The need for a regulatory framework

Regulation of accounting information is aimed at ensuring that users of financial

statements receive a minimum amount of information that will enable them to make
meaningful decisions regarding their interest in a reporting entity. A regulatory
framework is required to ensure that relevant and reliable financial reporting is achieved
to meet the needs of shareholders and other users.

There are a number of reasons why the harmonisation of accounting standards would
be beneficial. Businesses operate on a global scale and investors make investment
decisions on a worldwide basis. There is thus a need for financial information to be
presented on a consistent basis.

The advantages of harmonisation:

I Multinational entities
(i) Access to international finance is easier as financial information is more
understandable if it is prepared on a consistent basis
(ii) In a business that operates in several countries, the preparation of financial
information is easier as it would all be prepared on the same basis
(iii) There is greater efficiency in accounting departments
(iv) Consolidation of financial statements is easier.

II Investors – If investors wish to make decisions based on the worldwide availability of

investments, then better comparisons between entities are required. Harmonisation
assists this process, as financial information would be consistent between different
entities from different regions.

III Tax authorities – Tax liabilities of investors should be easier to calculate.

IV Large international accounting firms – Accounting firms would benefit as accounting

and auditing is easier if similar accounting practices exist on a global basis.

IFRS FOUNDATION
The IFRS Foundation is a not-for-profit, public interest organisation established to develop a single set of
high-quality, understandable, enforceable and globally accepted accounting standards—IFRS Standards
—and to promote and facilitate adoption of the standards.

IFRS Standards are set by the IFRS Foundation’s standard-setting body, the International Accounting
Standards Board.

The IFRS Foundation's three-tier structure

The IFRS Foundation has a three-tier governance structure, based on an independent standard-setting
Board of experts (International Accounting Standards Board), governed and overseen by Trustees from
around the world (IFRS Foundation Trustees) who in turn are accountable to a monitoring board of
public authorities (IFRS Foundation Monitoring Board).
The IFRS Advisory Council provides advice and counsel to the Trustees and the Board, whilst the Board
also consults extensively with a range of other standing advisory bodies and consultative groups.

Monitoring Board
The Monitoring Board is a group of capital market authorities and provides a formal link between the
Trustees and public authorities in order to enhance the public accountability of the IFRS Foundation

Trustees of the IFRS Foundation

The Trustees of the IFRS Foundation are responsible for the governance and oversight of the
International Accounting Standards Board, including the Constitution and due process for the
development of the accounting standards

International Accounting Standards Board

The International Accounting Standards Board (Board) is the independent standard-setting body of the
IFRS Foundation

IFRS Interpretations Committee

The interpretative body of the International Accounting Standards Board (Board), which works with the
Board in supporting the application of IFRS Standards.

About the IFRS Advisory Council (Advisory Council)

The Advisory Council is the formal advisory body to the International Accounting Standards Board
(Board) and the Trustees of the IFRS Foundation. It consists of a wide range of representatives,
comprising individuals and organisations with an interest in international financial reporting.

The focus of the Advisory Council is to provide strategic support and advice to the IFRS Foundation, and
it meets in London at least two times a year for a period of two days.

The Standard Setting Process - IFRS

The process for the development of a standard involves the following steps

1. Setting the Agenda

• To help the IASB in considering its future agenda, its staff are asked to identify, review and raise issues
that might warrant the IASB’s attention. • New issues may also arise from a change in the IASB’s
conceptual framework. • In addition, the IASB raises and discusses potential agenda items in the light of
comments from other standard-setters and other interested parties, the IFRS Advisory Council and the
IFRS Interpretations Committee, and staff research and other recommendations. • The IASB receives
requests from constituents to interpret, review or amend existing publications. The staff considers all
such requests, summarize major or common issues raised, and present them to the IASB from time to
time as candidates for when the IASB is next considering its agenda.
2. Project planning

• When adding an item to its active agenda, the IASB also decides whether to: • conduct the project
alone, • or jointly with another standard-setter. • Similar due process is followed under both
approaches. • After considering the nature of the issues and the level of interest among constituents,
the IASB may establish a working group at this stage. • A team is selected for the project by the two
most senior members of the technical staff: – The Director of Technical Activities; – and The Director of
Research. • The project manager draws up a project plan under the supervision of those Directors. • The
team may also include members of staff from other accounting standard-setters, as deemed appropriate
by the IASB.

3. Development and Publication of Discussion Paper

• Although a discussion paper is not mandatory, the IASB normally publishes it as its first publication on
any major new topic to explain the issue and solicit early comment from constituents. • If the IASB
decides to omit this step, it will state why. • Typically, a discussion paper includes: – 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.

4. Development and publication of an exposure draft

• Publication of an exposure draft is a mandatory step in due process. Irrespective of whether the IASB
has published a discussion paper, an exposure draft is the IASB’s main vehicle for consulting the public. •
Unlike a discussion paper, an exposure draft sets out a specific proposal in the form of a proposed
standard (or amendment to an existing standard) • The development of an exposure draft begins with
the IASB considering: – issues on the basis of staff research and – Recommendations; comments
received on any discussion paper; and suggestions made by the IFRS Advisory Council, working groups
and accounting standard-setters, and arising from public education sessions. • After resolving issues at
its meetings, the IASB instructs the staff to draft the exposure draft. When the draft has been
completed, and the IASB has balloted on it, the IASB publishes it for public comment.

5. Development and publication of an IFRS standard

The development of an IFRS is carried out during IASB meetings, when the IASB considers the comments
received on the exposure draft, the IASB considers whether it should expose its revised proposals for
public comment, for example by publishing a second exposure draft. • In considering the need for re-
exposure, the IASB: – identifies substantial issues that emerged during the comment period on the
exposure draft that it had not previously considered – assesses the evidence that it has considered –
evaluates whether it has sufficiently understood the issues and actively sought the views of constituents
– considers whether the various viewpoints were aired in the exposure draft and adequately discussed
and reviewed in the basis for conclusions.
6. Procedures after an IFRS is issued

• After an IFRS is issued, the staff and the IASB members hold regular meetings with interested parties,
including other standard-setting bodies, to help understand unanticipated issues related to the practical
implementation and potential impact of its proposals. • The IFRS Foundation also fosters educational
activities to ensure consistency in the application of IFRSs. • After a suitable time, the IASB may consider
initiating studies in the light of: – its review of the IFRS’s application, – changes in the financial reporting
environment and regulatory requirements, and – comments by the IFRS Advisory Council, the IFRS
Interpretations Committee, standard-setters and constituents about the quality of the IFRS. • Those
studies may result in items being added to the IASB’s agenda and a post implementation review of the
standard after a year or two of operation