IASB’s Standard-Setting Process

Under the IFRS Foundation’s Constitution, the IASB has complete responsibility for all IASB technical matters including the preparation and issuance of IFRSs and exposure drafts, each of which shall include any dissenting opinions, and the approval and issuance of

Interpretations developed by the IFRS IC.285 The IASB is required to publish an exposure draft on all projects and typically will publish a discussion document for public comment on major projects in accordance with procedures approved by the Trustees.286 The IASB has full discretion in developing and pursuing its technical agenda, subject to consulting with the

Trustees and the IFRS Advisory Council, and subject to carrying out a public consultation every three years, the first of which was started in 2011.287 The IASB also has full discretion over project assignments on technical matters.288 In organizing the conduct of its work, the IASB may outsource detailed research or other work to national standard setters or other

organizations.289

284

See Work Plan.

285

See IFRS Foundation Constitution.

286

See id.

287

See id. See also the IASB’s 2011 Agenda Consultation.

288

See IFRS Foundation Constitution.

289

The IFRS Foundation’s Constitution specifies certain steps for the IASB to take in gathering input on standards under development. Specifically, the IASB shall normally form working groups or other types of specialist advisory groups to give advice on major projects.290 It shall consult the IFRS Advisory Council on major projects, agenda decisions, and work priorities.291 Although not a requirement for each project, the IASB shall consider holding public hearings to discuss proposed standards and consider undertaking field tests (both in

developed countries and in emerging markets) to ensure that proposed standards are practical and workable in all environments.292 The IASB also shall establish procedures for reviewing

comments made within a reasonable period on documents published for comment.293 Further, the IASB shall explain to the Trustees its reasons for not following any of the non-mandatory procedures specified by the Trustees.294

In addition to the responsibilities outlined in the IFRS Foundation’s Constitution, and as noted in the Work Plan, the IASB relies on a number of practices and other factors to ensure that it considers a diversity of views from the public. First, its meetings are open to public observers and are broadcast over the Internet. Additionally, meeting materials, comment letters received, and staff summaries of comment letters on discussion papers and exposure drafts, among other materials, are publicly available on the IASB website.295 Further, the IASB consults with national accounting standard setters and other official bodies concerned with standard setting in order to understand better global financial reporting issues in a regional and national context.296

b. Commission Staff Monitoring of the IASB’s Process

The Staff monitors all of the IASB’s standard-setting projects, other than efforts related to IFRS for small and medium-sized entities (“SMEs”).297 For projects that are conducted jointly by the Boards, the Staff listens to all public meetings and education sessions. The Staff also listens to public IASB meetings and education sessions on certain IASB-only projects. The Staff reviews all IASB discussion papers and exposure drafts and participates in IOSCO’s Committee 1 to provide comment letters to the IASB. The Staff also periodically discusses IASB and joint

290 See id. 291 See id. 292 See id. 293 See id. 294 See id. 295

For more information, see IFRS, Standard-setting process—How we develop IFRSs (available at: http://www.ifrs.org/How+we+develop+standards/How+we+develop+standards.htm).

296

See IASB, How we consult: Encouraging broad participation in the development of IFRSs (Dec. 10, 2010) (“IASB’s How We Consult”) (available at: http://www.ifrs.org/NR/rdonlyres/A9708702-32FA-49A9-B469­ FC6BAF6136E9/0/HOWWECONSULTFINALvb.PDF).

297

IFRS for SMEs is a self-contained standard of 230 pages, designed to meet the needs and capabilities of small and medium-sized entities. The Commission does not accept use of IFRS for SMEs by foreign private issuers without reconciliation to U.S. GAAP. See 2007 FPI Adopting Release.

IASB-FASB standard-setting projects with IASB staff on conference calls to ask questions or explain Staff comments.

The Staff attends meetings of the IFRS Advisory Council and the IFRS IC as an observer (on behalf of IOSCO) and occasionally also attends IASB project-specific advisory group

meetings as an observer. The Staff reviews various other materials that are available to the public, such as comment letters received by the IASB on its documents, IASB staff comment letter summaries and summaries of IASB outreach to investors and other constituents, remarks by IASB members about the Board’s activities, and IASB educational webcasts, among other materials.

The Staff approaches its review of IASB standard-setting documents in much the same way as it conducts its review of FASB standard-setting documents. The Staff considers whether each standard under development clearly expresses its objective and proposed requirements and is understandable. The Staff considers whether the proposed requirements will result in more accurate, transparent, and useful information for investors and other users. The Staff also considers whether the standard setter has given appropriate consideration to comments by constituents about operational concerns or costs of implementing new standards, in light of the expected benefits. The Staff also considers whether there is any impact or overlap with existing Staff guidance or Commission rules or requirements and how that impact or overlap can best be addressed. Overall, the Staff considers whether the standard setter is operating in the public interest, that the results are credible and the product of an independent and unbiased process, and that each standard adopted is within an acceptable range of alternatives that serve the public interest and protect investors.