International Accounting Standards - Article Example

International Accounting Standards Bhupendra Prakash Kohli This paper explores the study of International Accounting Standards and the structures of the Board for IAS. It consist two main bodies, i.e. trustees and the IASB, an entity which develops and issues International Financial Reporting Standard. International Accounting Standard means a set of standards stating how the transaction and events should be shown in the statement of Finance. After 2000, new standards multiplied, named as International Financial Reporting Standards (IFRS). These were implemented by the International Accounting Standards Committee (IASC). In this short article a sincere effort has been made to bring the main features before the readers. The IASC Foundation Trustee establishes a degree of leadership in choosing the IASB Members, and develops necessary fund-raising efforts. The IASB does answer to the authority of the Trustees of the International Accounting Standards Committee (IASC) Foundation. Keywords : International Accounting Standard, structure of IASB. BRIEF HISTORY OF IASB The International Accounting standards Board (IASB) falls under the auspices of the “International Accounting Standards Committee Foundation;” that Foundation is a non-profit organization created in the state of Delaware, USA, at the beginning of the 21st century (IASB, 2006). However, the foundation also has roots going back to London, England in the late 20th century, when it was known as the International Accounting Standards Committee (IASB, 2006). Among the responsibilities of the organization is the development of the International Financial Reporting Committee (IFRC), along with the promotion of accounting standards which highlight transparency and accountability. The IASB is based in the UK, and acts as a third-party and objective way to establish accounting standards in a way that is not biased. The accounting standards of the IASB in America are those based in the UK IASC, and although there are minor differences between the two, there are also strong similarities. The restructuring of the IASC into the IASB shows dynamic change and forward progress. STRUCTURE OF IASB The structure of the IASB is standardized and centralized. It consists of the IASC Foundation (which can be separated into the trustees and the IASB), and the Standard Advisory Council. Although the structure is bureaucratic, the organization remains somewhat more responsive than other bureaucracies, perhaps because it has relatively recently been a part of dynamic change and progress. The International Financial Reporting Interpretation Committee is also part of the IASC structure, under the auspices of the SAC. The IASC Foundation trustees are responsible for choosing and advocating the position of IASB members, exercising oversight, and fundraising activities, while the IASB is responsible for setting International Financial Reporting Standards (International Accounting Standards). Diagram of the Current IASB Structure The IASB is responsible – to develop and issue International Financial Reporting Standards and Exposure Draft and approve interpretations developed by the International Financial Reporting Interpretation Committee (IFRIC). IASB Members The IASB consists of 15 board members, each having one vote. Criteria used for choosing members include their professional competence, experience, and organizational capacity. “In January, 2009 meeting the Trustees of the IASC Foundation concluded the first part of the Second Constitution review, announcing the creation of a Monitoring Body and the expansion of the IASB to 16 Members” (IASB, 2006). The IASB was at this point also given definitive parameters about the geographical interstices of its operations. The members of the IASB are not part-timers; instead, “Out of the 16 members atleast 13 serve full time and not more than 3 part time. A unanimous vote is not necessary in order for the publication of a standard exposure draft or final IFRIC interpretation” (IASB, 2006). A majority of members must approve of a draft for it to go forwards. In terms of to whom the IASB reports, as mentioned above, the trustees of the IASC foundation hold ultimate authority in this regard. There are about twenty of these trustees, spread out over geographical areas, and representing North America, Asia, Europe, and other areas, to achieve a geographical diversity. Trustees are not simply positions that are held in name only; the IASC Constitution is clear about trustees needing to show a solid and demonstrable commitment to IASC, have demonstrated experience in finance and management globally, and an ability to commit to the organization, in terms of time as well as resources (IASB, 2006). The due process procedures at the IASB are not set in stone; they are regularly amended and changed, to show an attention to the dynamism of the current global financial situation. “The Accounting Standards currently published are AS-19 and International Accounting Standards are IAS 41” (IASB, 2006), but that is not to say that they cannot change. Explanation of steps involved in creating an International Accounting Standard in accordance with due process A. Agenda-setting B. Phase of project management C. Discussion paper is developed for members to peruse D. Exposure draft is developed E. Development and publication of an IFRS F. Procedures after an IFRS is issued International Financial Reporting Standards (IFRSs) are instigated globally, as an agreement is sought between different accountants, analysts, and others involved in financial matters, including all who use financial statements (business owners, stockbrokers, regulatory bodies such as the SEC, etc.). What the IASB is doing here is establishing what could be called a global consensus on standards. Formal due process for projects normally but not necessary involves the following steps:- 1. Topics are identified and placed on Board’s Agenda 2. Research and analysis made on the topic and memorandum of favour and opposition issued. 3. Public hearing is made on proposed standards 4. Board considers research and response of public and afterwards issues exposure draft. 5. If necessary, the Board evaluates research and response of public and changes exposure draft accordingly. 6. The new FASB standard statement requires the support of four of the seven board members. 7. FASB uses the term Financial Accounting Standard in its pronouncements. Two most recent Accounting Standards issued by the IASB are IAS-23, which relates to expense and borrowing costs, and IAS-24, which relates to financial disclosure. One can see how through these amendments, the organizational body is remaining responsive and able to react to global changes in accounting standards, including changes which may have been brought about by the current global financial situation. References http://www.iasplus.com/restruct/restruct.htm. IASB. (2006). Due process Handbook for the IASB. UK: International Accounting Standards Committee Foundation. Read More