International accounting standards provide a global language for business affairs. It enables users to understand and compare company accounts from different countries. The International Accounting Standard Board (IASB) is one of the independent bodies that issues international accounting standards known as the International Financial Reporting Standards (IFRS). It was formally known as International Accounting Standards Committee (IASC) that was set up in 1973. The IASB took over all of the IASC’s standards when it took over responsibilities for international financial reporting.
The IASB is organised under the IFRS Foundation. As stated in the IFRS Foundation Constitution, the IASB is solely responsible for all technical matters of the IFRS Foundation. It has the full discretion to develop and pursue its technical agenda. The IASB is also responsible for the preparation and issuing of IFRSs (other than interpretations) and exposure drafts, following the due process requirements stated in the Due Process Handbook. Lastly, the IASB also approves and issues interpretation developed by the IFRS Interpretations Committee.
The IASB consists of 14 members whom are appointed by the trustee of the IFRS Foundation. Geographical balance is emphasized when appointing members to ensure international diversity. The IFRS Foundation Constitution S. 6 states that the board must be made up of 4 members from the Asia-Oceania region, 4 members from Europe, 4 members from the America, 1 member from Africa and 1 member from any area. The 14 board members are not necessarily all full-time members. 3 members may be part-time members (s. 24). Part-time members only need to commit most of their time to the IFRS Foundation and need not sever all other employments. However they must fulfil the guidelines for independence set down by the Trustee.
The Chair and Vice Chair are selected among the full-time members. The Vice Chair chairs the board meeting when the Chair is absent and represent the Chair in external contacts. Members of the Board shall be appointed for a term of 5 years. They may be reappointed for a further term of 3 to 5 years subjected that they do not exceed 10 years of service as a board member. The criteria for Board membership is set out in the annex of the Constitution. It requires demonstrated technical competence and knowledge of financial accounting and reporting.
When an IASB member position is due to become vacant, the Trustee will place a vacancy advertisement via the Foundation website, the IFRS Email Recruitment Alert System and the Economist (online and app). The application process will be open for at least 4 weeks. The Chair of the Trustee’s Nominating Committee will also seek nomination from stakeholder groups like auditing, securities, regulatory, and investment protection communities. The Nominating Committee and the IASB senior management will then review the applications and nominations and list the shortlisted candidates. When the list is compiled, the candidates will be invited for an interview by the Nominating Committee with the participation of the IASB Chair and Vice-Chair. After the interviews, the Nominating Committee will meet and make recommendations to the rest the Trustees to proceed with the preferred candidate(s). Assuming the candidate(s) wish to progress, due diligence processes are then undertaken, including vetting procedures by a specialist third party organisation. The checks consist of a press search, carried out in local and national media covering both English and the local language for the individual’s jurisdiction of residence. The search examines the past 10 years in detail and provides information on any major issues identified in the past 20 years. A stewardship check is undertaken on a similar basis looking at organisations the individual has worked for or run. Professional and graduate level qualifications, regulatory / licensing status and employment for the past 10 years are also verified. Subject to jurisdictional restrictions, criminal records, credit records, civil litigation and regulatory history checks are also conducted. In addition, each individual is asked to complete a Declaration of Interests. Once the checks have been completed they are reviewed by the Chair of the Nominating Committee and one other Trustee on behalf of the full Nominating Committee. If these checks do not highlight matters that would prevent an appointment, approval to proceed will be sought from the Nominating Committee and then all Trustees. After the above steps have been satisfactorily completed, an offer of appointment is made to the selected candidate(s).
For reappointments, the IASB Member must confirm whether they wish to be considered for reappointment. If they do not, the role is advertised as above. If they do, then the same due diligence procedures are followed, though these are limited to the period of their first term i.e. the last 5 years. Once these checks have been completed satisfactorily, the IASB Member will be interviewed by the Chair of the Nominating Committee and a panel of members who will have access to the annual evaluation reports on the individual. The process for approving and making the appointment is the same as for the initial term.