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FRC’s Response to Exposure Draft: Proposed Targeted Amendments to the IFRS Foundation Constitution

Erkki Liikanen Chair of the IFRS Foundation Trustees IFRS Foundation Columbus Building 7 Westferry Circus Canary Wharf London E14 4HD, UK

30 October 2026

Exposure Draft: Proposed Targeted Amendments to the IFRS Foundation Constitution

Dear Erkki,

The Financial Reporting Council (FRC) welcomes the opportunity to provide comments on the IFRS Foundation's Exposure Draft: Proposed Targeted Amendments to the IFRS Foundation Constitution published in August 2026.

This letter highlights our key points for consideration and is followed by an Appendix which includes our detailed responses to the specific questions posed by the Trustees.

The purpose of the FRC is to serve the public interest and support UK economic growth by upholding high standards of corporate governance, corporate reporting, audit and actuarial work. The comments in this letter are based on the FRC's extensive experience in standard setting, including in issuing accounting, audit, assurance and actuarial standards, in addition to setting the UK Corporate Governance Code and Stewardship Code. The FRC has also, for many years made a significant financial contribution on behalf of the UK, collected from levy payers, to fund the IFRS Foundation's work.

The FRC has long been a supporter of high-quality international standards designed to meet the needs of global capital markets. International standards reduce friction between markets and reduce costs to businesses in meeting their regulatory reporting requirements. They also ensure the preparation of consistent, comparable standards, and our comments in this letter are very much focused on ensuring that the credibility and wide global adoption of international standards continues. That credibility comes, we believe, because standards are developed drawing on diverse perspectives from a wide range of jurisdictions ensuring that they meet the needs of global stakeholders – the importance of standards being "generally accepted" is critical.

Reduction in board size

The FRC welcomes the Foundation's work to ensure the organisation remains fit for the future and continues to deliver on its mission to bring transparency, efficiency and accountability to capital markets globally. We agree that such a mission should be fulfilled effectively, efficiently and sustainably over the long term. The FRC further welcomes the Trustees' commitment to supporting the two standard-setting boards as independent global standard-setters and to maintaining the boards' technical capacity, stakeholder engagement and ability to deliver their work programmes over the long term.

We note the Trustees' assertion that streamlining aspects of the IFRS Foundation's operations and governance arrangements, including a reduction in the size of the IASB and ISSB, will support the Foundation's mission and ensure that the boards remain sustainable within the Foundation's available resources for the long term. However, we have serious doubts about whether the Trustees' expectation that each board will comprise ten members by the end of 2028 is the best way to support both the Foundation's mission and global adoption of standards. The reduction in size of the boards' risks undermining this, along with the legitimacy of the standards that are developed. We ask the Trustees to consider whether there are other ways to address the need to have a more sustainable cost base, without losing the perspectives that a diverse multi-stakeholder model, linked to global capital markets allows.

We would value further information on the Trustees' process of evaluating and prioritising the IFRS Foundation's resources and, particularly, their conclusion that substantially reducing the size of the boards is the only way to ensure that the boards remain sustainable within the Foundation's available resources¹. For instance, could a larger board be sustained at the same cost by lowering remuneration. We also believe that such a significant decision merits consultation with stakeholders.

Sufficiently high voting thresholds to give comfort that standards have been generally accepted are also an important factor in supporting confidence in the standards and suitability for global adoption. We are pleased to see that, in practice, the supermajority principle has been retained and would like to see the terminology also retained.

The announcement, in August 2026, of the Trustees' five-year operating and financing plan refers to a review of separate projected funding and resourcing requirements for the IASB and ISSB over five years. The plan includes 'enhancing the ISSB's multi-location model... to foster adoption and build capacity for implementation' by opening a new office in Geneva whilst maintaining a presence in Frankfurt, however, we query whether such an expansion is consistent with the streamlining of the IFRS Foundation's operations and reducing its cost base.

We note the announcement, in October 2026, that two former ISSB members have been appointed as Senior Advisers to the ISSB Chair. Although these are unpaid positions, we query whether the appointments are consistent with the decision to reduce the size of the boards and would be interested in the governance arrangements in relation to the appointments. We also note that a number of other ISSB members' appointments came to an end on 30 September 2026 and that the reappointment process had not been concluded by that date, necessitating interim arrangements. Although this is a pragmatic short-term solution, it is disappointing that the process could not be concluded on a timely basis; it is important for the credibility of the boards that changes in membership are managed effectively and with certainty and that the Chairs of the boards can plan with certainty that their work programmes will be able to draw on board members with necessary expertise.

Independent review of the Trustees' governance

We note that the proposals in this consultation would significantly enhance the Trustees' discretionary powers, including in relation to board size, the geographical allocation of board members and the duration of board member terms.

In principle, we support the Trustees exercising a degree of discretionary powers in their oversight of the boards but suggest that the Trustees consider defining those principles to underpin their use of the new discretionary powers, and to ensure appropriate transparency and accountability.

We also note that the Trustees' own governance arrangements must be exemplary, and we therefore recommend an independent review of the IFRS Foundation's governance arrangements. Such a review could include consideration of the Trustees' composition and selection process and is particularly important given the changes, since the completion of the last review in 2012, to the IFRS Foundation, including the creation of a new board, and in the wider environment in which the Foundation operates. We recommend that the IFRS Foundation only updates the Constitution once such a review of the Foundation's governance arrangements has been concluded to provide stakeholders with assurance that they are working effectively and efficiently.

Proposed amendments to the Constitution

We note that the proposed targeted amendments to the Constitution in this consultation operationalise the Trustees' decision to reduce the size of the boards and that the Trustees are consulting on adjustments to the ways the boards organise and conduct their work rather than their decision to reduce the size of the boards; we have commented above that the reduction in the size of the boards also merits consultation. We also note that when the amendments to the Constitution are finalised, the IFRS Foundation Due Process Handbook will be updated as necessary to reflect the changes, including changes to the voting requirements.

Our key points in relation to the proposed amendments to the Constitution include:

We recommend a narrower range for board membership and, assuming that the IFRS Foundation's available resources mean that only a maximum number of 20 members across both boards will ensure that the boards remain sustainable, we recommend different board sizes based on the nature and intensity of each boards' workload.
We are concerned by the significant proposed reduction in the geographical allocation of board members to Asia-Oceania, Europe and the Americas as a proportion of the total board sizes and recommend normal geographical allocations for the different board sizes that have a narrower range of at-large members. We also disagree with the statement that these proposals would not change the existing geographical allocation of members.
We would have welcomed further information in this consultation about how the Due Process Oversight Committee might amend the Due Process Handbook, including its restriction in relation to the number of board members that can meet privately to discuss technical matters. This is of fundamental importance as it impacts on developing standards in a way that means that a final standard will be widely adopted and meet the needs of capital markets.

If you have any queries or would like to discuss our comments in more detail, please do not hesitate to contact me or Jenny Carter at [email protected].

Wishing you all the best for life after the Foundation.

Handwritten signature

Mark Babington Executive Director, Regulatory Standards Direct telephone line: 020 7492 2323 Email: [email protected]

Appendix

Exposure Draft: Proposed Targeted Amendments to the IFRS Foundation Constitution

Question 1—Board size and geographical allocation of board members

Do you agree with how the Trustees propose to amend the Constitution to implement their decision to reduce the size of the boards by:

(a) specifying a range for board membership; and

(b) amending the geographical allocation of members to maintain appropriate international diversity and balance?

If not, why not and what would you propose instead and why?

We note that we are being asked whether we agree with how the Trustees propose to amend the Constitution to implement their decision to reduce the size of the boards rather than whether we agree with the Trustees' decision to reduce the size of the boards. We have, however, chosen to comment on the Trustees' decision to reduce the size of the boards in the main body of the letter. We note there that:

we have serious doubts about whether such a significant reduction in the size of the boards is the best way to support the IFRS Foundation's mission and ensure broadest possible global support for and adoption of the standards that are developed. There may be other ways of managing the IFRS Foundation's resources and ensuring its overall sustainability without undermining this critical objective;
we would value further information on the Trustees' process of evaluating and prioritising the IFRS Foundation's resources and, particularly, their conclusion that substantially reducing the size of the boards is the only way to ensure that the boards remain sustainable within the Foundation's available resources. For instance, could a larger board be sustained at the same cost by lowering remuneration; and
we also believe that such a significant decision merits consultation with stakeholders.

We also note that the proposals in relation to board size and the geographical allocation of board members would significantly enhance the Trustees' discretionary powers and, in the main body of the letter:

suggest that the Trustees consider defining those principles to underpin their use of the new discretionary powers, and to ensure appropriate transparency and accountability; and
call for an independent review of the IFRS Foundation's governance arrangements.

Specifying a range for board membership

We do not disagree in principle with the Trustees having a degree of discretionary power in relation to board size and for the Trustees to determine the number of members for each board having regard to the boards' respective priorities and workloads. We therefore do not disagree in principle with the proposal to specify a range for board membership. However, we believe that the proposed range for board membership is too wide and caution that constant fluctuations in board size could be disruptive and that changes in board size require careful management.

We believe that the global credibility and legitimacy of the boards, as well as their continuing technical capacity, stakeholder engagement and ability to deliver their work programmes over the long term ideally require a board size of between ten and 12 members. We also believe that a board size of at least ten members is necessary to ensure sufficient diversity of professional backgrounds, skills and perspectives.

We therefore recommend that the IASB and ISSB should normally comprise the narrower range of between ten and 12 members. However, assuming that the IFRS Foundation's available resources mean that only a maximum number of 20 members across both boards will ensure that the boards remain sustainable, we recommend different board sizes based on the nature and intensity of each boards' workload.

Specifically, we recommend that the IASB should normally comprise between ten and 12 members and the ISSB should normally comprise between eight and ten members. One example of the differences in workload is that, over the last six months, the number of hours of board meetings have been roughly four times greater for the IASB than for the ISSB. We recognise, of course, that the number of hours of board meetings represent only one proxy for the boards' current workloads and recommend that the IFRS Foundation also considers stakeholder feedback on the forthcoming boards' work plan consultations to determine the likely future nature and intensity of each boards' workload.

Amending the geographical allocation of board members

We recognise that the normal geographical allocation of members currently specified in the Constitution must be amended for the smaller boards.

We note that, while members are appointed as individuals rather than as representatives of a geographical region, geographical diversity is an important consideration in the composition of each board. We therefore welcome the Trustees endeavour to ensure geographical balance in the membership of each board and the stipulation that the proposed allocation of at-large members for both boards is subject to not creating overall geographic imbalance. We also support the proposals to preserve participation from Asia-Oceania, Europe, the Americas and Africa and recognise the value of at-large members.

However, we are concerned by the significant proposed reduction in the geographical allocation of board members to Asia–Oceania, Europe and the Americas as a proportion of the total board sizes and we disagree with the statement in this consultation that the proposed geographical allocation is consistent with the existing allocation.

The current Constitution guarantees board members from Asia–Oceania, Europe and the Americas 86% of the IASB geographical allocation and 64% of the ISSB geographical allocation for board sizes of 14 with one and four at-large members, respectively. However, board members from Asia-Oceania, Europe and the Americas would only be guaranteed 50% of the proposed geographical allocation for board sizes of 12, with five at-large members. This is of particular concern for Europe given the proportion of the funding provided to the IFRS Foundation by European jurisdictions and the value of the capital markets in European jurisdictions. The boards should be reflective of the capital markets that are applying IFRS Standards.

We do not disagree in principle with the Trustees having a degree of discretionary power in relation to the geographical allocation of board members. However, we believe that the proposed range for at-large members is too wide and may mean that the boards will not reflect the global nature of the IFRS Foundation's work.

We have previously recommended, assuming that the IFRS Foundation's available resources mean that only a maximum number of 20 members across both boards will ensure that the boards remain sustainable, that the IASB should normally comprise between ten and 12 members and the ISSB should normally comprise between eight and ten members. In line with this suggestion, we recommend the following normal geographical allocation for the different board sizes:

Region	Your proposed geographical allocation of IASB and ISSB members	Our proposed geographical allocation of IASB members	Our proposed geographical allocation of ISSB members
Asia-Oceania	2	3	2
Europe	2	3	2
Americas	2	3	2
Africa	1	1	1
Any area ('at-large members')	1–5 remaining members*	0–2 remaining members*	1–3 remaining members*
Total	8–12	10–12	8–10

* subject to not creating overall geographical imbalance.

Such allocations have a narrower range of at-large members, which we believe would support confidence that the boards will remain geographically diverse and credible global standard setters.

We support the proposal to designate the Chair as one of the at-large members. However, we note that such a proposal would not work with our proposed geographical allocation of IASB members for a board size of ten and so would require further consideration. Such a proposal further supports a board size larger than between eight and ten members.

We recognise the importance of the boards continuing to draw on feedback from a wide variety of global perspectives through their formal consultations, consultative bodies and outreach. However, such feedback cannot replace geographical diversity and balance of the boards.

We are wary of the statement in this consultation that jurisdictional participation in the boards can be considered across the two boards. While connectivity between the boards is important, each board has a distinct remit, and we would be concerned about one board's geographical allocation impacting the other's.

We note the statement in this consultation that jurisdictional participation is provided in other parts of the boards' activities, such as the standard-setting advisory forums, Advisory Council and other consultative bodies and the boards' interpretation and implementation committees. We agree that such bodies should be geographically diverse, however, they have fundamentally different roles from the boards and, for example, may be advisory rather than decision-making bodies. Jurisdictional participation on such bodies would not therefore replace the boards being geographically diverse.

We also note the statement in this consultation that the Trustees provide strong links with particular jurisdictions. While jurisdictional diversity is important for the Trustees, the suggestion that their geographical allocation could substitute for the boards' would not seem to be consistent with the IFRS Foundation's governance arrangements and, particularly, the Trustees' oversight of the boards.

Question 2—Attributes of board members

Do you agree with the Trustees' decision to propose no changes in the Constitution:

(a) to the main provisions related to part-time board membership; and

(b) to the main qualifications for membership of the boards?

If not, why not, and what would you propose instead and why?

Part-time board membership

We note that a part-time member is defined as a member committing 'most of their working time to paid employment' by the IFRS Foundation and agree that part-time members could help attract individuals to the boards, subject to those members meeting independence requirements. We therefore support the existing provisions related to part-time board membership.

However, we stress the importance of the Trustees' evaluation of:

any potential part-time member on a case-by-case basis against their Code of Conduct and through their Ethics and Governance Committee; and
the effect of part-time members on a board's capacity to undertake its workload and, particularly, its capacity to undertake stakeholder engagement.

We agree with the proposal that both the board Chairs would be full-time members.

Main qualifications for board membership

We agree that the main qualifications for board membership should be 'professional competence and recent relevant professional experience' and welcome the Trustees' commitment to ensuring that the boards continue to have the skills, experience and perspectives necessary to fulfil their responsibilities.

We therefore support the existing qualifications for membership of the boards.

Question 3—Voting arrangements

Do you agree with how the Trustees propose to update the voting requirements in the Constitution to facilitate effective decision-making for the smaller boards? If not, why not and what would you propose instead and why?

We recognise that the voting provisions currently specified in the Constitution must be updated for the smaller boards.

Exposure Drafts and Standards

We note that the Constitution currently requires eight board members to approve the publication of Exposure Drafts and Standards if the board comprises 13 or fewer members (at least 62% of members) or nine board members if the board comprises 14 members (64% of members). Paragraph 3.16 of the Due Process Handbook defines this as a supermajority of the board.

We also note that the proposals to require a simple majority of the board members in office plus one additional vote to approve Exposure Drafts and Standards, would require six board members to approve the publication of Exposure Drafts and Standards if the board comprises eight members (75% of members) or eight board members if the board comprises 12 members (67% of members).

A comparison of the number of board members required to approve Exposure Drafts and Standards for different board sizes is:

Board size	Current number of members required	Percentage	Proposed number of members required	Percentage
8	8	100%	6	75%
9	8	89%	6	67%
10	8	80%	7	70%
11	8	73%	7	64%
12	8	67%	8	67%
13	8	62%	N/A	N/A
14	9	64%	N/A	N/A

As the proposed voting thresholds for a board of eight to 12 members are similar to the current voting thresholds for a board of 12 to 14 members as a proportion of board size, we do not have particular concerns about the proposed thresholds. However, the description of a simple majority of the board members in office plus one additional vote to approve Exposure Drafts and Standards suggests a departure from the principle of a supermajority of the boards. We therefore suggest retaining the supermajority terminology.

We are also concerned by the stipulation that 'in no case fewer than five affirmative votes' would be required to approve Exposure Drafts and Standards and the statement in this consultation that the proposed minimum board size would therefore be five members. This stipulation and statement suggest that a further significant reduction in board sizes is possible, and we query whether only five affirmative votes would support stakeholder confidence in the legitimacy of the Standards.

Abstaining

We agree with the proposal clarifying that, for the purposes of counting affirmative votes, abstaining is always equivalent to voting against, which is consistent with paragraph 3.19 of the Due Process Handbook. However, we note that any new board members abstaining due to lack of familiarity with a project could be particularly problematic for the smaller boards and should therefore be considered in the induction of board members.

Small group and board adviser meetings

We note that paragraphs 3.42 and 3.43 of the Due Process Handbook restrict the number of board members that can meet privately to discuss technical matters, including attending small group and board adviser meetings, so that the board members attending cannot form a potential blocking minority during balloting. We recognise that the Due Process Handbook restriction may have to be amended for the smaller boards.

The current voting provisions mean that the maximum number of board members that can meet privately to discuss technical matters is five for board sizes of 14. However, the proposed voting provisions mean that the maximum number of board members that can meet privately to discuss technical matters is three for board sizes of ten and two for board sizes of eight. We would have welcomed further information in this consultation on how the Due Process Oversight Committee might amend this Due Process Handbook restriction. This is of fundamental importance as it impacts on developing standards in a way that means that a final standard will be widely adopted and meet the needs of capital markets.

We note that such a change may particularly impact the SASB Standards Board Adviser Group as paragraph A3 of the Due Process Handbook notes that the number of board members assigned to the Group is the maximum number permitted by paragraph 3.43 and that the composition of the Group aims to maintain geographical diversity in its membership. One solution may be to develop the SASB Standards in public rather than private. We expressed our concerns about the proposed due process for the SASB Standards in our comments on the IFRS Foundation's Exposure Draft IFRS/DPH/ED/2024: Proposed Amendments to the IFRS Foundation Due Process Handbook.

Question 4—Other targeted amendments

Do you agree with the other proposed targeted amendments to the Constitution?

We note that the proposals in relation to the duration of board member terms would enhance the Trustees' discretionary powers and, in the main body of the letter:

suggest that the Trustees consider defining those principles to underpin their use of the new discretionary powers, and to ensure appropriate transparency and accountability; and
call for a new independent review of the IFRS Foundation's governance arrangements.

We agree with the proposal clarifying that the IASB can carry out a public consultation at least every five years from the date of the most recent public agenda consultation.

We agree with the proposal clarifying that a basis for conclusions must accompany a Standard and an Exposure Draft.

We do not have particular concerns about the proposal amending the title and description of the Managing Director.

We agree with the proposal withdrawing the interim provisions that applied to the ISSB.

Footnotes

See Introduction to Exposure Draft: Proposed Targeted Amendments to the IFRS Foundation Constitution. ↩

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Name FRC’s Response to Exposure Draft: Proposed Targeted Amendments to the IFRS Foundation Constitution

Publication date 30 October 2026

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