Module 1: The Nature and operations of IASB

 Important Dates:
- 1972: a conference in Sydney by the professional accountancy bodies.
(Australia, Canada, France, Germany, Japan, Mexico, the
Netherlands, the United Kingdom with Ireland, and the
United States of America.)

- 1973: The International Accounting Standards Committee (IASC) was founded.

- From 1973 to 2001: 140 of accountancy bodies with membership of the
IASC represented over 100 countries.IAS.

- On 1 April 2001till NOW: the IASB took over from the IASC the
responsibility for setting International Accounting Standards. IFRS.

 Structure of the IFRS Foundation:

 The Monitoring Board:
- provide a link between the Trustees of the IFRS Foundation and public
authorities.
- participates in, and approves, the appointment of trustees.
- provides advice to trustees.
- meets at least annually with the Trustees. (‫)بيجتمع مع األمناءعلى األقل مرة في السنة‬

 The IFRS Foundation Trustees:

- oversee the operating procedures of its sub-committees.
(The IASB, the IFRS Interpretations Committee and the IFRS Advisory Council)
- 22 Trustees.
- The Trustees act by simple majority vote (50%+1) except for amendments
to the Constitution, which require a 75% majority.
)‫ من األعضاء‬%75 ‫(التعديالت الجوهرية أو الدستورية الزم الموافقة من‬

 The IASB:
- 14 full-time members.
- The principal responsibilities of the IASB are:
1. develop and issue IFRSs and Exposure Drafts.
2. approve Interpretations developed by the IFRS Interpretations Committee.
↓
(The publication of a Standard, Exposure Draft, or final Interpretation
requires approval by the Board)

 The IFRS Advisory Council:

- Advising the Board on priorities in the Board’s work. (W‫)بينصح المجلس بشآن اآلولويات‬
- Informing the Board of the views of the organisations and individuals on the Council
on major standard-setting projects. (‫)بيعرف المجلس وجهات النظر حول مشاريع المعايير‬
- Giving other advice to the Board or to the Trustees
- should have a minimum of 30 members.

 The IFRS Interpretations Committee: )14 members (

- Interpret the application of (IFRS Standards).
- provide timely guidance on financial reporting issues not specifically
addressed in IFRS Standards or IAS Standards.
)IAS ‫ أو‬IFRS ‫ المالية التي لم يتم تناولها في معايير‬W‫(تقديم إرشادات في الوقت المناسب حول قضايا التقارير‬
- Publish draft Interpretations for public comment and consider comments
made within a reasonable period before finalising an Interpretation.
) ‫ فى اعتبارها التعلقيات قبل اإلصدار النهائي للمعيار‬W‫(بينشر التعديالت ويتآخذ‬
- Approval of draft or final Interpretations requires that not more than four
voting members vote against the draft or final Interpretation.
 (‫تتطلب الموافقة على المسودة أو التفسيرات النهائية أال يصوت أكثر من أربعة أعضاء ضد المسودة أو التفسير‬
‫)النهائي‬
 Accounting standards:
- From 1973 to 2000  IASs Standards – Issued by IASC.
- 2001 till NOW  IFRSs Standards - The IASB replaced the IASC.
IFRS 1 First-time Adoption of IAS 16 Property, Plant and Equipment
International Financial Reporting
Standards.
IFRS 2 Share-based Payment IAS 17 Leases**
IFRS 3 Business Combinations IAS 18 Revenue *
IFRS 4 Insurance Contracts IAS 19 Employee Benefits
IFRS 5 Non-current Assets Held for Sale IAS 20 Accounting for Government
and Discontinued Operations Grants and Disclosure of
Government Assistance
IFRS 6 Exploration for and Evaluation of IAS 21 The Effects of Changes in
Mineral Resources Foreign Exchange Rates 
IFRS 7 Financial Instruments: Disclosures IAS 23 Borrowing Costs
IFRS 8 Operating Segments IAS 24 Related Party Disclosures
IFRS 9 Financial Instruments IAS 26 Accounting and Reporting by
Retirement Benefit Plans
IFRS 10 Consolidated Financial Statements IAS 27 Separate Financial Statements
IFRS 11 Joint Arrangements IAS 28 Investments in Associates and
Joint Ventures
IFRS 12 Disclosure of Interests in Other IAS 29 Financial Reporting in
Entities Hyperinflationary Economies
IFRS 13 Fair Value Measurement IAS 32 Financial Instruments:
Presentation
IFRS 14 Regulatory Deferral Accounts IAS 33 Earnings per Share
IFRS 15 Revenue from Contracts with IAS 34 Interim Financial Reporting
Customers
IFRS 16 Leases IAS 36 Impairment of Assets
IFRS 17 Insurance contracts IAS 37 Provisions, Contingent
Liabilities and Contingent Assets
IFRS For SMEs IAS 38 Intangible Assets
IAS 1 Presentation of Financial IAS 39 Financial Instruments:
Statements Recognition and Measurement*
IAS 2 Inventories IAS 40 Investment Property
IAS 7 Cash Flow Statements IAS 41 Agriculture
IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors
IAS 10 Events after the Reporting Period
IAS 11 Construction Contracts*
IAS 12 Income Taxes
- * IAS 11 & IAS 18 are replaced by  IFRS 15. for accounting periods
beginning on or after 1 January 2018.
- * IAS 39 is replaced by  IFRS 9 for accounting periods beginning on or
after 1 January 2018.
- ** IAS 17 is replaced by IFRS 16 for accounting periods beginning on or
after 1 January 2019.

 The Conceptual Framework for Financial Reporting:

- establishes the purpose of financial statements and the major principles lying
behind their preparation. ↓
(is to give information to users (particularly investors and creditors) so that
they can make financial decisions)
↓
(The most useful information would therefore be that which enables the
prediction of future cash flows)

 The purposes of Framework:

To assist:
1. the Board itself when preparing IFRS Standards.
)‫ معايير مستقبلية ومراجعة المعايير الحاليية‬W‫ فى تطوير‬IASB ‫(مساعدة الــ‬
2. national standard -setters when preparing national standards.
)‫ المحلية و تحقيق التوافق بينها وبين المعايير الدولية‬W‫ فى صياغة المعايير‬W‫(مساعدة واضعى المعايير‬
3. preparers of financial statements to apply IFRS Standards and deal
with topics that are not the subject of an IFRS Standard.
)‫ وكيفية التعامل مع القضايا التى لم تتناولها المعايير‬IFRS ‫ معايير‬W‫(مساعدة من يقوم بإعداد القوائم المالية في تطبيق‬
4. auditors to form an opinion on the financial statements.
)‫ الدولية‬W‫(مساعدة المراجعيين في تشكيل رأي حول ما إذا كانت القوائم المالية متطابقة مع المعايير‬
5. To assist users to understand financial statements.
)‫(مساعدة مستخدمي القوائم المالية على فهم وتفسير المعلومات الموجودة بها‬
  Qualitative characteristics – make information useful:
Fundamental characteristics Enhancing characteristics
Relevance Faithful representation o Comparability.
- Predictive Value. - Completeness. o Verifiability.
- Conformity Value. - Neutrality. o Timeliness.
- Materiality. - Free from error. o Understandability.

 the definition of the five main elements of financial

statements:
o statement of financial position: 3 elements:
1. Assets. (Controlled, Past event, Future economic benefit).
Ex:
- $ 10,000 spent by a business to patent its technology.
- $ 40,000 on equity shares in other company. ‫اإلستثمار فى شركات آخري‬
2. Liabilities. (Present Obligation, Past event, Future Settlement-outflow).
Ex:
- $ 15,000 that a retailer expects to have to repay to customers that
return purchased items within the 30-day statutory return period.
3. Equity. (Residual interest in assets less liabilities). E=A-L

o Income statement (Financial Performance): 2 elements:

1. Income (Revenue, Gain).  Accruals concepts
2. Expense (Expense, loss).  Accruals concepts
NOTE: When determining whether an item meets the definition of an asset, liability
or equity, attention should be given to the commercial substance of the item and not
simply its legal form. controlled not ownership, Ex: leases.
‫ المستآجر بتسجيله طوال مدة‬W‫ ويقوم‬، Wً‫ األصل رغم ملكيته قانونيا‬W‫(فى عقود التآجير التمويلي المؤجر بيستبعد‬
)‫العقد ويقوم بحساب اإلهالك له‬

 Accounting standards provide guidance for preparers to deal with the recognition,
measurement, presentation and disclosure requirements for transactions and
events.

 If no IFRS Standard specifically deals with a transaction should follow:

- The requirements and guidance in IFRSs & IFRIC® Interpretations dealing
with similar and related issues.
- The Conceptual Framework.
- The most recent pronouncements from other standard setting bodies that use a
similar conceptual framework to develop accounting standards, other accounting
literature and accepted industry practice to the extent that these do not conflict
with (a) and (b) above.

Questions
1. Are International Financial Reporting Standards recognised in all
financial capital markets in the world?
- International Financial Reporting Standards (IFRS Standards) have achieved
recognition universally as a highly influential set of accounting standards. The
IASB says that 119 countries require the use of IFRS Standards by some companies
and a further 14 allow their use. However, IFRS Standards have not been adopted in
the United States of America (see Module 2 for more details).
2. What are accounting standards and what is the difference between
IAS Standards and IFRS 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.
- Standards issued by the International Accounting Standards Board (IASB,
'the Board') are designated International Financial Reporting Standards (IFRS
Standards). Standards originally issued by the Board of the International
Accounting Standards Committee (1973-2001) continue to be designated
International Accounting Standards (IAS Standards). Both have the same status.

3. What is IOSCO, and what is its link with the IASB?

- The International Organization of Securities Commissions (IOSCO) is the
representative body of the world's securities markets regulators. High quality
financial information is vital to the operation of an efficient capital market, and
differences in the quality of the accounting policies and their enforcement between
countries leads to inefficiencies between markets. IOSCO has been active in
encouraging and promoting the improvement and quality of IFRS Standards for over
ten years.
‫ودة‬WW‫ وتؤدي اإلختالفات في ج‬، ‫(تعد المعلومات المالية عالية الجودة أمرًا حيويًا لتشغيل سوق رأس المال الفعال‬
‫جيع‬CC‫ في تش‬IOSCO ‫ة‬W‫طت منظم‬W‫ نش‬.‫واق‬W‫اءة بين األس‬W‫دم الكف‬W‫السياسات المحاسبية وإنفاذها بين البلدان إلى ع‬
.)‫ ألكثر من عشر سنوات‬IFRS ‫وتعزيز تحسين وجودة معايير‬

4. How does the IASB decide what subjects to add to its agenda?
- Board members, members of the IFRS Advisory Council, national standard-
setters, securities regulators, other organisations and individuals and the IASB
staff are encouraged to submit suggestions for new topics that might be dealt with in
the IASB's standards.

5. Are the IASB’s standards always in line with the Conceptual

Framework?
- Not exactly. The Conceptual Framework was written after some of the
standards. Also, sometimes, practical or political necessity forces the Board to
stray from the framework.
Q: What is the role of the IFRS Interpretations Committee?
The correct answer is C
‫ القضايا المحاسبية التي من المحتمل أن تتلقى أيضًا معاملة متباينة أو غير مقبولة في‬، ‫) للنظر في الوقت المناسب‬
( ‫حالة عدم وجود دليل موثوق‬

Q: Which of the following is not one of the four enhancing qualitative

characteristics?

The correct answer is B

The four enhancing qualitative characteristics are Understandability, Verifiability,
Timeliness and Comparability.

Q: The definition of an asset includes which of the following terms?

1. Control
2. Future economic benefits
3. Ownership
4. Past transaction.

The correct answer is B

 An asset is a resource controlled by the entity as a result of past events and from which
future economic benefits are expected to flow to the entity.

Q: Faithful representation means that financial information represents

the substance of transactions rather than their legal form. Which of the
following demonstrates a situation where the accounting treatment differs
from the legal form of the transaction to ensure faithful representation?

The correct answer is C

The entity that uses the asset does not have legal title to it but accounts for it as a non-
current asset in its statement of financial position.

Q: The Monitoring Board is responsible for:

The correct answer is C

Example 1 – Qualitative characteristics

The IASB’s Conceptual Framework for Financial Reporting identifies characteristics
which make financial information faithfully represent what it purports to represent.
Which of the following are examples of those characteristics?
1. Accruals.
2. Completeness.
3. Going concern.
4. Neutrality.
A (1) and (2)
B (2) and (4)
C (2) and (3)
D (1) and (4)
The correct answer is B – For information to faithfully represent the transaction it
needs to be complete, free from bias and neutral.
Example 1 - Regulatory Framework
Which one of the following is a duty of the IFRS Interpretations Committee?
A.to provide guidance on financial reporting issues not specifically addressed in
IFRSs.
B. to develop and approve IFRSs.
C.to gather views that supplement the normal consultative process.
D.to promote the use and rigorous application of IFRSs.
The correct answer is A

Example 2 – Regulatory bodies

Which one of the following would NOT be regarded as a responsibility of the
IASB?
A. Responsible for all IFRS technical matters.
B. Publish IFRSs.
C. Overall supervisory body of the IFRS organisations.
D. Final approval of interpretations by the IFRS Interpretations Committee.
The correct answer is C

The correct answer is D