WHO: STANDARD SETTING BODIES
ACCTG 1200: Conceptual Framework and Accounting Standards (Lecture)
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WHO? GLOBAL SCENARIO
WHO? IASC
IASB (International Accounting
Standards Board)
IASC (Internationally Accounting
Standards Committee)
IASC; 1973 approved
2001 formally started
Made the IFRS – International
Financial Reporting Standards
166 Jurisdictions (Countries)
The ones making the standards that
we use to present FS.
- IFRS Foundation
- 14 members
- formed in 2001 to replace
IASC
FASB (Financial Accounting Standards
Board)
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1973
Uses GAAP – Generally Accepted
Accounting Principles
Covers different states in the US.
WHO? ORGANIZATIONS
Beside the two bodies:
IASC – International Accounting Standards
Committee in IASB (1973)
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1973:
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1982:
sponsoring
“members”
comprised
of
all
professional
accountancy bodies of International
Federation of Accountant (IFAC)
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1997: need to change in structure
(strategy working party)
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DEC 1998 published discussion
paper and NOV 1999 is the final
recommendations
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DEC 1999 approved by the board
and MAY 2000 members approved
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JULY 1, 2000 renamed to IASB
and the constitution took effect
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APRIL 2, 2001 formally started
under IFRS Foundation
CAP – Committee on Accounting Procedure
and (1938)
APB – Accounting Principles Board in FASB
(1959)
organized by 10 Countries
Australia
Canada
France
Japan
Mexico
Netherland
United Kingdom
Ireland
USA
Germany
WHO? IASC: STRUCTURE
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MIM’s
WHO: STANDARD SETTING BODIES
ACCTG 1200: Conceptual Framework and Accounting Standards (Lecture)
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As of 2018, 144 jurisdictions require
the use of IFRS for all or most
publicly listed companies and further
12 jurisdictions permit its use.
Globally comparable accounting
standards promote transparency,
accountability, and efficiency in
financial markets around the world.
IASC BOARD
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The standard setting board of the
IASC.
13 country members and up to 3
additional
organizational
members (part time and voluntary
basis)
Each member was represented by 2
representatives and 1 technical
advisor
Observe
Members
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(representative of IOSCO, FASB,
and the European Commission)
participated in debate but not in
voting
Consultative Group – advisory
body
Standing
Interpretations
Committee (SIC) – developed and
invited
public
comment
on
interpretations, subject to final
approval
Advisory Council – oversight body
Steering Committees – expert task
forces for individual agenda projects
Who are required/permitted to follow?
FIRMS COVERED
International
Board (IASB)
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2
Accounting
Standards
IFRS – permitted but not required,
for use by at least some domestic
publicly
accountable
entities,
including listed companies and
financial institutions
Foreign securities issuers are
required or permitted by IFRS
SME may choose full IFRS.
Financial Accounting Standards Board
(FASB)
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Public and private companies and
not for profit organizations
Governed by FASB, only public
traded companies are required to
comply with GAAP because they
are created with investors in mind.
There are no separate private
company standards and the new
efforts are aimed to augment
existing principles rather than
creating separate standards for
private companies.
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WHERE? GLOBAL SCENARIO
IASB
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Cannon Street 17 years Canary
Wharf
London, UK
FASB
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Norwalk Connecticut
US
WHY? GLOBAL SCENARIO
IASB
MIM’s
WHO: STANDARD SETTING BODIES
ACCTG 1200: Conceptual Framework and Accounting Standards (Lecture)
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To develop, in the public interest, a
single set of high quality (relevant
and
faithful
representation),
understandable, enforceable, and
globally accepted financial reporting
standards based upon clearly
articulated principles.
FASB
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Develops and issues financial
accounting standards through a
transparent and inclusive process
intended to promote financial
reporting that provides useful
information to investors and others
who use financial reports.
IASB Objectives
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IFRS
Principles Based
○ Subjective
○ Judgement
○ Flexibility
○ Restrict Standardization
FASB
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GAAP
Rules Based
○ Prescriptive
○ TICK BOX approach
○ Must Adhere
○ Promotes Standardization
PRINCIPLES-BASED VS. RULES-BASED
STANDARDS
Difficulties associated with rules-based:
Globally accepted accounting standards:
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Providing
high
quality,
transparent,
comparable
information for users.
Common language for financial
reporting.
Transparency and integrity.
Consistent application of standards.
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IASB-FASB CONVERGENCE
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October 2002
Agreement
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the
Norwalk
KEY TAKEAWAYS
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IASB vs FASB
- IFRS vs GAAP
Principles Based vs Rules Based
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Bright-line tests lead to
inconsistencies
in
the
application and a lack of
comparability.
Tend to be seen as an act of
compliance as opposed to a
means of communicating
information.
Complexity does not allow
for effective understanding
and
application of the
underlying
accounting
principle.
Can be circumvented and
can override the intent of the
standard.
WHAT? PRINCIPLES: RULES
IASB
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MIM’s