Question

The existing procedures for setting international accounting standards are now well established.

Required:

Explain the roles of the following in relation to the regulatory environment to develop and publish IFRS Standards:

 The IFRS Foundation;

 The International Accounting Standards Board (IASB);

 The IFRS Interpretations Committee. [6 Marks]

c. Explain how the standard-setting authority approaches the task of producing a new financial reporting standard, with particular reference to the ways in which comment or feedback from interested parties is obtained. [10 Marks]

Answer 1

First Let us understand in brief about IASB and IFRS Foundation in below two points.

The main objective of the IFRS foundation are to raise the standard of financial reporting and eventually bring about global harmonisation of accounting standards.

The IASB is an independent, privately funded body that develops and appoves IFRS standards.The IASB operates under oversight of the IFRS Foundation.

The roles of IFRS Foundation is mentioned as below.

a.)Develop a single set of high quality, understandable, enforceable and globally accepted IFRS standards through its standard setting body-IASB

b.)Promote the use and vigorous application of those standards.

c.)Take account of the needs of a range of size and types of entities in diverse economic setting standards and IFRS standards.

d.)Promote and facilitate adoption of IFRS standrads through the convergence of national accounting standards and IFRS standards.

The IFRS Foundation is currently made up of 22 Trustess, who essentially monitor and fund the IASB, the IFRS advisory Council and IFRS interpretation committee.The trustees are appointed from a variety of geographical and functional background.

Structure of IFRS Foundation is as below

The roles of IASB is mentioned as below.

The overall agenda of the IASB will initially be set by discussion with the IFRS advisory council.The process for developing an individual standard would involve the following steps.

Step 1 :Durig the early stages of a project , The IASB may establish an Advisory Committee to give advice on issues arising in the project.Consultation with the Adisory Committee and the IFRS Advisory Council occurs throughout the project.

Step2 : IASB may develop and publish Discussion papers for public comment.

Step 3 :Following the receipt and review of comments , the IASB would develop and publish an exposure Draft for public comment.

Step 4: Following the receipt and review of comments, the IASB would issue a final IFRS.

The IFRS Interpretation Committe:

The IFRS Interpretation Committe issues 'Interpretations' which carry the same authority as IFRSs, in the sense that set out consensus views that entities must adhere to if they describe their financial statements as beling prepared in accordance with IFRS standards.

Interpretations are applicable from the date of issue or if they specify one, from their effective date. Some interpretations may contain 'transitional provision' that apply to their first application.

An interpretation then ceases to apply when it is overridden bya new IFRS standard (or other authoritative IASB document).Ehen this happens, this would be mentioned in the exposure draft of the new, overriding IFRS standard (or other document).The IASB would then inform the IFRS interpretation committee when it happens.

C.) Comment of Feedback from Interested parties:

The development of an IFRS standard involves a full and fair consultation which includes an open, Public process of debate technical issues and evaluating input sought through several mechanisms. Opportunities for interested parties to participate in the development of an IFRS standard would include, depending on the nature of the project.

a) Participation in the development of views as a member of the IFRS Advisory Council.

b) Participation in advisory groups

c) Submission of a comment letter in repsonse to a discussion document.

d) Submission of a comment letter in response to an Exposure draft.

e) Particiption in public hearings.

f) Participation in field visils and field tests.

The IASB publishes annual report on its activities during and past year and priorities next year. This report providesa basis and opportunity for comment by interested parties. In addition to undertake a public consultation on its future technical agenda every five years.

The IASB reports on its technical project on its website. It also publishes on IASB decisions immediatley after each meeting in its newsletter IASB update.