The United States of America has a
huge influence on the accounting
standards in use around the world.
The USA follows the Financial
Accounting Standards Board (FASB),
which has many standards that are
disseminated by the international
accounting standards committees. The
rest of the world follows the
International Accounting Standards Board
(IASB). The IASB is head-quartered
in London, England and is an
independent and privately-funded
accounting standard-setter
(International accounting standards,
2010). The board consists of
representatives from nine different
countries and is designed to achieve
convergence in accounting standards
around the world (IASB
international, 2010).
The International Accounting
Standards Board (IASB) is the independent, accounting standard-setting
body of the IFRS Foundation.
The IASB
was founded on April 1, 2001 as the
successor to the International
Accounting Standards Committee (IASC). It is responsible for developing International
Financial Reporting Standards (the new name for International
Accounting Standards
issued after 2001), and promoting the use and application of these standards
Foundation
On January 25, 2001, the
International Accounting Standards Foundation (IASF) was incorporated as a
tax-exempt organization in the US state of Delaware. On February 6, 2001, the International Financial Reporting Standards
Foundation was also
incorporated as a tax-exempt organization in Delaware. The IFRS Foundation is
the parent entity of the International Accounting Standards Board (IASB), an
independent accounting standard-setter based in London, England.
On 1 March 2001, the IASB assumed
accounting standard-setting responsibilities from its predecessor body, the International
Accounting Standards Committee (IASC). This was the culmination of a restructuring based
on the recommendations of the report Recommendations on Shaping IASC for the
Future.
The IASB structure has the following
main features: the IFRS Foundation is an independent organization having two
main bodies, the Trustees and the IASB, as well as a IFRS Advisory Council and
the IFRS Interpretations Committee (formerly the IFRIC). The IASC Foundation
Trustees appoint the IASB members, exercise oversight and raise the funds
needed, but the IASB has responsibility for setting International
Financial Reporting Standards (international accounting standards).
History
The International Accounting
Standards Board was established on
April 01, 2001 to replace the
International Accounting Standards
Committee (IASC). The IASB is
expected to develop International
Financial Reporting Standards
(IFRS), which are accounting standards
promulgated after 2001, and to
enforce the use of each standard
(International accounting standards,
2010). The IASC operated from
June of 1973 until April 01, 2001.
It was established as a result of an
agreement by accountancy bodies in
Australia, Canada, France,
Germany, Ireland, Japan, Mexico, the
Netherlands, the United Kingdom,
and the United States. In 1977, the
International Federation of
15
Accountants (IFAC) was established,
and in 1981, the IASC and the IFAC
agreed that all standards would be
completely issued by the IASC
autonomously (International
accounting standards, 2006).
Figure 1 illustrates a timeline of
the history and development
of the IASB.
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Figure 1. IASB Timeline
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1966 Proposal to establish an
International Study Group comprising the Institute of Chartered Accountants
of England & Wales.
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1967 In February the Accountants
International Study Group (AISG) was founded.
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1973 In June the International
Accounting Standards Committee (IASC) was established
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1973- Between these years, the
IASC released a series of standards known 2000 as the International
Accounting Standards
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1997 Standing Interpretations
Committee was established to consider contentious accounting issues
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2000 International Accounting
Standards were finally recognized in the Stock Exchanges around the world
|
|
2001 The International Accounting
Standards Board (IASB) came into effect on April 01, 2001
|
|
2003 The first IFRS was published
in June
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2005 Companies in the UK were
required to present their financial statements using the international
accounting standards adopted by the European Union
|
Source: Knowledge guide to IAS &
IFRS, 2010.
Today, the International Accounting Standards Board (IASB) is an
independent group that consists of fifteen board members.
The
members are appointed by a Board of Trustees, and by 2012,
an
additional board member will be added, following a decision
made in
January 2009 (Members of the IASB, 2007). These members are
listed
in the Appendix.
Members
The IASB has 15 Board members, each
with one vote. They are selected as a group of experts with a mix of experience
of standard-setting, preparing and using accounts, and academic work. At their
January 2009 meeting the Trustees of the Foundation concluded the first part of
the second Constitution Review, announcing the creation of a Monitoring Board
and the expansion of the IASB to 16 members and giving more consideration to
the geographical composition of the IASB.
The IFRS Interpretations Committee
has 14 members. Its brief is to provide timely guidance on issues that arise in
practice.
A unanimous vote is not necessary in
order for the publication of a Standard, exposure draft, or final
"IFRIC" Interpretation. The Board's 2008 Due Process manual stated
that approval by nine of the members is required.
The members (as of July 2011) are:
- Hans Hoogervorst (Chairman), Netherlands, former Minister of Health, Minister of Finance
- Ian Mackintosh (Vice-chairman), New Zealand, former Coopers & Lybrand, Chief Accountant Australian Securities and Investments Commission
- Stephen Cooper, UK, UBS Investment Research
- PhillipeDanjou, France, former Arthur Andersen, AMF (Financial Markets Authority of France)
- Jan Engström, Sweden, former Volvo Group
- Patrick Finnegan, USA, formerly of the CFA Institute
- AmaroLuiz de Oliveira Gomes
- PrabhakarKalavacherla (‘PK’) (was an audit partner at KPMG LLP in the San Francisco office)
- DrElkeKönig (Germany)
- Patricia McConnell, USA, formerly of Bear Stearns
- Takatsugu Ochi (Japan)
- Paul Pacter (US)
- Darrel Scott (South Africa)
- John T. Smith, USA, former Deloitte, FASB
- Zhang Wei-Guo, China, former Professor in Shanghai, China Acc. Standards Committee
Former IASB members include James J. Leisenring,
Robert P. Garnett, Mary Barth, David Tweedie,
Gilbert Gélard, Warren McGregor, and Tatsumi Yamada.
What is the
purpose of international accounting standard board?
To provide
common, integrated global accounting standards
for the capital markets of the world
as well as provide a common language
that outside users of Corporate and Governmental financial information can …
developing and implementing, in the public
interest, a single set of high‐quality, easily understood
and enforceable accounting standards of
entities and countries who have adopted
the use of International
Accounting Standards. Current board members
come from nine countries and have a
diverse financial reporting background. The
board also works closely with other
financial accounting setting boards to
ensure a convergence of financial reporting
standards across the globe
WORK EFFORTS AND ACHIEVEMENTS
The following points
will describe the work efforts and achievements of the IASB:
• Development of 33
Accounting Standards.
• Co-operation with national standard-setters.
• IOSCO Endorsement.
• EU regulation.
• Co-operation of IASB and FASB.
Development of 33 Accounting Standards
The IASB has developed
so far 33 standards, which are used on a rather broad level.30 It encourages
countries without Accounting Standards to use IAS and to eliminate differences
to IAS. In Appendix 8.12 one can see those countries, which already accept the
IAS for preparing financial statements. On the one hand many Latin American or
Asian countries do still not allow the usage of IAS. On the other hand with the
regulation of the EU the IAS will be accepted in 15 countries.
Co-operation with national standard-setters
As could be seen in
chapter four, the IASB has several approaches to work close together with
national standard-setters. First, we have the eight national standard-setters
which are represented in the Board of the IASC Foundation. Here, they have the
possibility to take actively part in the announcing and revising of International
Standards. Second, we have the SAC, which invites organizations and interest
groups, not represented in the Board, to take part in the process. Third, as
explained above, the approach of the due-process enables the participation of a
variety of individuals and organizations as national standard-setters,
financial analysts, stock exchanges or users of financial statements. The IASB
Constitution envisages a "partnership" between IASB and national
bodies as they work together to achieve the convergence of Accounting Standards
world-wide (IASB, 2002 n). The logic behind the establishment of liaison
relationships with national standard-setters is, that the IASB hopes, that
national standard-setters will adopt identical standards and that they will co-ordinate
their agendas. (Ruder, 2001) As the IASB is a private body and can not enforce
its standards, it needs the support of national standard-setters for the
implementation of the IAS.
IOSCO Endorsement
The recommendation of
the IOSCO to its members to allow multi-national companies to use IAS for
cross-border offerings and was a rather important step for the world-wide
acceptance of the IAS. It opened the door for IAS to be used of companies for
listings on international capital markets. All member organizations (e.g.
U.S.-SEC, Financial Services Authority of the U.K. or Australian Securities and
Investments Commission) had to accept companies that prepared their financial
statements in accordance with IAS. On the other hand the members of the IOSCO
could still require supplementary information (e.g. reconciliation or
additional disclosure) As already explained, the IAS have only the character of
recommendations. Therefore, the IASB needs the support of other organizations
to make an acceptance of their standards possible, this was done by the IOSCO
Endorsement in 2000.
EU regulation
The EU will require
from all listed European companies to prepare consolidated statements in
accordance with IAS by 2005. In chapter four one could observe a continuously
movement of the EU towards the IAS. The first time in 1995, when the EC decided
to support the IASB, by joining its Consultative Group and by its decision, not
to develop own standards.
factors might have been
the reasons for this decision. First, it can be seen as a no of the EU to
U.S.-GAAP in Europe. This decision can be first explained by the fact that
there is no possibility, to influence U.S.-GAAP from the European position. In
contrary, as explained in chapter four, the EU has some possibility to
influence the work of the IASB (e.g. liaison with three national standard-setters
in the IASB). Second, it can be interpreted as an European answer to the
denying attitude of the U.S. regulators (e.g. SEC, FASB). The U.S.-GAAP have
been accepted without reconciliation in Europe. European companies in contrary
could only be listed on American stock exchanges with a full preparation of
financial statements according to U.S.-GAAP, or according to IAS with a
reconciliation to U.S.-GAAP.
Co-operation
of IASB and FASB
The announcement of
IASB and FASB to work together in order to design a single set of global
accounting rules in 2002 is another breakthrough for the acceptance of IAS. The
U.S. capital market is considered to be the most important in the world
(Turner, 2001). An acceptance of IAS on that market without reconciliation
would in our view motivate companies as well as regulators of other countries
to further consider the use of IAS. As the IASB needs consistent support from
other organizations to be able to fulfill its tasks, it is not surprising that
the IASB agreed to add to its agenda a short-term joint project with the FASB.
It aims at the elimination of differences between standards (IAS versus
U.S.-GAAP) of both boards. In the medium term, IASB and FASB resolved to work
on a range of individual projects that would reduce further those differences.
Finally, they agreed about to work closer together and to make their agendas
more similar in future. (IASB, 2002 g) However, this co- operation is
surprisingly, considered from the FASB´s side. It can be considered as a change
in the thinking of the FASB and the U.S. regulators. Until the announcement of
a closer work, the FASB insisted that a convergence would take place only on
the basis of U.S.-GAAP. It stated as well that the U.S. standards are the best
in the world and that it could not accept any other standards of less quality
(e.g. IAS). (Investors Relations Business, 2002 a; IASB, 2002 e, SEC, 2002 i)
However, it seems that the FASB and U.S. regulators (e.g. SEC) are more
flexible in this issue now. Or, we could imagine that the IASB will have to
make a lot of compromises, in order to achieve an acceptance of the IAS in the
United States.
In our point of view
two factors have convinced the FASB to co-operate with the IASB. First, there
is the decision of the EU to use the IAS. With that regulation the IAS will be
the official Accounting Standards for almost 7000 EU listed companies in 2005.
Second, we think that
the scandals (e.g.
Enron31, WorldCom) of the US decreased the faith of Americans in their own
Accounting Practices. (Investors Relations Business, 2002 a) Hence, less
believe of the Americans in their own rules and the strong support of the EU
might make a compromise on internationalization of Accounting Standards
possible.
IASB CURRENT ISSUES
The International Accounting
Standards Board (IASB) today issued International Financial Reporting Standard
(IFRS) 8 Operating Segments. The IFRS continues the IASB’s work in its joint
short-term convergence project with the US Financial Accounting Standards Board
(FASB) to reduce differences between IFRSs and US generally accepted accounting
principles (GAAP).
IFRS 8 arises from the IASB’s
comparison of International Accounting Standard (IAS) 14 Segment Reporting with
the US standard SFAS 131 Disclosures about Segments of an Enterprise and
Related Information. IFRS 8 replaces IAS 14 and aligns segment reporting with
the requirements of SFAS 131.
The IFRS requires an entity to adopt
the ‘management approach’ to reporting on the financial performance of its
operating segments. Generally, the information to be reported would be what
management uses internally for evaluating segment performance and deciding how
to allocate resources to operating segments. Such information may be different
from what is used to prepare the income statement and balance sheet. The IFRS
therefore requires explanations of the basis on which the segment information
is prepared and reconciliations to the amounts recognized in the income
statement and balance sheet.
The IASB believes that adopting the
management approach will improve financial reporting. First, it allows users of
financial statements to review the operations through the eyes of management.
Secondly, because the information is already used internally by management,
there are few costs for preparers and the information is available on a timely
basis. This means that interim reporting of segment information can be extended
beyond the current requirements.
As part of its deliberations leading
to IFRS 8, the IASB considered comments by a coalition of over 300
non-governmental organizations (NGOs) known as the Publish What You Pay
campaign, which asked for the scope of the IFRS to be extended to require
additional disclosure on a country-by-country basis. Because the IFRS was
developed as a short-term convergence project, the IASB decided that
country-by-country disclosure should not be addressed in the IFRS. Instead, the
matter will be raised with international bodies that are engaged with similar
issues.
