The Trustees of the IASC Foundation today issued a letter to participants of the upcoming G20 meeting on 24-25 September in Pittsburgh, USA.
15 September 2009
The Honourable Barack Obama
The President of the United States
1600 Pennsylvania Avenue, NW
Washington, DC 20500
Dear Mr President
Trustee letter to G20 participants
On behalf of the Trustees of the IASC Foundation, the oversight body of the International Accounting Standards Board (IASB), I am writing to you as the host of the upcoming meeting of leaders of G20 countries on 24-25 September in Pittsburgh. We respectfully request that the meeting secretariat circulates this letter to other meeting participants.
The purpose of this letter is to inform the leaders of G20 countries of the progress that the IASC Foundation and the IASB have made in response to the G20’s recommendations on accounting standards agreed at the Leaders Summits in Washington in November 2008 and in London in April 2009.
In preparation for the upcoming Pittsburgh Leaders Summit, the G20 finance ministers recently called for:
Convergence towards a single set of high-quality, global, independent accounting standards on financial instruments, loan-loss provisioning, off-balance sheet exposures and the impairment and valuation of financial assets. Within the framework of the independent accounting standard setting process, the IASB is encouraged to take account of the Basel Committee guiding principles on IAS 39 and the report of the Financial Crisis Advisory Group; and its constitutional review should improve the involvement of stakeholders, including prudential regulators and the emerging markets.
The IASC Foundation and the IASB support these objectives and are committed to achieving them. The attached progress report (Appendix A) describes the substantial progress already made. The IASB, which is responsible for International Financial Reporting Standards (IFRSs) used in over 100 countries and growing, is working with the US Financial Accounting Standards Board (FASB) to reach convergence between IFRSs and US generally accepted accounting principles (GAAP). This would help achieve the goal of one global standard.
The Trustees support the IASB’s deepening of its engagement with its stakeholders and its taking account of the Basel Committee guiding principles and the report of the Financial Crisis Advisory Group (FCAG). We are pleased that, while recognising the IASB’s commitment to investors as the primary users of financial information, the IASB, amongst other actions, has already established an enhanced technical dialogue with prudential supervisors, market regulators and other stakeholders. This dialogue will ensure their deeper input in the development of new standards. The first meeting of this enhanced technical dialogue occurred on 27 August in London. The IASB is also meeting regularly with the Basel Committee and is a member of the inancial Stability Board, where financial reporting issues are regularly discussed. At our July meeting, the Trustees stressed the urgency in completing the first component of the comprehensive revision of IAS 39, the IASB’s financial instrument standard, by year end. The work underway is consistent with the elements identified by the G20 finance ministers at their pre-Pittsburgh meeting.
The proposals to revise IAS 39 on which the IASB is now consulting globally provide a significant reduction in the complexity of financial instrument accounting—a goal highlighted at the April 2009 G20 Leaders Summit in London. The proposals are also consistent with the view of many stakeholders, including the Basel Committee, that cost-based accounting is appropriate for some categories of financial instruments. In making their proposals and in order to provide transparency and reflect economic reality, the IASB’s emphasis has been to define in a balanced and transparent way the appropriate criteria for classifying instruments to be measured at cost and fair value—not to increase or decrease arbitrarily the use of fair value. Whether there is a decrease or an increase of fair value will depend on a particular institution’s business model and holdings. The IASB is not proposing that the loan book of banks will be held at fair value.
Complementing the review of fair value accounting for financial instruments, the IASB is improving the accounting for loan-loss provisions, another area cited by the G20. The IASB is working closely with prudential supervisors, financial institutions, investors, and other stakeholders specifically to develop more forward-looking measures (an expected loss model rather than the incurred loss model currently in place in IFRS and US GAAP). The IASB has already issued a discussion document on provisions and will release a final proposal in the fourth quarter.
Finally, regarding governance issues, the changes proposed in the first part of the five-yearly Constitution Review are already in place. They include, importantly, the creation of a public accountability link to a Monitoring Board comprising public capital market authorities. On 9 September 2009, the Trustees published their proposals for the second part of the Constitution Review. These proposals seek to enhance further the governance and public accountability of the organisation. They also propose to improve the involvement of stakeholders with a broad range of perspectives in both developed and emerging markets. In addition to the
formal written comment process on these proposals, the Trustees are now consulting stakeholders throughout the world through a series of public round table meetings in London, New York, and Tokyo.
In summary, the Trustees and the IASB are committed to taking all of the actions necessary within their sphere of responsibility to deal with the issues arising from the financial crisis. The report in this letter and the attached appendix will, we trust, indicate the strength of our commitment to consult with our stakeholders and to act promptly.
Sincerely,
Gerrit Zalm
Chairman of the Trustees
- Click here to view the G20 progress report referred to in the letter
- Click here for a print-friendly version of the letter from Trustees of the IASC Foundation to participants of the G20 meeting
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