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Introduction Introduction to this edition Overview The International Accounting Standards Board (IASB), based in London, began operations in 2001. The IASB is committed to developing, in the public interest, a single set of high quality, global accounting standards that require transparent and comparable information in general purpose financial statements. In pursuit of this objective, the IASB co-operates with national accounting standard-setters to achieve convergence in accounting standards around the world. The IASB members have a broad range of professional backgrounds an d have liaison responsibilities throughout the world. The IASB is selected, overseen and funded by the International Accounting Standards Committee (IASC) Foundation. Financial support is received from the major accounting firms, private financial inst itutions and industrial companies throughout the world, central and development banks, and other international and professional organisations. Trustees Twenty-two Trustees provide oversight of the operations of the IASC Foundation and the IASB. The responsibilities of the Trustees include the appointment of members of the IASB, the Standards Advisory Council and the International Financial Reporting Interpretations Committee; monitoring the IASB’s effectiveness and adherence to its due process and consultation procedures; establishing and maintaining appropriate financing arrangements; approval of the budget for th e IASC Foundation; and responsibility for constitutional changes. The Trustees comprise individuals that as a group provide an appropriate balance of professional backgrounds, including auditors , preparers, users, academics, and other officials serving the public interest. Underthe Constitution of the IASC Foundation as revised in 2005 (see below), the Trustees are appointed so that there are six from the Asia/Oceania region, six from Europe, six from North America, and four others from any area, as long as geographical balance is maintained. IASC Foundation Constitution The Trustees completed a review and revision of the IASC Foundation’s Constitution in June 2005. The revised Constitution came into effect on 1 July 2005. The IASB The IASB consists of fourteen members (twe lve full-time and two pa rt-time) and has full discretion in developing and pursuing the technical agenda for setting accounting standards. The main qualifications for membership of the IA SB are professional competence and practical experience. The Trustees are required to select members so that the IASB, as a group, will comprise the best available combination of technical expertise and international business and market experience, and to ensure that the IASB is not dominated by any particular constituency or geographical interest . The IASB is also © IASCF 3 Introduction expected to provide an appropriate mix of recent practical experience among auditors, preparers, users and academics. The IASB, in consultation with the Trustees, is expected to establish and maintain liaison with national standard-setters and other official bodies concerned with standard-setting in order to promote the convergence of national standards and the IASB’s International Financial Reporting Standards (IFRSs). The publication of a standard ,exposuredraft,orfinal IFRIC Interpreta tion requires approval by nine of the IASB’s fourteen members. At 31 December 2007 the IASB members were: Sir David Tweedie, Chairman Thomas E Jones, Vice-Chairman Professor Mary Barth (part-time) Stephen Cooper (part-time) Philippe Danjou Jan Engström Robert P Garnett Gilbert Gélard James J Leisenring Warren J McGregor John T Smith Tatsumi Yamada Wei-Guo Zhang [one vacancy] The IASB issues a summary of its decisions promptly after each IASB meeting. This IASB Update is published in electronic format on the IASB’s Website www.iasb.org. Standards Advisory Council The Standards Advisory Council (SAC) provides a forum for participation by organisations and individuals with an inte rest in international financial reporting, and diverse geographical and functional backgrounds. Th e objective of the SAC is to give the IASB advice on agenda decisions and priorities in its work, inform the IASB of the views of SAC members on major standard-setting projects, and give other advice to the IASB or the Trustees. The SAC comprises about forty members. The SAC normally meets at least three times a year. Its meetings are open to the public. The chairman of the SAC is appointed by the Trustees, and cannot be a member of the IASB or its staff. The chairman of the SAC is invited to attend and participate in the Trustees’ meetings. Details of the members of the SAC are available on the Website www.iasb.org. International Financial Reporting Interpretations Committee The International Financial Reporting Interpretations Committee (IFRIC) is appointed by the Trustees to assist the IASB in establ ishing and improving standards of financial accounting and reporting for the benefit of users, preparers and au ditors of financial statements. The Trustees established the IFRIC in March 2002, when it replaced the previous interpretations committee, the Standing Interpreta tions Committee (SIC). The role of the IFRIC is to provide timely guidance on newly identified financial reporting issues not specifically addressed in IFRSs or issues where unsatisfactory or conflicting interpretations have developed, or seem likely to develop. It thus promotes the rigorous and uniform application of IFRSs. 4 © IASCF Introduction The IFRIC assists the IASB in achieving international convergence of accounting standards by working with similar groups sponsored by national standard-setters to reach similar conclusions on issues where underlying standards are substantially similar. The IFRIC has twelve voting members in addi tion to a non-voting Chair, currently IASB member Robert Garnett. The Chair has the ri ght to speak to the technical issues being considered but not to vote. The Trustees , as they deem necessary, may appoint as non-voting observers regulato ry organisations, whose repr esentatives have the right to attend and speak at meetings. Currently, the International Organi zation of Securities Commissions (IOSCO) and the European Commission are non-voting observers. In October 2007 the Trustees approved an amendment to the IASC Foundation’s Constitution to expand the IFRIC’s membership to 14 voting members. The IFRIC publishes a summary of its decisions promptly after each meeting. This IFRIC Update is published in electronic format on the IASB Website. Details of the members of the IFRIC are available on the Website www.iasb.org. IASB staff A staff based in London, headed by the Ch airman of the IASB, supports the IASB. At 31 December 2007 the technical staff included people from Canada, China, France, Germany, Ghana, Ireland, Japan, Korea, Malaysia, Mexico, The Netherlands, New Zealand, Poland, South Africa, Spain, the United Kingdom and the United States. Due process IASB due process IFRSs are developed through a formal system of due process and broad international consultation. The IASB has complete responsibility for all IASB technical matters including the preparation and issuing of IFRSs and exposuredrafts, and final approval of Interpretations developed by the IFRIC. The IASB has full discretion in developi ng and pursuing its technical agenda. Formal due process for projects normally, but not necessarily, involves the following steps (the steps that are requ ired under the terms of the IASC Foundation Constitution are indicated by an asterisk*): (a) The IASB staff are asked to identify, revi ew and raise issues that might warrant the Board’s attention. The IASB ’s discussion of potential projects and its decisions to adopt new projects take place in public Board meetings. Be fore reaching such decisions the IASB consults the SAC on proposed agenda items and setting priorities.* (b) When adding an item to its active agen da, the IASB decides whether to conduct the project alone, or jointly with another standard-setter. (c) After considering the nature of the issues and the level of interest among constituents, the IASB may establish a working group. ©IASCF 5 Introduction (d) Although a discussion paper is not a mandatory step in its due process, the IASB normally publishes a discussion paper as its first publication on any major new topic. Typically, a discussion paper incl udes a comprehensive overview of the issue, possible approaches in addressing the issue, the preliminary views of its authors or the IASB, and an invitation to comment. If the IASB decides to omit this step, it will state its reasons. (e) Publication of an exposure draft is a mandatory step in the due process.* The developmentofanexposuredraftiscarriedoutduringIASBmeetings, conducted in public. It involves the IASB considering and reaching decisions on issues on the basis of staff research and recommendations, as well as comments from any discussion paper, suggestions made by the SAC, working groups and national standard-setters and arising from public education sessions conducted for the IASB. An exposure draft must be approved by at least nine members of the IASB.* An exposure draft will be accompanied by a basis for conclusions and include any alternative views held by dissenting IASB members. (f) The IASB reviews the comment letters received* and the results of other consultations. Asameansofexploringtheissuesfurther,andsolicitingfurther comments and suggestions, the IASB may conduct field visits, or arrange public hearings and round-table meetings. (g) The development of an IFRS is carried out during IASB meetings, conducted in public. After resolving issues arising from the exposure draft, the IASB considers whether it should expose any revised proposals for public comment. When the IASB is satisfied that it has reached a conclusion on the issues arising from the exposure draft, it instructs the staff to draft the IFRS. An IFRS must be approved by at least nine members of the IASB.* An IFRS will be accompanied by a basis for conclusions and include any dissenting opinions held by IASB members voting against the standard. Adopting the ‘comply or explain’ approach that is used by various regulatory bodies, the IASB explains its reasons if it decides to omit any non-mandatory step of its consultative process. The IASB has documented and described its consultative proc edures in the Due Process Handbook for the IASB, which has been approved by the Trustees. IFRIC due process Interpretations of IFRSs are developed through a formal system of due process and broad international consultation. The IFRIC discusses technical matters in meetings that are open to public observation. The due process for each issue normally, but not necessarily, involves the following steps (the steps that are required under the terms of the IASC Foundation Constitution are indicated by an asterisk*): (a) The IFRIC assesses issues suggested by constituents for addition to the IFRIC agenda. Where the IFRIC decides not to deal with an issue, it publishes the reason for this decision. The tentative agenda decision with reasons is published in draft immediately following the IFRIC meeting at which it is presented. This allows time for public comment before the recommendation not to deal with an issue is considered at the following IFRIC meeting. 6 ©IASCF Introduction (b) For those issues taken on to the agenda, the IASB staff prepare an issues summary. This describes the issue and provides the information necessary for IFRIC members to gain an understanding of the issue an d make decisions about it. Preparation of an issues summary involves a review of the authoritative accounting literature including the IASB Framework, consideration of alternatives, and consultation with national standard-setters, including national committees that have responsibility for interpretations of national standards. (c) A consensus on a draft Interpretation is reached if no more than four IFRIC members have voted against the proposal.* The draft Interpretation is released for public comment unless five or more IASB members object to its release within a week of being informed of its completion.* (d) Comments received during the comment pe riod are considered by the IFRIC before an Interpretation is finalised.* (e) A consensus on an Interpretation is re ached if no more than four IFRIC members have voted against the proposal.* The Interp retation is put to the IASB for approval. Approval by the IASB requires at least nine IASB members to be in favour.* Approved Interpretations are issued by the IASB. The IFRIC has documented and described its consultative pr ocedures in the Due Process Handbook for the IFRIC, which has been approved by the Trustees. Voting The publication of an exposure draft, a standard or a final Interpretation requires approval by nine of the fourteen members of the IASB. Other decisions of the IASB, including the publication of a discussion paper, require a simple majority of the members of the IASB present at a meeting that is attended by at least 60 per centof the members of the IASB, in person or by telecommunications. Each voting member of the IFRIC has one vote . Ten voting IFRIC members constitute a quorum. Members vote in accordance with their own independent views, not as representatives voting accordin g to the views of any firm, organisation or constituency with which they may be associated. Approvalof draft or final Interpretations requires that not more than four voting members vote against the draft or final Interpretation. Openness of meetings Meetings of the Trustees, the IASB, the SAC andthe IFRIC are all open to public observation. However, certain discussions (normally aboutselection, appointment and other personnel issues) are held in private. The IASB continues to explore how technology can be used to overcome geographical barriers and other logistical problems and thus facilitate public observation of open meetings. Examples of innovations for thatpurpose include the introduction of audio and video and Webcasting on the IASB Website. The agenda for each meeting of the Trustees, the IASB, the SAC and the IFRIC is published in advance on the IASB’s Website, together with Observer Note s, which contain the substance of the papers tabled for the meeting. The IASB also publishes promptly a © IASCF 7 Introduction summary of the technical decisions made at IASB and IFRIC m eetings and, where appropriate, decisions of the Trustees. When the IASB issues a standard or an Interpretation, it publishes a Basis for Conclusions to explain the rationale behind the conclusi ons and to provide background information that may help users of IFRSs to apply them in practice. The IASB also publishes its members’ dissenting opinions on standards. Comment periods The IASB publishes, for public comment, discus sion papers and each exposure draft of a standard, with a normal comment period of 120 days. In certain circumstances, the IASB may expose proposals for a longer or shorte r period. Draft IFRIC Interpretations are normally exposed for a 60–day comment period,although a shorter period of not less than 30 days may be used in certain circumstances. Co-ordination with national due process The IASB meets national stan dard-setters and other official bodies concerned with accounting standard-setting annually. In addition, sta ff members of the IASB and accounting standard-setters co-operate on a daily basis on projects, sharing resources whenever necessary and appropriate. Close co-ordination between the IASB’s due process and the due process of accounting standard-setters is important to the success of the IASB. In addition, IASB members are in regular contact with national standard-setters. Opportunities for input The development of an International Financial Reporting Standard (IFRS) involves an open, public process of debating technical issues and evaluating input so ught through several mechanisms. Opportunities for interested pa rties to participate in the development of IFRSs include, depending on the nature of the project: • participation in the development of views as a member of the SAC • participation in working groups • submission of an issue to the IFRIC (see the IASB Website for details) • submission of a comment letter in response to a discussion paper • submission of a comment letter in response to an exposure draft • submission of a comment letter in response to a draft Interpretation • participation in public hearings and round-table discussions • participation in field visits. The IASB publishes an annual report on its activities during the past year and priorities for the next year. The report provides a bass and opportunity for comment by interested parties. 8 © IASCF Introduction Preface to International Financial Reporting Standards The Preface to International Financial Reporting Standasets out the objectives and due process of the IASB and explai ns the scope, authority and timing of application of IFRSs (including Interpretations). IASB Framework The IASB has a Framework for the Preparation and Pr esentation of Financial Statemen.s The Framework assists the IASB: (a) in the development of future IFRSs and in its review of existing IFRSs; and (b) in promoting the harmonisation of re gulations, accounting standards and procedures relating to the presentation of financial statements by providing a basis for reducing the number of alternative accounting treatments permitted by IFRSs. In addition, the Framework may assist: • preparers of financial statements in appl ying IFRSs and in dealing with topics that have yet to form the subject of a standard or an Interpretation • auditors in forming an opinion on whether financial statements conform with IFRSs • users of financial statements in interpreting the information contained in financial statements prepared in conformity with IFRSs • those who are interested in the work of the IASB, providing them with information about its approach to the formulation of accounting standards. The Framework isnotanIFRS. However,whendevelopinganaccountingpolicyinthe absence of a standard or an Interpretation that specifically applies to an item, an entity’s management is required to refer to, and consid er the applicability of, the concepts in the Framework (see IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors). In a limited number of cases there may be a conflict between the Framework and a requirement within a standard or an Interpretation. In those cases where there is a conflict, the requirements of the standard or Interpretation prevail over those of the Framework. Accounting standards The IASB publishes its standards in a series of pronouncements called International Financial Reporting Standards (IFRSs). Upon its inception the IASB adopted the body of International Accounting Standards (IASs) issued by its predecessor, the Board of the International Accounting Standards Committee. The term ‘International Financial Reporting Standards’ includes IFRSs, IASs and Interpretations originated by the IFRIC or its predecessor, the former Standing Interpretations Committee (SIC). Benchmark and allowed alternative treatments In some cases, IFRSs permit different trea tments for given transactions and events. In limited cases, one treatment is identified as the ‘benchmark treatment’ and the other ©IASCF 9 Introduction as the ‘allowed alternative treatment’. The financial statements of an entity may appropriately be described as being prepared in accordance with IFRSs whether they use the benchmark treatment or the allowed alternative treatment. The IASB’s objective is to require like tran sactions and events to be accounted for and reported in a like way and unlike transactionsand events to be accounted for and reported differently, both within an entity over time and among entities. Consequently, the IASB intends not to permit choices in accounting treatment. Also, the IASB has reconsidered, and will continue to reconsider, those transa ctions and events for which IASs permit a choice of accounting treatment, with the objective of reducing the number of those choices. Staff advice The IASB’s Operating Procedures do not generally allow IASB staff to give advice on the meaning of IFRSs. Current technical activities Details of the IASB’s and the IFRIC’s current technical activities, including the progress of the IASB’s and the IFRIC’s deliberations, are available on the IASB Website. As projects are completed, the IASB expects to add new projec ts. The IFRIC adds topics to its agenda on the basis of an assessment of issues submitted to it by constituents. The IASB reports on its technical projects in its quarterly newsletter,IASB Insight, and on its Website. The IASB publishes a report on itsdecisions promptly after each IASB meeting in IASB Update. The IFRIC publishes a report on its decisions promptly aftereach IFRIC meeting in IFRIC Update. IASB/IASC Foundation publications and translations The IASC Foundation holds the copyright of International Financial Reporting Standards, International Accounting Stan dards, Interpretations, expo sure drafts, and other IASB publications in all countries, except wher e the IASC Foundation has expressly waived copyright on portions of that material . For more information regarding the IASC Foundation’s copyright, please refer to the copyright notice with this edition or the IASC Foundation’s Website. Approved translations of International Financial Reporting Standards are available in over 40 languages, including all major European and Asian languages. The IASC Foundation will consider making approved translations available in other languages. For more information, contact the IASC Foundation’s Director of Operations. Although the IASC Foundation makes every reasonable effort to translate IFRSs into other languagesonatimelybasis,arigorousprocessmustbefollowedtoensurethatthe translations are as accurate as possible. For that reason, there may well be a lag between when a standard or an Interpretation is issued by the IASB (in English) and when it is issued in other languages. Further details are available on the IASB Website (www.iasb.org) and from the IASC Foundation’s Publications department. 10 © IASCF Introduction More information The IASB Website, at www.iasb.org, provides news, updates and other resources related to the IASB and the IASC Foundati on. The latest publications and subscription services can also be ordered from the IASC Foundation’s Shop at www.iasb.org. For more information about the IASB, or to obtain copies of its publications and details of the IASC Foundation’s subscription services, visit the IASB Websit e at www.iasb.org, or write to: IASC Foundation Publications Department 30 Cannon Street, London EC4M 6XH United Kingdom Telephone: +44 (0)20 7332 2730 Fax: +44 (0)20 7332 2749 Email: email@example.com Web: www.iasb.org © IASCF 11
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