Financial Reporting & IFRS

Financial Reporting & IFRS

1. History & Structure of the IASB

   • 1973 : IASC - Father
     • Issues IAS
     • IASC Foundation - independent organisation
       • Trustees
         • appoint IASB members
         • exercise oversight
         • raise the needed funds
       • objectives
         • to bring about convergence of national accounting standards and IAS & IFRS to high quality solutions
         • to promote the use & rigorous application of the standards
         • to develop in the public interest a single set of high quality, understandable, & enforceable global accounting standards
           • that require high quality, transparent & comparable information in F/S & other financial reporting
             • to help participants in the world's capital markets & other users make economic decisions
       • IASB - Son
         • Independent & privately-funded accounting standard setter (London)
         • Issues IFRS which includes IAS
         • sole responsibility for setting accounting standards
           • 14 board members - diff. countries - variety of functional backgrounds
           • members not dominated by any particular constituency / regional interest
           • technical expertise
     • to promote the harmonisation of the accounting standards
       • requirement of the European Commission - listed companies - European Union - prepare the F/S in accordance to IFRS
       • endorsement of IOSCO on IFRS / IAS

2. Interpretations

   • IASB issues
     • IFRS (13 sets - IFRS 1 to 13)
     • IAS (29 sets - 12 withdrawn - IAS 1 to 41)
       • Difference
         • IASB designated its accounting standards as IFRS
           • IAS were issued by IASC
             • After IASB, IFRS includes IAS
     • SIC & IFRIC (9 SIC & 13 IFRIC sets)

3. Objective

   • to resolve & reconcile the accounting differences in each country and place

4. Current Trends & Future Challenges

   • Trends
     • globalization of accounting standards & convergence to IFRS
       • convergence on terminology to be used
     • Fair value measurement
       • more relevant
       • should reflect market condition at the balance sheet - revalued at each balance sheet
     • Less accounting choices would be available
     • Off-balance sheet item must be recognised in the balance sheet
     • risk approach / oriented disclosures are required
   • Challenges
     • Historical accounting differences
     • corporate failure
     • Limited experience & time consuming
       • Further changes in IFRS may occur
     • does not have mechanism to resolve application dispute, inconsistent application / misapplication issue
     • If any dispute, no international organization - power to enforce IFRS & assure entities are really in compliance with the IFRS
     • Fair value accounting was blamed & increasing pressure on IASB & IFRS

5. Application & Use

   • general purpose F/S
   • other financial reporting
     • comprises information outside the F/S
       • assists - interpretation - complete set of F/S
       • improves users' ability - make efficient economic decisions
   • content perspective
     • sets out recognition, measurement, presentation, & disclosure requirements dealing with transactions
     • equal authority
       • bold
         • main principles
       • plain
   • entity perspective
     • apply to the general purpose F/S & other financial reporting
       • all profit-orientated entities
         • not-for-profit public & government entities may find them appropriate

6. Authority

   • achieves its objectives
     • promoting the use of those standards in general purpose F/S & other financial reporting
     • developing & publishing IFRS
   • no authority to require compliance with its accounting standards
     • where IFRS are the required accounting standards / an entity chooses to comply with IFRS
       • requirements of all IFRS should be regarded as mandatory
   • rigorous & open due process
     • high quality
     • developed only after giving IASB's constituencies opportunities to make their views known at several points in the standard setting due process
   • Procedure for developing an IFRS
     • Set an agenda
       • Plan a project
         • Develop & publish a discussion paper
           • Develop & publish an exposure draft
             • Develop & publish an IFRS
               • Procedures after an IFRS is issued