Setting of standards
The International Accounting Standards Board is charged with the responsibility of setting accounting standards. The board comes up with and publishes the International Financial Reporting Standards (IFRS). It also develops IFRS for SMEs and approves the explanations developed by the IFRS interpretation committee. The board uses a participatory approach in developing these standards. When using this approach, stakeholders across the globe are engaged in the process. The stakeholders comprise of interested individuals and other entities. The process of setting standards follows six steps. The first step is setting the agenda. At this stage, the board comes up with the work plan. In doing this, the board takes into account the resource constraints, quality of standards to be developed, increasing convergence, and relevance of the standard to the users. The second step entails planning the project. In this stage, the board determines on whether to execute the project on their own or jointly. Further, a consultative group can also be formed in this stage. The development and publication of a discussion paper come in the third stage. However, the discussion paper is not mandatory. It gives information on the broad’s synopsis of the issue, probable ways of addressing the subject, the initial views of the authors, and provides an invitation to comment. The fourth step is the development and publication of the exposure draft. The board uses exposure draft to consult the public. The draft gives a specific proposal of the standard. The fourth stage is the development and publication of an International Financial Reporting Standard (IFRS). Once the board is satisfied with the outcome of the previous stage, then the IFRS is established. The final step is a regular review of the standard. The aim of this stage is to address unexpected issues that relate to implementation of the standard. Thus, it can be concluded that the board follows an open and clear approach in setting the standards as is the case of the Financial Accounting Standard Board (FASB). Besides, it publishes all the documentations that relate to the process followed in setting up the standards.
Members of International Accouting and Standards Board (IASB)
The constitution states that the board shall comprise of fourteen members. However, the number was expected to increase to sixteen as from 1st July, 2012 (IFRS 9). At the moment, the board is made up of 14 members. The chairman is Hans Hoogervorst from the Netherlands. Ian Mackintosh is the vice chairman and he is from New Zealand. The other members are Stephen Cooper from London, Philippe Danjou from Paris, Martin Edelmann from Germany, Patrick Finnegan from the United States, Amaro Luiz de Oliveira Gomes from Brazil, Gary Kabureck from the United States, Suzzanne Llyod from Australia, Takatsugu Ochi from Japan, Darrel Scott from South Africa, Chungwoo Suh from Korea, Mary Tokar from the United States, and Wei Guo Zhang from China. The board members are appointed for a period of 5 years. This can be renewed further for 3 years. The appointment process does not take less than four weeks.
Work plan
A review of the staff report on IFRS that was released by the staff members of the Securities and Exchange Commission (SEC) in July 2012 shows that the process of convergence of the US GAAP and IFRS is still on going. The staff report indicates that the convergence activities that are still ongoing have a potential of significantly affecting accounting for leases, financial instrument, and revenue among others. Further, the report indicates that the impact of enforcing compliance with the standard requirements in the US financial reporting system will remain the same regardless of whether they are integrated in IFRS or not (Staff of the U.S. Securities and Exchange Commission 32). In light of these findings, the SEC should continue to allow foreign registrants to use IFRS for their financial statements and disclosures instead of changing to the US GAAP. This answer is based on the finding reported in the enforcement and compliance section (Staff of the U.S. Securities and Exchange Commission 32). The report further indicates that the approach of incorporation will help reduce the concerns that may arise during implementation.
Supplemental information
The idea of allowing the US companies to voluntarily provide supplemental IFRS information was welcomed by a number of players in the industry. The SEC should allow the US and other foreign companies to use IFRS. This move will retain the primacy of the US GAAP and allow issuers in the US to provide IFRS on a voluntary basis. Further, this move will foster the process of convergence. However, when the element of inventory is considered, most companies will find it costly to prepare the financial statements using both the US GAAP and IFRS. This idea can only be embraced by companies that are already preparing their statements using these two standards. This suggestion will mostly benefit the users of financial statements, especially investors because it enhances comparability. The cost in this suggestion will be felt by companies and shareholders in terms of reduced profitability. The response is supported by the section on ongoing role of the FASB in the staff report (Staff of the U.S. Securities and Exchange Commission 80).
References
IFRS 2015, About IFRS foundation and the IASB. Web. 2015.
Staff of the U.S. Securities and Exchange Commission 2012, Work plan for the consideration of incorporating international financial reporting standards into the financial reporting system for U.S. issuers. PDF. 2015. Web.