The History and structure of IASB
|✅ Paper Type: Free Essay||✅ Subject: Accounting|
|✅ Wordcount: 1062 words||✅ Published: 1st Jan 2015|
On April 2001, in the needs for international accounting coordination, the International Accounting Standards Board (refer to IASB in the following context) took over its predecessor known as IASC (Board of the International Standards Committee) and was dedicated for international accounting standards settings. At the first meeting of IASB in London, UK, the main highlighted statement was that “any existing standards issued by IASC would remain being adopted by ISAB until amended or withdrawn and still named as International Accounting Standards” (April, 2001), but all new issued standards thereafter should be designated as International Financial Reporting Standards (abbreviate as IFRS). IASC was initially established in 1997 by Austrian, Canada, France, Germany, Japan, Mexico, Netherlands, English and USA and 16 major professional accounting bodies. After the number of countries are increasing extremely fast. Right before the IASC was taken over; there were in total 112 countries and 153 accounting professional parties involved.
ISAB’s first IFRS-1was then issued in June, 2003. So far, there are 41 IASs which were initially issued by IASC from 1993 to 2001 and 9 IFRSs after the successor.
Structure of IASB
The IASB has a parent independent entity, which called the IFRS Foundation. IFRS Foundation was incorporated as a non-profit organization in the state of Delaware, although the Board’s headquarter is located now in London, UK.
There are 22 trustees in the Foundation (initially was only 19 trustees). Their jobs are not involved in any setting of IFRSs, which solely under IASB’s responsibility, but to oversee the work done by IASB, review effectiveness of standard-settings, appoint the council’s and board’s new members, and do finance by raising funds. (See Illustration 1.)
Illustration 1 IFRS Structure (source: IFRS Foundation, Who we are, 2011)
Under IFRS Foundation, there are three branches: IFRS advisory council, IASB and Interpretations Committee who take care of the standard-setting.
The advisory council has approximate 40 members. Their jobs include providing any strategic advises to the IASB and informing to the Foundation.
“The upper level Monitoring Board approves, appoints the new trustees of IASB Foundation and oversees them. Monitoring Board was formatted of public capital market authorities by the meeting in Mid-Jan, 2009” (Byatt, 2009).
International Accounting Standards Board
The objective of IASB is “to set up one whole set of financial reporting standards which is high-qualified, understandable, enforceable and internationally acceptable on the basis of clearly articulated principles” (IFRS Foundation, 2011).
Until this year, there are 15 board members in the IASB. Each member has a voting right. “But considering fairer on geographical distribution, the number might expand to 16 members by July, 2012 according to foundations proposal” (IFRS Foundation, 2010).
Generally speaking, their everyday work is to set technical agenda, to project planning, to public the discussion paper, to approve new standards, and to exposure drafts and interpretations. In May 2002, the IASB published the final version of Preface to International Financial Reporting Standards. In this document, the Due Process was regulated as following steps:
identify and review all the problems and issues that are related to;
research on different nations requirements and practices;
get advices from Advisory Committee, whether to issue the agenda;
form a advisory team to provide information of this project;
publish the discussion draft and gather all the comments;
publish a exposure draft approved by at least nine members;
consider the comments received within the time of discussion;
consider the need to hold a hearing and the need for field tests;
approve the final draft voted by at least nine members (IASCF,2010).
In middle 1990’s, People were more critical of international accounting standards, less recognized this. Criticism focused on international accounting standards gave too many choices on accounting practices. It harmed the comparability of accounting reports, and thus would not be conducive to improving the quality of accounting information.
But today, the convergence of IFRS is the trend, especially after the new formation of IASB. With great efforts of IASB and of course many other accounting organizations, more and more countries join the army to application of IFRS.
In 2006, China has announced the roadmap of convergence of China Accounting Standards and IFRS. Especially the international financial crisis of 2008 is likely to accelerate this situation.
In August 2008, U.S. Securities and Exchange Commission (SEC) proposed a Proposed Roadmap for the potential use of financial statement regarding how to transition to IFRS from current Generally Accepted Accounting Principles (U.S. GAAP). Eventually, if achieved, all US capital markets should issue files under IFRS in 2014. (SEC, 2008) Furthermore, the commission statement in February 2010 reiterated the support of establishing a set of global high-quality accounting standards, developed a work plan on adopting the IFRS, and said that the SEC would make a final formal decision on whether to adopt the IFRS. (SEC, 2010) At the working level, the convergence of FASB and IASB for rapid process is on schedule.
In December 2009, Japan Financial Service Agency officially released the roadmap on adoption of IFRS, providing a reliable framework for part of voluntary companies’ early usages of IFRS. Around 2012, Japan will also make a final decision on whether to force all the companies use IFRS by the end of 2016. (FSA, 2009)
Apparently, the convergence of international accounting standards has become the consensus of the world and is transformed into practical actions.
However, based on economic, political, and cultural backgrounds, the recognition on current international accounting standards would still vary degrees. The different levels of economic development would be a major constraint factor.
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