International Accounting Standards Board (IASB)
The single body in charge of producing financial report standards international is the IASB. This body currently consists of numerous members from different countries and adopts a rule-based system. The IASB issues new international financial reporting standards (IFRS).
The main objectives are:
- To develop a single set of high quality, understandable, enforceable and globally accepted international financial reporting standards (IFRSs) through its standard-setting body, the IASB;
- To promote the use and rigorous application of those standards;
- To take account of the financial reporting needs of emerging economies and small and medium-sized entities (SMEs);
- To promote and facilitate adoption of International Financial Reporting Standards (IFRSs), being the standards and interpretations issued by the IASB, through the convergence of national accounting standards and IFRSs.
Did you know: The IASB is currently developing proposals for a standard on non-financial information.
When the IASB sets new standards this is referred to as the standard-setting process and the standards accounting council (SAC ) provides advice on the impact of new proposed standards on users and producers of financial statements. In addition, it advices on the work the IASB should prioritise.
European Commission (EC)
The EC are involved with the IASB in setting IFRSs to harmonise reporting rules across European member states. The EC investigates conflicts between the EU norms and international standards to work on achieving compatibility.
Did you know: All member states in the EU must use IFRSs in their consolidated financial statements since 2005.
International Federation of Accountants (IFAC)
The IFAC is a private sector body consisting of over a 100 professional accounting bodies from numerous countries. IFAC focuses on leading the development of the accounting profession on a global scale through introducing international standards on auditing, management accounting, ethics, education and training. The IASB works together with the IFAC.
Did you know: IFAC has Members and associates in 127 countries.
General Accepted Accounting Practice (GAAP)
GAAP also referred to as accounting standards is the framework for financial accounting. GAAP includes:
- Rules about recording and summarising the preparation of financial statements.
Financial Accounting Standards Board (FASB)
The FASB and the IASB are working towards developing international accounting standards usable by all companies for financial reporting and to move away from a rule-based system to a principal-based system.
Did you know: When IFRSs are developed they require discussions involving accountants, financial analysts and other users and regulatory bodies worldwide.
Effect of IASB and IFRS
In Europe the IASB has had a great effect as many of Europe’s multinationals companies prepare financial reports to international requirements.
Did you know: America and Japan are the two developed countries most reluctant to prepare under the IFRSs.
Criticisms of ISAB
The issues with the IASB include:
- Choice in accounting standards – Should be given a choice in financial reporting matters.
- Government pressure can influence standards
- Different financial reporting models
|Arguments in support of standards||Arguments against standards|
|Comparability: Users should be able to predict future cash flows, make comparisons and evaluate the performance of management. In order to do so, users must be supplied with relevant and reliable data that have been standardised to avoid distorted data.||Overload– Some of the standards are either too many or too few. The standards do not consider the size of the business whether large or small which has crucial effects.|
|Discipline: Companies that do not meet standards are disciplined which helps enforce standards.||There are numerous standard setters with different requirements (eg IASB, ASB, national stock exchange listing requirements).|