Conclusiones

The IASB and the US Financial Accounting Standards Board (FASB) have been working together since 2002 to achieve convergence of IFRS and US GAAP. A common set of high quality global standards remains a priority of both the IASB and the FASB. Both parties set out their agreement in a Memorandum of Understanding known as the Norwalk Agreement. Their work plan was set out in a roadmap for convergence which outlined their targets over the period up to 2008 (see also chapter 4).

In 2007, the US Securities and Exchange Commission (SEC) removed the necessity for a reconciliation between IFRS and US GAAP for non-US companies that were listed in the US providing their financial statements complied with IFRS.

In 2008, and again in 2010, the Memorandum of Understanding was updated, setting out the objectives for the period to 2011 in the convergence of US GAAP and IFRS. The IASB and the FASB have a June 2011 target date for projects which are deemed to be most important, and those with a lesser degree of importance will be dealt with later.

The IASB and FASB are currently working on the following projects:

x Financial instruments x Consolidations

x Derecognition of financial instruments x Fair value measurement

x Revenue recognition x Leases

x Financial instruments with characteristics of equity x Financial statement presentation

x Joint ventures

x Post-employment benefits x Insurance contracts x Liabilities

The IASB is also involved in a joint project with the FASB to develop a common conceptual framework.

This would provide a sound foundation for developing future accounting standards. The aim is that future standards should be principles-based and internationally-converged. This represents a movement away from the rules-based approach which has characterised US accounting standards.

The new framework will build upon the existing IASB and FASB frameworks and take into account subsequent developments.

Key chapter points

x The regulatory framework is the most important element in ensuring relevant and reliable financial reporting and so meeting the needs of shareholders and other users.

x As the IASB has no power to regulate the use of IFRS, regulation takes place at a national level.

x The organisational structure for International financial reporting consists of:

–– The IFRS Foundation

–– The IASB

–– The IFRS Advisory Council

–– The International Financial Reporting Standards Interpretations Committee.

Quick revision questions

1 One objective of the IASB is to promote the preparation of financial statements using the Euro.

Is this statement true or false?

A true B false

2 What happened in 2005 for listed companies in the EU?

A IFRS to be used for all financial statements

B IFRS to be used for consolidated financial statements C financial statements to be presented in euros

D financial statements to be presented in US dollars 3 What are the objectives of the IASB?

A to enforce IFRS B to issue IFRS

4 Which committee of the IASB aims to improve users' interpretation of IFRS?

A IFRS Advisory Council B IFRS Foundation

C IFRS Interpretations Committee

D International Accounting Standards Committee 5 What is the correct definition of GAAP?

A national accounting standards and company law

B national accounting standards, stock exchange rules and company law C international accounting standards, company law and stock exchange rules

D national accounting standards, international accounting standards, stock exchange rules and company law

6 Which of the following is an advantage of regulation of company financial statements?

A less disclosure of a company's activities in financial statements B lower costs of producing financial information

C higher quality financial information is produced D more financial information available for competitors 7 What is the name of the accounting standards issued by the IASB?

A International Accounting Standards B Financial Reporting Standards

C International Financial Reporting Standards D International Reporting Standards

8 With which body is the IASB currently undertaking a project for the harmonisation of IFRS?

A European Commission B United Nations

C International Federation of Accountants D Financial Accounting Standards Board

Answers to quick revision questions

The answers to these quick revision questions can be found in the Answers to quick revision questions at the end of the Study Manual.

Self-assessment questions

1 What is the name of the general principles document produced by the IASB which provides the conceptual framework for the setting of International accounting standards?

A Framework for setting accounting standards B Statement of principles for financial reporting

C Framework for the preparation and presentation of financial statements D Statement of concepts for the preparation of financial statements 2 Consider the following two statements:

I US operates a principles-based system of setting accounting standards II IASB operates a prescriptive based system of setting accounting standards Which of these statements are correct?

A I only

4 Which bodies does the IFRS Foundation oversee?

A IASB and IFRSIC

B IFRSAC, IASB and IFRSIC C IFRSIC and IFRSAC

D IASB and the Monitoring Board

5 Which of the following is not a role of the IFRS Advisory Council?

A to issue International Financial Reporting Standards B to consult on all major IASB projects

C to advise on the prioritisation of the work of the IASB

D to comment on the implications of the work of the IASB on users of financial statements 6 In which country is the Financial Accounting Standards Board based?

A UK

B France

C US

D Germany

Answers to self-assessment questions

The answers to these self-assessment questions can be found in the Answers to self-assessment questions at the end of the Study Manual.