INTERNATIONAL ACCOUNTING STANDARD BOARD (IASB)

INTERNATIONAL ACCOUNTING STANDARD BOARD (IASB)

About the IASB The International Accounting Standards Board (IASB) is an independent, private-sector body that develops and approves International Financial Reporting Standard (IFRSs). The IASB operates under the oversight of the IFRS Foundation. The IASB was formed in 2001 to replace the International Accounting Standard Committee.

Objective Of IASB Promote use of standard Helpful to the outsider users Resolving the accounting issues Materialistic information Issue accounting standard which help in comparability to take informed decision

Mission of IFRS & IASB Transparency Accountability Efficiency

STRUCTURE OF IFRS FOUNDATION

International Financial Reporting Standards (IFRS Standards) are developed through an international consultation process, the "due process", which involves interested individuals and organisations from around the world.

Due Process Comprise Six stages Setting The Agenda Planning the Project Developing And Publishing The Discussion Paper Developing and publishing the exposure Draft Developing and publishing The Standard

Global Convergence Of Accounting Standards The international convergence of accounting standards refers to the goal of establishing a single set of high-quality accounting standards to be used internationally, Convergence is the process of harmonizing accounting standards issued by different regulatory bodies in order to produce a common set of high quality accounting standards to enhance the consistency, comparability and efficiency of financial statements.

Arguments for global convergence Benefits of global convergence : Comparability of international financial information Willingness to on the part of investors Scope for expansion of companies Cross board mergers and acquisitions Listing of more and more companies on the stock exchanges around the world

Chronology of events in convergence of accounting standards year events 1960s Economic integration and related increase in cross-boarder capital flows. 1962 Eight International Congress of Accountants stressed upon the need for –development of auditing, accounting and reporting standards on international basis 1966 Formation of Accountants International study group by AICPA 1967 First textbook on international accounting titled “International Accounting” was written by ‘professor Geerhard G. Mueller 1973 Creation of IASC –International Accounting Standard Committee& its eight counterparts

year Events 1979 Setting of task force by FASB 1987 Making the standards for prescriptive rather than being descriptive 1983 FASB became member of the IASC Consultative group and a Non-voting observer to the IASC 1991 FASB issued first strategic plan 1993 United Kingdom and Australia formed a group referred to as G4. Later on New Zealand also joined it, the group renamed as G4+1

Year Events 1996 The national securities markets improvement act of 1996 became law 1999 The FASB published “International Accounting Standard Setting : A Vision for the Future”. 2000 SEC issued a Concept on International accounting standards 2001 The IASC reconstituted into IASB 2002 The European Union adopted legislation requiring all the companies to prepare their financial statements using IFRS

year Events 2003 The SEC reaffirmed to FASB as the private sector accounting standard setter for US 2006 The FASB and IASB issued a Memorandum of Understanding describing the progress expected to be achieved towards convergence by 2008 2007 SEC issued the final rule eliminating the reconciliation requirement for foreign registrants that used IFRS issued by IASB 2008 SEC issued a proposed roadmap for public comments regarding use of IFRS by U.S. issuers 2010 SEC again issued a statement in support of global convergence

year Events 2011 The FASB hosted the semi-annual meeting of national standards setters in New York 2013 The IFRS Foundation established the Accounting Standards Advisory Forum to improve cooperation among world standard setter to advice IASB in developing IFRS.

IASB And Global convergence IASB is playing a crucial role in the harmonisation & convergence process & is commmitted towards the development of high quality single set of standards across the globe. Although IASC was created in 1973 but till 2002, very few countries, that too those, which lacked their own standard setting infrastructure,adopted IASC standards. It was in 2001, when IASC was reconstituted into IASB, as an independent standard setting board, that the pace of convergence was accelerated.

Major Achievements of IASB IOSCO Endorsement : First major breakthrough towards convergence was reached in May 2000. When IOSCO accepted 30 core IAS & recommended its members to allow MNC'so to use IAS for cross border offerings. This backing by IOSCO led to the acceptance & recognition of IASC as worldwide standard setter.

It opened the door for companies using IAS for listings on international capital markets. In 2001 IASC was reformed into IASB & the US SEC suggested the acceptance of IAS for use in cross border listingso in US, without reconciliation to results under the US-GAAP.

EU regulation: Another milestone towards convergence happened March 2002 when the European Parliament voted overwhelmingly in favour of EU Commission's proposal that by 2005, all listed European companies must prepare consolidated statements in accordance with the standards issued by IASB. A number of other countries including Canada & Australia also announced their intention to adopt IAS.

Co-operation of IASB & FASB The decision of EU to use IASB standards convinced the FASB to co-operate with the IASB as the regulation was going to cover more than 7000 EU listed companies. So, FASB joined IASB & announced & signed a MoU inSeptember 2002, to work together in order to design a single set of global accounting rules.

At their joint meeting in Oct 2004, IASB & the US FASB decided to add to their respective agendas a joint project to develop a common conceptual framework, based on & built upon, both the existing IASB framework & the FASB conceptual Framework.

The two boards reached the following tentative decisions about the approach to the project: The project should initially focus on concepts applicable to business entity in the private sector & later, the board should consider applicability of those concepts to other sectors. The project should be divided into phases, with the initial focus being on achieving the convergence of the frameworks & improving particular aspects of frameworks.

Phases of the joint project Phase A: Objectives & Qualitative characteristics Phase B: Elements & Recognition Phase C: Measurement Phase D: Reporting Entity Phase E: Presentation & Disclosure Phase F: Purpose & Status Phase G: Application to not-for-profit entities Phase H: Remaining issues

Standards developed by IASB STANDARD NO. YEAR OF ORIGINAL ISSUE OR MAJOR AMENDMENT IFRS 1 First- time adoption of IFRS 2003 IFRS 2 Share-based payment 2004 IFRS 3 Business combination IFRS 4 Insurance contracts IFRS 5 Non current assets held for sale & discontinued operations IFRS 6 Exploration for & Evaluation of Mineral Resources 2006 IFRS 7 Financial Instruments: Disclosures 2005 IFRS 8 Operating segments IFRS 9 Financial instruments 2014

STANDARD NO. YEAR OF ORIGINAL ISSUE OR MAJOR AMENDMENT IFRS 10 Consolidated financial statements 2011 IFRS 11 Joint arrangements IFRS 12 Disclosures of interests in other entities IFRS 13 Fair value measurement IFRS 14 Regulatory Deferral A/c 2014 IFRS 15 Revenue from contracts with customers 2014 IFRS 16 leases 2016

International Accounting Standards (IAS) STANDARD NO. YEAR OF ORIGINAL ISSUE OR MAJOR AMENDMENT IAS 1 Presentation of financial statements 2003 IAS 2 Inventories IAS 7 Statement of cash flow 1992 IAS 8 Accounting policies, change in accounting estimates & errors IAS 10 Events after the reporting period IAS 11 Construction contracts 1993 IAS 12 Income taxes 1996 IAS 16 Property, plant & equipment IAS 17 leases

STANDARD NO. YEAR OF MAJOR AMENDMENT IAS 18 Revenue 1993 IAS 19 Employee benefits 2004 IAS 20 Accounting for govt. grants & disclosure of govt. assistance 2008 IAS 21 The effect of changes in foreign exchange rates 2003 IAS 23 Borrowing costs 2007 IAS 24 Related party disclosures IAS 26 Accounting & reporting by retirement benefit plans 1987 IAS 27 Separate financial statements IAS 28 Investment in associates & joint ventures 2011 IAS 29 Financial reporting in hyperinflationary economies

STANDARD NO. YEAR OF MAJOR AMENDMENT IAS 32 Financial Instruments: Presentation 2003 IAS 33 Earning per share IAS 34 Interim financial reporting 1998 IAS 36 Impairment of assets 2004 IAS 37 Provisions, Contingent Liabilities & Contingent Assets IAS 38 Intangible assets IAS 39 Financial Instruments: Reporting & Measurement IAS 40 Investment Property IAS 41 Agriculture 2008

IFRS interpretations STANDARD NO. YEAR OF MAJOR AMENDMENT IFRIC 1 Changes in Existing Decommissioning, Restoration & similar liabilities 2004 IFRIC 2 Member’s shares in Cooperative Entities& similar IFRIC 4 Determining whether an arrangement contains a lease IFRIC 5 Rights to interests arising from Decommissioning , Restoration & Environmental Rehabilitation Fund IFRIC 6 Liabilities arising from Participating in a specific market-Waste Electrical & Electronic Equipment 2005

Arrangements for the construction of Real Estate STANDARD NO. YEAR OF MAJOR AMENDMENT IFRIC 7 Applying the restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies 2005 IFRIC 10 Interim Financial Reporting & Impairment 2006 IFRIC 12 Service concession arrangements IFRIC 13 Customer loyalty program mes 2007 IFRIC 14 IAS 19 – The limit on a defined benefit asset, minimum funding requirements & their interactions IFRIC 15 Arrangements for the construction of Real Estate 2008

STANDARD NO. YEAR OF MAJOR AMENDMENT IFRIC 16 Hedges of net investment in a foreign operation 2008 IFRIC 17 Distribution of non- cash assets to owners IFRIC 18 Transfer of assets from customers 2009 IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments IFRIC 20 Stripping costs in the production phase of a surface mine 2011 IFRIC 21 levies 2013

SIC Interpretations Standard no. Year of major amendment SIC 7 Introduction of Euro 1998 SIC 10 Govt. assistance- No specific relation to operating activities SIC 15 operating leases- incentives 1999 SIC 25 Income taxes-changes in the tax status of an entity or its shareholders 2000 SIC 27 Evaluating the substance of transactions involving the legal form of a lease SIC 29 Service concession arrangements 2001

STANDARD NO. SIC 3 YEAR OF MAJOR AMENDMENT SIC 31 Revenue- Barter Transaction involving advertising services 2001 SIC 32 Intangible assets- web site costs

OBSTACLES IN GLOBAL CONVERGENCE HETEROGENEUS ACCOUNTING PHILOSOPHIES BETWEEN COUNTRIES INTERPRETATION AND SUPERVISION OF IAS/IFRS TRANSLATION OF THE INTERNATIONAL STANDARDS FINANCIAL COSTS POTENTIAL KNOWLEDGE SHORTFALL

SUITABILITY TO SMALL AND MIDDLE SIZED ENTITIES AND ACCOUNTING FIRMS POLITICAL FACTORS FORCED OBLIGATION PROBLEM IN COORDINATION NO FLEXIBILITY