Role and evolution of IASB


Role and evolution of IASB

"The role and history of the International Accounting Standards Board, including an examination of the Board's evolution and stance on ethics issues."

The International Accounting Standards Board, (IASB), began life as the International Accounting Standards Committee (IASC) in the 1973. The IASC was created in June 1973 as a result of an agreement by the accountancy bodies of Australia, Canada, France, Germany, Japan, Mexico, the Netherlands, the United Kingdom and Ireland and the United States. These countries constituted the Board of IASC at that time.

The international professional activities of the accountancy bodies were organized under the International Federation of Accountants (IFAC) in 1977. In 1981, IASC and IFAC agreed that IASC would have full and complete autonomy in setting international accounting standards and in publishing discussion documents on international accounting issues. At the same time, all members of IFAC became members of IASC. This membership link was discontinued in May 2000 when IASC's Constitution was changed as part of the reorganization of IASC.

The main objective of the IASC was the development of International Accounting Standards, in an effort to reduce the differences in accounting practices across countries. Harmonization is the name given to the process of reducing differences in financial reporting practices and increasing comparability of financial statements in various countries. As such the intent of the IASC was to create a set of accounting rules that would be relevant and consistent to all countries involved.

The IASC started with the ten board members above but gradually expanded this number and also added associate members along the way. The first exposure draft was published in 1974 and in 1981 the organization began to pay visits to national standard-setters in its efforts to reduce the diversity of financial reporting practices. The IASC started its comparability project in 1987 and the following year it published E32: Comparability of Financial Statements. Also in 1988, the FASB joined the IASC Board as an observer and in 2000 lent support to having international standards. The growth and influence of the IASC was further confirmed that same year when the European Commission announced plans to require IASC standards for all EU listed companies from no later than 2005.

After a major reorganization, the IASC became the International Accounting Standards Board (IASB) in 2001. The IASB objective is very clear. As stated in their Constitution, the IASB's goal is to develop a set of global accounting standards with the objective to have one set of standards that are relevant for creditors, investors and decision makers.

The IASB is structured in committees designed to analyze past standards and pronouncements and draft new ones. The IASB has 14 members, two of them working on a part-time basis. The Board includes academics, current and past practioners, each sharing different views on each subject discussed. The current accounting guide exists in the IASB's Framework, the 34 International Financial Reporting Standards and the Interpretations. IFRS are not mandatory and the IASB cannot force compliance. They are merely a global set of rules to use. However, many foreign regulatory bodies require publicly traded companies to prepare their financial statements using IFRS, as opposed to US GAAP, as required in United States.

In striving for its goals of transparency and harmonization, the IASB recognizes that integrity and independence are core competencies of the accounting profession and that strong ethical values are a must for accountants. Examples of ethical failures have become all too common with recent high profile examples occurring on both sides of the Atlantic. (Consider Enron and Parmalat to name a few.) As a part of its commitment to ethical behavior, the IASB acted in consultation with its partner standard setters throughout the world to examine the quality of existing accounting standards in light of issues raised by such cases as Enron. In February of 2002, the chairman of the IASB went before the US Senate to share his thoughts on these matters.

The IASB is not just reactionary however, and in addition to dealing with current events, it had already established an Ethics Committee whose goal is to promote ethical behavior and which reports directly to the board. These facts support the board's stance on the necessity of strong ethical values.


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