A former and a current CFO will join the International Accounting Standards Board this year. Elke König, onetime CFO of Germany’s Hannover Re Group, and Darrel Scott, CFO of South Africa’s FirstRand Banking Group, have been appointed to the IASB for five-year terms, beginning in July and October, respectively. They join Jan Engström, a former finance chief of the Volvo Group, as IASB members with experience heading a corporate-finance department.

König and Scott will replace Robert Garnett and Gilbert Gélard, whose terms end on June 30. The IASB continues its search to replace James Leisenring, an American whose stint also expires at the end of June. The board’s constitutional guidelines emphasize that its membership should represent a specific geographic mix, so it is likely that Leisenring’s replacement will come from North America.

König is currently a nonexecutive board member of private-equity firm Hannover Finanz and mortgage company Deutsche Hypothekenbank, as well as a member of the CFO Forum of European insurers. Scott will be required to step down from his post as CFO of FirstRand under the IASB’s constitution.

As CFO of FirstRand, Scott has responsibility for both regulatory and statutory financial reporting under the banking industry’s Basel II Accords. His presence will provide the board with a banking-industry preparer’s perspective as it works on hedge- and equity-accounting projects this year. Exposure drafts on both projects are due out during the first half of 2010.

The IASB’s Elke König, former CFO,
Hannover Re Group

Further, König’s insurance-industry background should prove particularly useful this year, as the IASB is scheduled to dive into the second phase of its project on accounting for insurance contracts. Up for debate will be a proposal to change the current practice of deferring policy-acquisition costs, as well as the concept of requiring the time value of money to be included when calculating the insurance liability in contracts. Insurance-accounting issues are considered some of the thorniest rules to write because of the industry’s inherent complexity. Indeed, insurers are not only regulated and therefore required to follow statutory accounting rules, but the industry turns traditional accounting on its head, as the business is predicated on companies recording premiums up front for an event that may never occur.

The IASB’s Darrel Scott, CFO, FirstRand
Banking Group

The IASB’s insurance working group met 11 times last year, and the full board met twice with the U.S. Financial Accounting Standards Board to sort out insurance-contract issues. Since 2002 the IASB and FASB have been working on converging international financial reporting standards and U.S. generally accepted accounting principles into a single set of standards. The boards expect to release exposure drafts on insurance contracts during the second quarter of this year, with a final rule slated to be published in 2011.

König and Scott also are able to provide insights into the implications of moving away from local GAAP to IFRS. As part of the European Union, König’s home country of Germany already requires its publicly traded companies to use IFRS, so she is familiar with the practical issues involved in the switch. The same is true for Scott, as South Africa also requires its public companies to report under IFRS. However, Scott may bring a private-company perspective as well. In 2007 South Africa was the first country to adopt the IFRS exposure draft for SMEs (small and midsize entities) as its local standard, and it has since adopted the finalized rules.

SMEs are estimated to represent 95% of all companies in the world, and the related standards were developed by the IASB after a five-year process that whittled down 2,500 pages of full IFRS into 230 pages of principles affecting private companies. Last year the American Institute for Certified Public Accountants recognized the IASB as an official standard-setting body, thereby clearing the way for private companies in the United States to file results using IFRS. If the IASB trustees who appoint board members are looking for North American candidates with practical IFRS experience to replace Leisenring, executives from Canada and Mexico would fit the bill. Canada will require its public companies to file using IFRS in 2011, while Mexican companies must do the same by 2012.

American companies are waiting for the Securities and Exchange Commission to make a decision about requiring public corporations to file financial results using IFRS. The SEC published a “roadmap” in 2007, under then-chairman Christopher Cox, saying it would announce its decision in 2011. On Friday the SEC will begin a two-day meeting, “The SEC Speaks in 2010,” to publicly talk about developments at the commission, including the global financial crisis and international accounting. It is unclear whether SEC chairman Mary Schapiro or chief accountant James Kroeker will provide updates to the IFRS roadmap. At press time, the SEC did not return a call for comment.