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Convergence of Accounting Standards and the IASB Process

Convergence of Accounting Standards and the IASB Process. Gilbert Gelard, Member of IASB Bucharest, May 2003. Harmonisation? No Convergence? Yes. Harmonisation. European Directives of the 1970’s aimed at harmonisation Did not succeed

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Convergence of Accounting Standards and the IASB Process

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  1. Convergence of Accounting Standards and the IASB Process Gilbert Gelard, Member of IASB Bucharest, May 2003

  2. Harmonisation? No • Convergence? Yes

  3. Harmonisation European Directives of the 1970’s aimed at harmonisation Did not succeed Hence, choice of a single set of standards for Europe (2002 – 2005) to ensure a level playing field for listed companies

  4. Why harmonisation failed • A bottom-up approach • No conceptual basis • No real desire to move from one’s habits • Too much linkage with taxation and law Little progress, uneven playing field

  5. Convergence Aim: One single set of standards Means: Partnership between IASB and (key) National Standard Setters through: • Joint projects • Monitoring • Enhancement of communication

  6. Requirement for convergence of accounting standards • Sharing a common conceptual framework • Working under effective partnership(s) • Choosing the best alternative, whatever its origin is • Mechanism for consistent interpretations Consistent accounting standards

  7. Requirement for consistency and convergence in practice • Having compulsory consistent accounting standards and • A strong enforcement, including strong • Regulation (law, market, regulation) • Auditing (competence, independence, oversight) • Governance Standards can achieve nothing by themselves. Enforcement is the key

  8. IASC Foundation & International Accounting Standards Board The Organisation

  9. IASC Foundation Structure IASC Foundation (19 Trustees) Standards Advisory Council IFRIC Interpretations Committee IASB 12 Full time 2 Part time Advisory Groups 21 Tech.Staff

  10. IASC Foundation Trustees

  11. IASB Composition

  12. Logistics • Monthly IASB meetings • Regular meetings with 8 liaison standard setters • SAC meetings: 3 times per year • IFRIC meetings: 6 times per year

  13. FASB UK Canada France Australia Germany NZ Japan Liaison Standard-setters

  14. Partnering Arrangements • Bi-lateral between IASB and 1 of liaison standard-setters • Lead, support and monitoring roles • Commitment to accept outputs

  15. Process • Full due processes, as applied by national standard-setters • Partnering arrangements with liaison standard-setters

  16. IASB outputs for the first two years up to May 2003 Exposure Drafts • Improvements to twelve standards • Amendments to IAS32 – IAS39 • First time adoption ED1 • Share based payments ED2 • Business Combinations* ED3 * with consequential amendments to Impairment and to Intangible Assets

  17. IASB Expected out put up to March 2004* Standards* • IFRS 1: First time adoption • Business combinations I • Share based payments • Insurance contracts (phase I) • Improvements to twelve standards • Amendments to IAS32 – IAS39 Exposure Drafts • Performance reporting • Business combinations II • Deposit taking, lending and securities activities • With a view to implementation in Europe as of January 2005

  18. SME’s and Emerging Markets • Option to member states to extend IFRS’s beyond the consolidated accounts of limited companies • The IASB has recently formed a group to deal with the very difficult issue of SME’s. Very preliminary stage

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