Monday 12 November 2012

INTERNATIONAL ACCOUNTING: AN IASB HISTORY DETAILS



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.
Figure 1. IASB Timeline
1966 Proposal to establish an International Study Group comprising the Institute of Chartered Accountants of England & Wales.
1967 In February the Accountants International Study Group (AISG) was founded.
1973 In June the International Accounting Standards Committee (IASC) was established
1973- Between these years, the IASC released a series of standards known 2000 as the International Accounting Standards
1997 Standing Interpretations Committee was established to consider contentious accounting issues
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
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:
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

Page Content
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.
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