17 February 2005

Mr Erik Wong
Project Manager
IASC Foundation
30 Cannon Street
London EC 4M 6XH
UNITED KINGDOM
 

Dear Mr Wong

Review of the Constitution

The Group of 100 (G100) is pleased to respond to the Invitation to Comment ‘Review of the Constitution: Proposals for Change”. The G100 is an organisation representing the Chief Financial Officers of Australia’s major business enterprises. Our comments are set out below:

Small & Medium-Sized Entities (SMEs)
As previously advised the G100 believes that the present statement of objectives is adequate in respect of dealing with SMEs in the business sector. Under its existing arrangements the IASB can take account of the so-called special needs of SMEs and distinguish between consistent requirements for recognition and measurement by all reporting entities and provide relief in the form of differential disclosure requirements. That the IASB presently has a project on SMEs demonstrates that it currently has the power to deal with SMEs.

Trustees
The G100 does not support the proposed increase in, and distribution of, the membership. The distribution of membership should better reflect those jurisdictions that are adopting IASB Standards. The G100 believes that, while it is appropriate for North America to be adequately represented, the proposed representation does not contain any inducements for IASB Standards to be adopted in North America. For example, the number of representatives from North America could be set at four, increasing to six members on adoption of IASB Standards. In addition, if the Trustees are to be seen as truly international formal recognition of Africa, Central and South America as sources of members would be appropriate.

Oversight Role of Trustees
The G100 strongly believes that for accountability and governance purposes the Trustees should provide broad oversight of the IASB’s agenda, priorities and strategy to ensure that the IASB is taking appropriate account of the views and concerns of constituents.

The G100 is concerned about the practicality of the Trustees reviewing the developments of education programs and materials by others. It is our view that this activity would require significant resources which would be better used in the development of accounting standards.

Funding
The G100 considers that the proposed change shifts the emphasis of the responsibility of the Trustees. Under the existing Constitution the Trustees assume responsibility for fund raising whereas under the proposal all that the Trustees are required to do is to ‘satisfy themselves’ that appropriate arrangements relating to funding are in place. This does not specify where the responsibility for making such arrangements rests.

Composition of IASB
The G100 still believes that the size of the Board should be reduced to ten members. However, in view of the proposal to retain the current size of the Board the G100 believes that the composition should be changed to ensure that there are more members from a preparer background. A major benefit of such a change would be reflected in the implementation guidance accompanying the Standards.

The G100 strongly believes that limiting the terms of members to two terms and not more than seven years in total is a further means of ensuring that the Board remains focussed on implementation issues as well as high technical quality.

Formal Liaison Relationships
The G100 supports the proposed change. All members of the IASB, if they are to serve and be aware of the public interest, must be engaging in liaison activities whether formally with national standard-setters and other constituent groups or otherwise. The G100 agrees that the nature of liaison activities will change from time to time and from topic to topic.

Consultation Arrangements
The G100 believes that in terms of accountability and governance the IASB’s discretion in respect of developing (determining) its technical agenda should be tempered by the broad oversight of the Trustees.

The G100 supports the proposal that the IASB comply with all due process requirements or explain in detail the reasons for not doing so. However, in respect of the due process it is important that the IASB be able to adapt the due process to meet/respond to changing circumstances from time to time or from topic to topic.

Voting Procedures
The G100 supports the proposal to require nine votes in favour to approve a Standard.

IFRIC
The G100 believes that membership of IFRIC should contain a better balance of preparers as those from the external audit background tend to dominate. While the Committee acknowledges that concerns tend to relate to operational rather than constitutional issues, the operational issues must be addressed if IFRIC is to discharge its functions in an efficient and timely manner.

Standards Advisory Council (SAC)
The G100 supports the proposed changes. As outlined in our submission of 25 June 2004, the G100 believes that Australia should be formally represented at the SAC and that the Financial Reporting Council is the appropriate organisation to have such representation.

Yours sincerely

John V Stanhope
National President