Question

Describe the legislative framework that the IASB goes through and evaluate its effectiveness.

Answer 1

1. The IASB was established in 2001 as part of IASC Foundation. The governance of IASC Foundation rests with the Nineteen Trustees. The trusties appoint the members of the IASB and associated council. The Board comprises of twelve full-time and two part time members.

2. The IASB has two advisory committees namely The International Financial Reporting Interpretations Committee (IFRIC) and Standard Advisory Council (SAC).

The objectives of IASB as set out in its Constitution are: –

1. To formulate and publish in the public interest a single set of high quality, understandable and enforceable global accounting standards that require high quality, transparent and comparable information in financial statement and other financial reporting to help participants in the various capital markets of the world and other users of the information to make economic decisions.

2. To promote the use and rigorous application of those standards.

3. To work actively with national standard-setters to bring about convergence of national accounting standards and IFRSs to high quality

Timing of application

IFRS apply from a date mentioned in the IFRS. The IFRS also sets out transitional provisions for their initial application.

IASB and National Standard Setting Bodies

The relationship of IASB with the national standard setting bodies has increased and IASB has tried to increase comparability between national standards and IFRS.

IASB and Professional Accountancy Bodies/IFAC

The IASB is closely connected with professional bodies through joining with IFAC. IFAC represents the worldwide accountancy professions.

The mission of IFAC is the development of accountancy profession to enable it to provide services of a consistently high quality in the public interest.

IASB and the EC/ Intergovernmental Bodies.

The European Commission has acknowledged the role of IASB in harmonization of world wide accounting rules and EC representatives has joined the IASB. The EC has also set a committee to investigate the difference between the EU norms and IFRS.

Conclusion

If the IAS’s are applied to financial statements, their comparability, creditability and usefulness will enhance though out the world.