International Accounting Standards Board (IASB)

International Accounting Standards Board (IASB)

Definition

The International Accounting Standards Board (IASB) is an independent and privately funded organization established to formulate and enhance international accounting standards. The IASB was formed in 2001, replacing the International Accounting Standards Committee (IASC). The board’s primary objectives are to develop a unified set of high-quality, transparent, and enforceable global accounting standards, ensure rigorous application of such standards, and encourage convergence of national accounting standards with International Financial Reporting Standards (IFRS).

Objectives

1. Developing Global Standards: The IASB aims to create, in the public interest, a single set of high-quality accounting standards that are globally accepted and adhered to. This ensures that financial statements provide clear, comparable, and useful information to help participants in capital markets and other users make economic decisions.
2. Promoting Rigorous Application: The IASB fosters the robust application of these developed standards.
3. Converging Standards: The IASB works towards aligning national accounting standards with IFRS to eliminate discrepancies and enhance global financial reporting comparability.

Authority and Compliance

While the IASB does not have the legal authority to mandate compliance with its standards, many countries—including all member states of the European Union—require publicly traded companies to prepare their financial statements in accordance with IASB standards. In the UK, the alignment of national Financial Reporting Standards (FRS) with IASB standards was completed by January 2015.

IASB Structure

The IASB comprises 14 members with plans to expand to 16 to maintain a geographical balance:

• North America: At least four members
• Europe: At least four members
• Asia-Oceania: At least four members
• Africa: At least one member
• South America: At least one member

The current chairman is Hans Hoogervorst. Members are appointed by the trustees of the International Financial Reporting Standards Foundation.

Examples

1. Financial Reporting: A European Union publicly traded company prepares its financial reports in accordance with IFRS as mandated by the IASB.
2. Harmonization: A UK-based corporation transitions its financial reporting practices to align with IASB standards, completing the process by January 2015.

Frequently Asked Questions (FAQs)

Q1: What is the role of the IASB? A1: The IASB develops international accounting standards, promotes their rigorous application, and strives for convergence of national and international accounting standards to enhance global financial reporting quality and comparability.

Q2: Is compliance with IASB standards mandatory? A2: The IASB itself does not have enforcement authority. However, many countries, including EU member states, mandate compliance with IASB-issued standards for publicly traded companies.

Q3: How are IASB members selected? A3: IASB members are appointed by the trustees of the International Financial Reporting Standards Foundation, maintaining a geographical balance among the members.

Q4: What is IFRS? A4: IFRS stands for International Financial Reporting Standards, a set of accounting standards issued by the IASB to provide a global framework for financial reporting.

Q5: How does the IASB enhance transparency in financial markets? A5: By setting high-quality, understandable, and enforceable accounting standards, the IASB ensures that financial statements offer transparent and comparable information crucial for market participants.

Related Terms

• International Financial Reporting Standards (IFRS): Global standards for financial reporting established by the IASB.
• Financial Reporting Standards (FRS): National standards for financial reporting that converge with IFRS.
• International Accounting Standards Committee (IASC): The predecessor to the IASB, responsible for international standards until 2001.

Online Resources

• International Financial Reporting Standards (IFRS) Foundation Website
• IFRS Standards and Interpretations
• International Federation of Accountants (IFAC)

Suggested Books for Further Studies

1. “International Financial Reporting Standards (IFRS) 2019” by Ernst & Young
2. “Wiley IFRS 2020: Interpretation and Application of IFRS Standards” by PKF International Ltd.
3. “Applying IFRS Standards” by Ruth Picker, Kerry Clark, John Dunn, David Kolitz, Gilad Livne, Janice Loftus, and Victoria Wise
4. “IFRS 2021 Standards Guide” by Deloitte Touche Tohmatsu
5. “International GAAP 2021” by Ernst & Young

Accounting Basics: “International Accounting Standards Board (IASB)” Fundamentals Quiz

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