Tuesday, May 31, 2011

SEC Chair Schapiro Emphasizes Independent Funding for Accounting Standard-Setters

Noting that vital importance of the ongoing work of the FASB and the IASB to develop and improve financial accounting standards, SEC Chair Mary Schapiro praised the FASB and IASB for prioritizing projects in areas most in need of improved global standards, including revenue recognition, leases, financial instruments, and insurance. In remarks at a Financial Accounting Foundation event, Chairman Schapiro also emphasized the importance of accounting standard-setters having an independent source of funding. In a global financial marketplace measured in the hundreds of trillions of dollars, she continued, accounting board standard setters should not have to rely on voluntary contributions.

In addition to the quality of its board and staff, said the SEC Chair, one reason FASB is able to maintain its position as a world leader is the independent and stable funding it has received through the issuer accounting support fee established under Sarbanes-Oxley. But another important standard-setter, the IASB, lacks an independent and assured source of funding, she noted, as the IFRS Foundation has no authority to impose funding requirements. The SEC Chair noted that the threats of interference during the financial crisis serve as a continued reminder of the importance of financial independence for the IFRS Foundation and the IASB.

From her role as a member of the Monitoring Board, Chairman Schapiro knows that the trustees of the IFRS Foundation are working closely with regulators and other public authorities and key stakeholder groups to explore more stable funding mechanisms. Until then, however, funding for the IASB will remain a challenge. The Chair noted that the SEC staff continues to evaluate short-and long-term options for assisting the Foundation.

There has been growing concern over the lack of independent IASB funding. In a 2007 letter to the SEC, then Senate Banking Committee Chair Christopher Dodd (D-Conn) said that the IASB’s lack of an independent funding mechanism was not in the public’s best interest. In a 2008 letter to the IASB oversight body, the International Corporate Governance Network said that establishing a stable, transparent funding framework would significantly reduce the concern that financial pressure could compromise the independence of the IASB’s decision-making and would also ensure that the Board has adequate resources to fulfill its mission.