One World Trust – Accountability and how to get it so wrong on the IASB

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As part of its report on Global Accountability the One World Trust published a case study on the International Accounting Standards Board under the title

Good Practice Case Study 5: The IASB explains how its due process creates consistency in stakeholder engagement

Note that they published what the IASB had to say. And I'll also reiterate what they told me when I managed to talk to someone about this yesterday. They said they don't test the processes on which they report. They just review the systems.

If they had tested the systems or even done the must cursory of web searches they might have found that this, written presumably by the IASB is wholly inaccurate:

The IASB's foremost objective is to develop a single set of high quality, understandable, and enforceable global accounting standards. As such, the IASB is aware of its public impact and recognises the need for stakeholders' participation in the development of standards.

To ensure that stakeholders are engaged in the IASB's activities in a consistent way, the organisation has adopted a due process which maps out the stages of the development of standards, identifies which information the IASB will disclose, and how and when stakeholders can contribute. If the IASB decides to omit a stage, it must give a public explanation.

Crucial to sustaining the engagement of stakeholders is assuring them that they have been listened to and their concerns
considered. To ensure this, the IASB is mandated to publish with each draft standard and each completed standard a 'basis for conclusions' - a document that identifies the reasons why the IASB reached the conclusions it did, including the reasons for accepting or rejecting the comments of stakeholders. External stakeholder engagement has now been strengthened by the IASB's agreement to publish with major new standards a 'feedback statement' that summarises in plain English the basis for its decisions and why stakeholders' comments were or were not taken on board. Aimed at a non-technical audience, this statement is intended to enhance communication with a wider community outside the standard setting world.

In creating a true consultative process, the IASB seeks to ensure that the comments it obtains represent all views, not just those of the vocal few. It has therefore made participation in the development of standards as easy and accessible as possible, and has invested resources in raising awareness among stakeholders on how to become involved.

The due process benefits the IASB in two ways. Externally, by demonstrating that standards are developed in an open public consultative process, it enhances the legitimacy of the standards. Internally, it imposes discipline on the organisation by improving the consistency of and opportunities for stakeholders' participation. The IASB's hope is that wider recognition and understanding of its due process will sustain participation in the long term.

This did not work on IFRS 8:

1) The IASB said it was open to meetings. It could not arrange them.

2) It said it would undertake field visits. It refused an invitation to participate.

3) It said it would create a sub-committee to engage. It has never met.

4) When over 50 people submitted letters opposing IFRS 8 they were counted as 'one letter' by the IASB even though many made differing points. Those in favour counted as individual letters. This was a blatant manipulation of statistics. It also revealed that the letters had not been read or this could not have happened.

5) The European Parliament has sharply criticised the IASB decision making process.

6) That is why they have established their new 'feedback statement' - this is needed because the arrangement that the One World Trust has praised so obviously did not work.

7) I can also say with come confidence that there is truth in the report that "In creating a true consultative process, the IASB seeks to ensure that the comments it obtains represent all views, not just those of the vocal few". Every time we got a letter in to them they managed to find another to match it. I found that a strange coincidence.

But what all this says is that the One World Trust got this report horribly wrong.

And they did so for a reason. That reason is that by adopting the process based methodology they use they clearly indicate that they think accountability is a noun - a description of a process. They're wrong. Accountability is a verb - it's the description of an action.

And as the IASB resoundingly proved, having a process is useless when you are not willing to act on it. They didn't.