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IASB International Accounting Standards Board

IASB (IAS)

International Accounting Standards Board


Main Address

 

International Accounting Standards Board (IASB)


30 Cannon Street, London EC4M 6XH
United Kingdom
Telephone: +44 (0)20 7246 6410
Facsimile: +44 (0)20 7246 6411
Publications telephone: +44 (0)20 7332 2730
Publications facsimile: +44 (0)20 7332 2749
E-mail: iasb@iasb.org.uk 

 

 

 


Organization Profile

 

The International Accounting Standards Board (IASB) is an independent, privately-funded accounting standard setter based in London, UK. Board Members come from nine countries and have a variety of functional backgrounds. The Board is committed to developing, in the public interest, a single set of high quality, understandable and enforceable global accounting standards that require transparent and comparable information in general purpose financial statements. In addition, the Board cooperates with national accounting standard setters to achieve convergence in accounting standards around the world.

 

From April 1st 2001, the International Accounting Standards Board (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.
 

Accounting standards are authoritative statements of how particular types of transaction and other events should be reflected in financial statements. Accordingly, compliance with accounting standards will normally be necessary for the fair presentation of financial statements.

Statements of International Accounting Standards issued by the Board of the International Accounting Standards Committee (1973-2001) are designated "International Accounting Standards" (IAS).

The International Accounting Standards Board announced in April 2001 that its accounting standards would be designated "International Financial Reporting Standards"

The Interpretations of International Accounting Standards issued by the International Financial Reporting Interpretations Committee (IFRIC) (formerly, the "Standing Interpretations Committee" (SIC)) do not have the same status as IAS, but, in accordance with IAS 1, Presentation of Financial Statements, paragraph 11, "financial statements should not be described as complying with International Accounting Standards unless they comply with all the requirements of each applicable Standard and each applicable interpretation of the Standing Interpretations Committee".
 

Are International Financial Reporting Standards mandatory?
 

IASB has no authority to require compliance with its accounting standards. However, many countries require the financial statements of publicly-traded enterprises to be prepared in accordance with IFRS, and (where necessary) to give particulars of any material departure from those standards and the reasons for it.
Companies and/or securities legislation in many countries requires management and directors of publicly-traded companies (and, in many cases, all enterprises) to prepare financial statements in accordance with IAS that present fairly (or give a true and fair view of) the financial position of the enterprise at the end of the financial year and the results of its operations and cash flows for the year. The accountancy profession (through national institutes, international accounting firms and the International Forum for Accountancy Development) is committed to promoting and supporting compliance with IAS by preparers and auditors of financial information.

In short, where IFRS are the required accounting standards, or an enterprise chooses to comply with IFRS, the requirements of all IFRS should be regarded as mandatory.
 

In June 2000, the European Commission issued a Communication (a policy document) which proposed that European listed companies would no longer have a free choice to prepare their consolidated financial statements in accordance with either national accounting standards, US generally accepted accounting principles or IAS. This Communication was subsequently supported by the Economic and Finance Ministers of the European Union (ECOFIN) at a meeting in July 2000.

In February 2001, the European Commission presented draft legislation to the Parliament and the Council of Ministers embodying the policy set out in their Communication.

The Commission's Communication, EU Financial Reporting Strategy: The Way Forward, proposes that all EU companies listed on a regulated market (including banks and other financial institutions) should be required to prepare consolidated accounts in accordance with IAS. It is intended that this requirement will be effective by 2005 at the latest. It is intended also that within two years the requirement will be extended to all companies preparing a public offer prospectus in accordance with the EU's Listing Particulars Directive. The Commission is proposing also that Member States be permitted either to require or to allow unlisted companies to publish financial statements in accordance with the same set of standards as those for listed companies. The requirement to use IAS relates to the consolidated accounts of listed companies.

The Communication is part of the Commission's Financial Services Action Plan, adopted in 1999. The Action Plan seeks to adapt all aspects of the EU's regulatory structure to accommodate the single internal market and the introduction of the euro, with the ultimate goal of establishing within Europe an efficient capital market.

Financial reporting was recognized as a key part of an efficient capital market, and the Commission realized that the accounting standards chosen must meet investors' needs and be compatible with global developments. It wanted those accounting standards to be in accordance with an internationally recognized financial reporting framework. Within Europe, two such frameworks are currently used: U.S. GAAP and IAS.

The Commission recognizes that it cannot influence the elaboration of U.S. GAAP. On the other hand, it considers that IAS provides a comprehensive and conceptually robust set of standards for financial reporting that is able serve the needs of the international business community. IAS has the advantage also of being developed with an international perspective, rather than being tailored to any one business environment. In addition, the Commission, through its Observer status at the IASC Board and on steering committees was able to participate in IASC deliberations. The role of day-to-day participation in IASB's due process is the responsibility of the European Financial Reporting Advisory Group (EFRAG), established under the EU Commission's proposed Regulation of 13 February 2001 and subsequently endorsed by the Council of Ministers in March 2001.

The Commission's proposal is accompanied by some important provisos, including the establishment of an 'endorsement mechanism' within the European Commission. The Commission believes that the EU 'cannot delegate responsibility for setting financial reporting requirements for listed EU companies to a non-governmental third party' and that, within the EU's legislative structure it is appropriate to exercise oversight. It has therefore proposed a two-tier mechanism to give legislative weight to IAS in Europe.

The Commission believes that it is important that there is appropriate EU input before new standards are adopted by the IASB. Therefore, it has decided to institute a committee at the EU level that will facilitate the adoption of IAS in Member States. In addition, there will be a technical level of review, supported by the private sector. The Commission means to establish a constructive, dedicated and continuous dialogue with the IASB, in particular with the IASB's Standing Interpretations Committee, when implementation guidance is required. The endorsement mechanism will also advise the Commission whether or not an amendment to the EU Accounting Directives is recommended in the light of international accounting developments.

Ten sponsoring organizations, representing accountants, preparers, analysts and others interested in financial reporting in Europe appointed the private sector part of the EU 'endorsement mechanism' in June 2001. The European Financial Reporting Advisory Group consists of a 'technical group' and a larger 'supervisory board'. The technical group are eleven people experienced in accounting and financial reporting. The supervisory board monitors the technical group's activities as well as representing the various constituents within the sponsoring organizations.
 

The IASB structure has the following main features: the IASC Foundation is an independent organization having two main bodies, the Trustees and the IASB, as well as a Standards Advisory Council and the International Financial Reporting Interpretations Committee. The IASC Foundation Trustees appoint the IASB Members, exercise oversight and raise the funds needed, whereas IASB has sole responsibility for setting accounting standards.
 

Convergence of IAS and US GAAP


On October 29th, 2002 the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have issued a memorandum of understanding marking a significant step toward formalizing their commitment to the convergence of U.S. and international accounting standards. The agreement between the FASB and IASB represents their latest commitment, following their September joint meeting, to adopt compatible, high-quality solutions to existing and future accounting issues.

 

Compare also:  OECD  |  Sarbanes-Oxley  |  World Trade Organization  |  Global Corporate Governance Forum


 

 

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