Conceptual Framework and Environment of Accounting Standards PDF

CONCEPTUAL FRAMEWORK and ENVIRONMENT of ACCOUNTING STANDARDS IASB International Accounting Standards Board  Purpose:  = to develop a set of high quality, understandable, enforceable global accounting standards  = that require transparent and comparable information in the financial statements...

CONCEPTUAL FRAMEWORK and ENVIRONMENT of ACCOUNTING STANDARDS IASB International Accounting Standards Board  Purpose:  = to develop a set of high quality, understandable, enforceable global accounting standards  = that require transparent and comparable information in the financial statements of all companies  The IASB was established in 2001 via its parent entity the International Accounting Standards Committee ( IASC ), a non profit organization founded in Delaware, USA.  The IASB is based in London, UK. IASB STRUCTURE  = the structure is designed to support those attributes considered desirable to establish the legitimacy of a standard setting organization covering;  1. the representativeness of the decision making body  2. the independence of its members  3. technical experts MONITORING BOARD  The monitoring board is the overseeing segment of the IASB structure  Its purpose is to serve as a mechanism for formal interaction between capital market authorities and the IFRS Foundation  IFRS stands for International Financial Reporting Standards  The IFRS differs with GAAP since GAAP is a framework based on legal authority or rules based, while IFRS is a principled-based approach  Ex. Investments = income is recognized with GAAP based on contract, while IFRS is based on cashflow  Another difference between the two is R&D, both recognized the expense as they occur, however IFRS requires that such cost will be capitalized IFRS Foundation  Is an independent, not-for profit private sector organization working in the public interest  Its objectives are as follows;  - to develop a single set of high quality, understandable, enforceable and globally accepted international financial reporting standards through its standard setting, the IASB;  To promote the use and rigorous application of these standards  To take account of the financial reporting needs of emerging economies and , small and medium sized entities ( SMEs )  To bring about convergence of national accounting standards and IFRS, to high quality solutions What are accounting standards?  Accounting standards are authoritative statements of how particular types of transactions and other events should be reflected in financial statements  Accordingly, compliance with accounting standards will normally be necessary for the fair presentation of financial statements Are international financial reporting standards mandatory?  A set of financial statements can only be described as complying with IFRS if they comply with all existing  IFRS = International Financing Reporting Standard  IFRIC = International Financial Reporting Interpretations Committee  IAS = International Accounting Standards  SIC = Standard Industrial Classification The need for international accounting standards  Targets comparability = financial analysis  It can cause preparation costs for financial reporting that are much higher than necessary – a multinational company may have to prepare different reports on its operations for use in different countries  Businesses will want to have a uniform system for assessing financial performance in their operations in different countries. They will also want their external reports to be consistent with international assessments of performance. Philippine ASC to IAS  Used to be adopting FASB Financial Accounting Standards Board, yet in 1997, the ASC made a decision to move totally to International Accounting Standards.  Considerations:  - support of IAS by Philippine organizations;  - SEC, Rule 48, specifically include IAS in its hierarchy of GAAP  - moving away from GATS, the General Agreement on Trade in  Services of the World Trade Organization = a framework  of rules and principles for trade in services, a large and  fast growing segment of world trade Considerations continued  - increasing internalization of business  - improvement of IAS  - increasing recognition of IASB standards;  World Bank  Asian Development Bank  World Trade Organization  IOSCO = International Organization of Securities Commissions