Introduction to IASB
International Accounting Standard Board (IASB) is an independent, private-sector body (previously known as IASC), based in London.
IASB is committed to developing and approving a single set of global accounting standards (that is known as International Financial Reporting Standards), which require transparent and comparable information for the general purpose of financial statements.
In this article, you will learn more about the formation of IASB, the purposes of IASB (aims of IASB) and its functions of IASB.
The IASB arrogated its privately-funded accounting standard-setting responsibility for the establishment of a single set of global accounting standards (i.e. IFRS) w.e.f. 1st April 2001 From IASC, adopting all International Accounting Standards (IASs) and special interpretation committee in existence.
The Board Members of IASB come from nine countries and possess diverse knowledge and skills. Each member has one vote on technical and other matters. IASB comprises more than 100 worldwide accounting and financial organisations from 80+ countries. The objectives of IASB include:
- Increasing harmonisation of accounting standards and disclosures to meet the needs of the global market.
- Providing an accounting basis for underdeveloped or newly industrialised to follow as the accounting profession emerges in those countries.
- Increasing the compatibility of domestic and international accounting requirements.
The IASB provides support and cooperation to the European Union and the International Organisation of Security Commission. The purposes of the conceptual framework of IASB are as:
- Assist the board of IASB in the development of future International Financial Reporting Standard (IFRS) and the review of its existing IFRSs;
- Help the board of directors in promoting the concept harmonisation of regulations, Accounting Standard, procedures and methods relating to the presentation of financial statements by reducing the number of alternative accounting treatments permitted by IFRS;
- Helping the National Standard-setting committees in the development of the National Standards;
- Support the financial statements and prepares to apply IFRS while preparing the financial statements;
- Facilitate the auditors to provide an opinion relating to financial statements and whether IFRS guideline has complied while preparing the financial statements or not;
- Aid the users (investors, creditors, suppliers, employees, etc) of the financial statements in interpreting the information contained in the financial statements prepared in compliance with IFRSs as well as provide those who are interested in the work of IASB about its approach to the formulations of IFRSs.
Functions of IASB or Roles of IASB
There are several functions of IASB. But most prominent functions of IASB or roles of IASB are as discussed below:
Development and Creation of Global Accounting Standards
The primary objective of the IASB is to develop a single set of high-quality, understandable and enforcement accounting standards that require high-quality, transparent and comparable information in financial statements as well as in the other financial reporting to help users of the financial statements to participate in the world’s capital market and to make economic decisions.
Enforcement of Standards
It is one of the most prominent functions of IASB. The IASB committee has the power to enforce the organisation to comply with the accounting standard that promotes the use and rigorous applications of those standards.
Systematic and in-depth research on enterprise
The function of the International Accounting Standard Board does in-depth research on the special needs of small and medium-sized enterprises and emerging economies in fulfilling the objective of harmonisation of an accounting standard.
Active Convergence of Accounting Standards
The objectives of the IASB bring about the convergence of the National accounting standards and IAS and IFRS to high quality, understandable and enforcement of Accounting Standards that require high quality and transparent information in the financial statements.
The goal of IASB is to make significant progress by identifying areas such as
- Conceptual framework of IFRSs;
- Fair value measurement;
- Financial statement presentations;
- Post-employment benefits;
- Revenue recognition;
- Liabilities and equities;
- Financial instrument;
- Intangible assets and lease.
We conclude that the primary functions of IASB are more focused, on considering the changing global environment, developing and maintaining the universal accounting standard for the promotion of its use and rigorous application of these accounting standards by the financial statements prepared.
Several countries, including Brazil, Germany, India, Jamaica, Kenya etc. have taken a variety of approaches to implementing the IFRS with the main objective of enhancing national financial reporting practices in alignment with global standards.
There are some challenges too in the way of implementing IFRSs. Lack of coherence in regulatory frameworks, and insufficient legal backing of IFRS as reporting standard in a country; are some practical challenges that are still posing as barriers to IFRS as a global standard.
I hope this article helps you with understanding the functions of IASB.