Achievements of International Accounting Standards Board (IASB)

In this article we will discuss about the achievements of International Accounting Standards Board (IASB).

The IASB started its activities in 2001 and immediately took a number of projects left in the pipeline from its predecessor. To promote convergence of accounting standards worldwide, the International Accounting Standards Board (IASB) is committed to developing, in the public interest, a single set of high quality, understandable and enforceable global accounting standards that require transparent and comparable information in general purpose financial statements.


The IASB cooperates with national accounting standard setters to achieve convergence in accounting standards around the world. In this direction, the IASB has issued a Draft Memorandum of Understanding on the role of Accounting Standard-setters and their relationship with the IASB.

The document is intended to set out a shared vision of the respective roles of national and regional standard-setters and of the IASB in working towards a single set of high quality, understandable and enforceable global accounting standards. It is particularly relevant to standard-setters in jurisdictions that have adopted or converged with IFRSs, or are in the process of adopting or converging with IFRSs.

This document also deals with responsibilities of the national standard-setters towards convergence of International Financial Reporting Standards, their use in establishing national standards, issuance of interpretations, etc. The Draft Memorandum proposes to lay down a large number of responsibilities on the standard-setters around the world to promote convergence.

For Example:

(i) Accounting standard-setters should take the prime responsibility for identifying and dealing with domestic regulatory barriers to adopting or converging with IFRSs;

(ii) Accounting standard-setters should encourage national and regional regulators to participate in international convergence efforts in their own regulatory field where this would help to facilitate financial reporting convergence; and


(iii) Accounting standard setters should monitor the implementation of IFRSs in their jurisdictions, identify issues that might require interpretation, and request the International Financial Reporting Interpretations Committee (IFRIC) or the IASB to address the issue.

The following observations have been made by Ernst and Young about the achievements of IASB in its survey ‘Apply International Accounting Standards’, conducted in 2005:

The standards issued by the IASC in its last few years, and the direction that the IASB has taken in its first few years, allow the following observations to be made about trends in IFRSs:

i. The recent IFRSs reflect greater use of fair value in measuring transactions and a movement away from the traditional historical-cost basis of measurement. While fair values are somewhat most subjective than a price paid in a past transaction, current values are usually more relevant for economic decision making than past costs.


Examples of the use of fair values for measuring profits in recent IFRSs include:

a. Financial instruments (required for trading investments and an option to measure all other financial assets and financial liabilities at fair value)

b. Assets held for disposal

c. Impairment recognition (write-down to fair values)


d. Prohibition of pooling of interests (the required purchase method recognises the fair values of assets and liabilities acquired in a business combination)

e. Exchanges of similar items of property, plant and equipment

f. Changes in fair values of investments in real estate

g. Changes in fair values of agricultural crops, orchards, forests, and livestock prior to, harvesting.

ii. In the past, companies were able to keep certain obligations and expenses off their books because no IAS required the company to recognise those obligations and expenses. Sometimes, investors found out about the obligations only when a problem developed.

Recent accounting standards have moved off-balance-sheet items onto the balance sheet. In particular:

a. Special purpose entities

b. Derivatives

c. Share-based payment.

iii. Recent IASs have substantially expanded financial statement disclosures, especially about judgements, plans and assumptions:

a. Greater disclosure about accounting policy choices made by the company

b. Judgements made in applying accounting policies

c. Disclosure of key sources of estimation uncertainties in financial statement amounts

d. Risk-management policies

e. Sensitivity analyses.

iv. Historically, many accounting standards allowed companies to choose between two or more acceptable methods of accounting for the same transaction. Little by little, the IASC and the IASB have eliminated these accounting choices, and the LASB’s current projects will eliminate many more.

v. Convergence with US GAAP.

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