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