US tests standard setter's independence

The independence and funding of the International Accounting Standards Board (IASB) will be among the key issues to be examined by the US before it finally makes a decision on whether to buy into international standards.

A work plan released by the US Securities and Exchange Commission reveals the details of the key issues to be placed under the microscope before the watchdog commits the world’s biggest economy.

The SEC will look at whether the current governance structure will maintain the standard setter’s independence. As part of this it will look at the work of the IASB’s supreme oversight body, the Monitoring Board, in reviewing current governance structures.

The SEC will also look at the IASB’s mission of developing standards for investors. The work plan report said SEC staff would “analyse stakeholder perspectives in this area.”

The SEC will also consider its own funding arrangement for the IASB’s work. It reports that it is the largest national contributor to the standards body even though it has still to make a decision on adopting the standards. In 2009 the US provided £1.85m for the IASB towards a total spend of £16.6m. International accounting firms donated £5.7m collectively. Nationally, the UK donated £800,000.

The SEC notes that only a quarter of the countries committed to IFRS in one form or another is contributing to the IASB’s costs. Only one country in Africa, Uganda, made a donation.

Jim Kroeker, the SEC’s chief accountant, said: “The staff has invested significant time and effort in executing the Work Plan, and we’ve made great progress to date. This progress report emphasizes the importance of transparency in the staff’s activities, and can help the public’s understanding of the magnitude of this project and the staff’s progress.”

The SEC’s decision will be guided by an examination of six key areas sufficient development and application of IFRS for the US; the independence of standard setting for the benefit of investors.; investors’ education and understanding; the regulatory systems that would be affected by adoption; the impact on public companies both large and small; HR readiness.

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