100 believes that the present statement of objectives is adequate in respect of dealing with SMEs in the business sector. Under existing arrangements the IASB can take the special needs of SMEs into account. The lack of reference in the objectives has not proved a barrier to undertaking the existing project on SMEs.

2. Number of trustees and geographical and professional distribution
While the proposals appear to provide a better balance, at least geographically, there is no specific reference to representation from Africa, Central and South America. The G100 believes that there should be formal recognition of these regions in the Constitution.

3. Oversight role of trustees
The G100 strongly believes that for accountability and governance purposes it is appropriate for the Trustees to provide broad oversight of the IASB’s agenda, priorities and strategy. In doing so the Trustees should be precluded from participation in or approval of, technical decisions.

4. Funding
The IASC should rely on contributions and endorsements for funding. The system it administers should rise or fall on the acceptance in the capital markets that the standards are robust and result in high quality financial reporting. Achieving this outcome will induce contributions and endorsements.

5. Composition of the IASB
The G100 believes that the size of the Board should be reduced to ten members having relevant and recent experience in applying accounting standards. We believe that the importance of relevant recent experience should limit the tenure of members.

6. Formal liaison relationships
The G100 supports the concept of liaison standard-setters and the broad involvement of other national standard-setters in the IASB processes. However, to describe liaison standard-setters as being partners of the IASB is somewhat of a misnomer as from the practice of the relationships it appears that some partners are more equal than others.

7. Consultative arrangements of IASB
The G100 agrees that the due process requirements should be sufficiently flexible to deal with different circumstances. In order to enhance the transparency of its processes the IASB should, as a matter of practice, publish details of the status of due process of each project as each project proceeds. In addition, the G100 believes there should be a strong expectation of substantive field testing of proposals as projects proceed and that longer lead times for the implementation of standards to take account of national requirements for adopting IASB Standards are necessary.

8. Voting procedures of IASB
The G100 agrees with the proposal to require 9 votes in favour (64%) to approve an accounting standard if membership remains at 14. The same voting requirements should apply in respect of issuing exposure drafts.

9. IFRIC resources and effectiveness
The G100 believes that IFRIC should be restructured/reoriented if it is to provide timely guidance on Year 2005 issues. In this regard IFRIC’s relationship with similar national bodies and liaison standard-setters bears re-examination.

10. SAC Composition, role, effectiveness
The G100 supports proposals that the SAC Chair not be a member of the IASB or its staff.

Given the role of SAC and its broad membership including representatives of organizations and members in a personal capacity, the G100 believes that as a liaison standard-setter to the IASB and the fact that Australia has adopted IASB Standards in respect of 2005, Australia should be formally represented at the SAC. In this regard we suggest that the Financial Reporting Council is the appropriate Australian organization to have such representation.

The G100 also believes that SAC should report to the IASB on the range of issues discussed and should formally convey its views/advice to the IASB. The IASB should be required to state its reasons for not doing so when SAC advice/views are not adopted.

Yours sincerely

John V Stanhope
National President