IASB Abandons IFRS Convergence as Independent Objective

The IASB oversight committee has abandoned the convergence of IFRS and GAAP as an independent objective in favor of a strategy of promoting and facilitating the adoption of IFRS. The new approach was announced as part of comprehensive changes to the governance of the IASB.

Last year, the European Federation of Accountants called for a new approach to IFRS adoption, noting that that we are now in a period of diminished returns from further convergence due to the rapid increase in complexity, without hardly any additional benefit to investors that arises when seeking to eliminate increasingly smaller differences between IFRS and other standards. The Federation urged the IASB to change its strategy and concentrate exclusively on major improvements and simplifications in IFRS over the medium term. To this end, said the Federation, the IASB should work together with standard setting bodies from around the world, so that all stakeholders can be fully engaged and ensure that the quality of IFRS is not compromised.

As part of the governance changes, the oversight committee reaffirmed its commitment to a principle-based approach for IFRS and specifically designated investors as a target audience for financial information. The specific naming of investors was not intended to minimize the importance of other users of financial information, including regulators.

The overseer also created the position of Vice Chair for the IASB, both to ease the burden on the chair, and to promote wider geographical distribution in the leadership. Essentially, the chair and vice chair will come from different regions, reflecting the oversight body’s strong commitment to geographical diversity in light of the global acceptance of IFRS.

The oversight body also reduced in duration the length of the second term of IASB members in order to ensure practical experience. While there will still be the possibility of a second term for IASB members, the Trustees have reduced the second term from five years to three for IASB members not serving as the chair or a vice chair.

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