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The Regulatory Framework

The regulatory framework consists of legislation, accounting standards, and stock exchange regulations. The International Accounting Standards Board (IASB) establishes International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS) to promote consistent global financial reporting. The IASB standard-setting process involves consultation, exposure drafts, and approval of new standards. Accounting standards aim to reduce variations and increase comparability in financial reporting.

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28 views

The Regulatory Framework

The regulatory framework consists of legislation, accounting standards, and stock exchange regulations. The International Accounting Standards Board (IASB) establishes International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS) to promote consistent global financial reporting. The IASB standard-setting process involves consultation, exposure drafts, and approval of new standards. Accounting standards aim to reduce variations and increase comparability in financial reporting.

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info.karolinal
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© © All Rights Reserved
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The Regulatory Framework

The regulatory framework consists of

- Legislation
- Accounting standards
- Stock exchange regulations

Generally accepted accounting practice GAAP

- the complete set of regulations applying to a certain jurisdiction, together with any general
accounting principles or conventions applied usually in that jurisdiction
- International GAAP refers to the standards issued by the IASB
- Big GAAP: accounting regulations that apply to big companies
- Little GAAP: simpler accounting regulations that apply to small companies

The international accounting standards board IASB

- formed in 2001 as a replacement for the international accounting standards committee IASC
- Standards published by IASB: international nancial reporting standards IFRS Standards
- Standards published by IASC: international accounting standards IAS Standards
- Many IAS Standards are in force as they were adopted by IASB
- 16 IFRS Standards
- 24 IAS Standards
- IASB consists of 14 members (up to 3 may be part-time)
- IASB is responsible to the trustees of the IFRS foundation
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The IFRS Foundation
1. IFRS advisory council
2. IASB
3. IFRS interpretations committee

The objectives (also objectives if IASB)


a) to develop a good set of nancial reporting standards based upon clearly articulated
principles
b) To promote the use and rigorous application of those standards
c) By ful lling a) and b) you have to take account of the needs of a range of sizes and types of
entities in diverse economic settings
d) Promote and facilitate adoption of the IFRS Standards through the use of national accounting
standards and IFRS Standards

- Activities of the IFRS Foundation are directed by 22 trustees


- The trustees are responsible for appointing the members of the IASB, IFRS Advisory Council
and IFRS Interpretations Committee and for establishing and maintaining the necessary funding
for their work
- The trustees are responsible for reviewing the e ectiveness of the IASB

Financial support for the IFRS Foundation’s activities is received from:


a) national nancing regimes based upon a country’s GDP
b) Income from publications and related activities
c) Major international accounting rms

The Monitoring Board is of high-level representatives of public authorities like the European
Commission in which the trustees are required to make an annual written report to them

The IFRS Advisory council

- forum for individuals with an interest in international nancial reporting


- 30+ members

The objectives
a) to o er advice to the IASB with regard to its agenda and priorities
b) To inform the IASB of council members’ views on standard-setting projects
c) To o er other advice of the advisory council/trustees
- the chairman of the advisory council can’t be a member of the IASB or its sta

The IFRS Interpretations Committee


- to interpret the application of international standards (issuing IFRIC Interpretations)
- To provide timely guidance on nancial reporting matters which are not addressed in the
standards
- 14 voting members and a non-voting Chair
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The standard-setting process

- IASB develops standards involving accountants, users of nancial statements, the business
community, stock exchanges, regulatory authorities, academics and other interested
individuals/organisations

The main steps of the process


• identi cation and review of all the issues associated with the topic concerned
• consideration of the way in which the IASB Conceptual Framework (see Chapter 2)
applies to these issues
• a study of national accounting requirements in relation to the topic and an exchange of
views with national standard-setters
• consultation with the Trustees and the Advisory Council about the advisability of
adding this topic to the IASB's agenda
• publication of a discussion document for public comment
• consideration of comments received within the stated comment period
• publication of an exposure draft for public comment
• consideration of comments received within the stated comment period
• approval and publication of the standard

- publication of an international standards requires approval by at least 9 of 14 members of IASB


- International standards are designed to apply to the general purpose of nancial statements

The structure of an international standard


• introduction
• objectives and scope of the standard
• de nitions of terms used in the standard (these may be in an Appendix)
• the body of the standard
• effective date and transitional provisions
• approval by the IASB and any dissenting opinions by IASB members

A standard can have a Basis for Conclusions (not part of the standard itself) but it sets out the
considerations which were taken into account when the standard was made up. Application/
implementation guidance/illustrations might be included.

The purpose of accounting standards

- to reduce/eliminate variations in accounting practice


- To introduce a degree of uniformity into nancial reporting

Advantages of standardization
a) Faithful representation: free from bias and creative accou##nting is outlawed
b) Comparability: important for identifying trends in nancial performance, not possible if
statements haven’t been drawn up on a consistent basis
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First-time adoption of international standards

- IASB issued IFRS1 in 2003, objective was to ensure that an entity’s rst nancial statements
which comply with international standards should contain high-quality info such that:
• is transparent for users and comparable for all periods presented
• provides a suitable starting point for accounting under international standards
• can be generated at a cost that does not exceed the bene ts to users.

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