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Financial Accounting Foundation Responds to Criticism About $3 Million Payment to IASB Parent

February 26, 2014

The Financial Accounting Foundation’s (FAF) late January announcement that it would pay up to $3 million to the IFRS Foundation prompted several corners of the accounting profession to question the justification for the payment. The FAF says it is now reviewing the issues raised by its critics.

The Financial Accounting Foundation (FAF) is reviewing the issues raised about its recent announcement that it would contribute up to $3 million to the IFRS Foundation to help the IASB finish convergence work with the FASB, FAF Chairman Jeffrey Diermeier said on February 25, 2014.

In brief remarks to the FAF trustee meeting in Norwalk, Connecticut, Diermeier said the foundation planned to discuss the concerns internally as well as with the SEC.

“Since we made the announcement, we have heard from a number of stakeholders who have raised concerns about the contribution,” Diermeier said. “We appreciate those expressions of concern and are considering carefully the issues that were raised. We take the issues of our independence very seriously.”

Asked after the meeting about what kind of evaluation the FAF would conduct, Diermeier declined to elaborate, repeating that the discussion would be internal as well as with the SEC. He did not comment on a timeline about when the FAF would announce its response to the concerns.

The SEC didn’t respond to a request for a comment about the questions that have been raised about the FAF payments as this story was being written.

The FAF on January 28 announced that its payments would support completion of the remaining international accounting convergence projects.

The payments are scheduled to be made in three $1 million installments, and the money would come from the FAF’s reserve funds. The first installment was paid in January, and the second and third payments are due in June and December. Diermeier didn’t directly address the prospect that the FAF might reconsider or decrease the June or December payments.

“Completing these joint projects clearly is in the best interests of FASB stakeholders, including all of those around the world who invest in U.S. capital markets,” Diermeier said in a statement at the time.

But several FASB constituent groups soon afterward questioned the unprecedented funding arrangement.

The National Association of State Boards of Accountancy (NASBA) said the payment decision was made “without the usual transparency” and consideration of stakeholder input. A top official with the American Bankers Association questioned the size of the contribution. (See State Accounting Boards Question $3 Million Payment to IASB’s Parent in the February 19, 2014 edition of Accounting & Compliance Alert.)

The payments are being made at a time when the European Union is reconsidering the amount it sends to the IFRS Foundation. The European Parliament’s Economic and Monetary Affairs Committee is scheduled to vote in March on its spending allotment to the IFRS Foundation for the next five years, and at least one influential member of the panel Syed Kamall, a Conservative member from the UK, said recent news reports about governance lapses at the IFRS Foundation raise questions about whether the European Union should maintain its funding for the international board at the current level.