ACBP6221 LU1
ACBP6221 LU1 – IFRS and Conceptual
framework
1.1 Introduction
IFRS - International Financial Reporting Standards
= Standards, interpretations and the framework adopted and developed by the
International Accounting Standards Board (IASB)
In SA, companies used to prepare their financial statements in accordance with:
- IFRS or IAS (international accounting standards)
- South African Generally Accepted Accounting Practice (SA GAAP) – only in case of
small/med companies
SA GAAP was withdrawn as it was very similar to IFRS – now small and med entities must
prepare their financial statements in accordance with IFRS.
- SA GAAP was rule-based, industry-specific rules and guidelines
- IFRS is principle-based, principles that require judgment and interpretation to
determine how they are to be applied in a given situation
IFRS is becoming the global standard for preparation of company financial statements.
1.2 The need for a regulatory framework – LO1
Regulatory frameworks (accounting standards) provide a foundation of how to translate an
entity’s activities into a set of financial statements on which users can base their economic
and investment decisions.
Users of financial statements
- Investors - Financial - Suppliers
- Lenders institutions - Customers
- Government - Employees
By asking people to apply standards like IFRS, it ensures that the financial info provided to
the stakeholders meets their info needs and is relevant, reliable, comparable and
understandable.
1.3 International harmonization of accounting standards
Different countries have their own accounting rules based on local needs. So, the same
transaction might be recorded in different ways depending on the country.
Transactions that make up profit or loss may be accounted for differently under US GAAP
when compared to German GAAP, this challenges the comparability of financial statements.
1
,ACBP6221 LU1
1.4 The standard setters – LO2
Standard setters = IFRS foundation + its subsidiary bodies
- responsible for development, implementation and enforcement of IFRSs.
- not-for-profit, public interest org which ensures that the independence of the standard-
setting process is preserved
Mission of the standard setters:
- Improve transparency by making financial information more comparable and
reliable, helping investors make informed decisions.
- Strengthen accountability by reducing the information gap between shareholders
and management, ensuring better oversight.
- Boost economic efficiency by helping investors assess risks and opportunities
worldwide, leading to better capital allocation.
Standard setters’ org structure consists of:
the IFRS Foundation Monitoring Board
the IFRS Foundation Trustees
the IFRS Foundation
the International Accounting Standards
Board (IASB)
the IFRS Advisory Council
the IFRS Interpretations Committee
1- Org structure of the standard setters
1.4.1 IFRS Foundation Monitoring Board
Created in Jan 2009.
The monitoring board provides a formal link btwn the trustees and public authorities w
purpose of enhancing public accountability of the IFRS foundation.
The Monitoring board consists of capital market authorities responsible for setting the form
and content of financial reporting.
Primary responsibilities of the monitoring board include:
- Ensuring that the trustees discharge their duties in accordance w the IFRS
foundation constitution
- Approving the appointment and reappointment of trustees
The monitoring board meets the trustees at least once a year.
2
, ACBP6221 LU1
1.4.2 IFRS Foundation Trustees
Trustees oversee the activities of the IFRS foundation and IASB.
There are 22 members (Asia/Oceania region (6), Europe (6), Americas (6), Africa (1) and
those appointed from any area (3).
Responsible for:
- Appointing members for the IASB, IFRS interpretations committee and the IFRS
advisory council
- Establishing and amending operating procedures, consultative arrangements and
due process for the IASB, the Interpretations Committee and the Advisory
Council.
- Reviewing the IASB strategy annually and assessing its effectiveness
- Ensuring the financing of the IFRS Foundation and approving annual budgets.
- Safeguarding the independence of the IASB.
1.4.3 IFRS Foundation
IFRS foundation is an independent, not-for-profit private sector org working in the public
interest.
Principle objectives of IFRS Foundation:
- Develop a single set of high quality, understandable, enforceable and globally
accepted IFRSs through the IASB.
- Promote the use and rigorous application of those standards
- Take account of the financial reporting needs of emerging economies, including small
and medium-sized entities (SMEs).
- Promote and facilitate the adoption of IFRSs through the convergence of national
accounting standards (international harmonisation).
1.4.4 The international Accounting Standards Boards (IASB)
= independent, standard-setting body of the IFRS foundation.
14 board members, all over the world, all should be experts in standard-setting, preparing,
auditing and using financial statements.
IASB is responsible for:
- development and publication of IFRSs
- IFRS for SMEs
- approving interpretations of IFRS developed by the IFRS Interpretations committee
IASB meetings are held at least once a month.
IASB’s voting procedure, which formalises their decision:
- Simple majority in favour of a decision
- 9 votes in favour of a decision
3
ACBP6221 LU1 – IFRS and Conceptual
framework
1.1 Introduction
IFRS - International Financial Reporting Standards
= Standards, interpretations and the framework adopted and developed by the
International Accounting Standards Board (IASB)
In SA, companies used to prepare their financial statements in accordance with:
- IFRS or IAS (international accounting standards)
- South African Generally Accepted Accounting Practice (SA GAAP) – only in case of
small/med companies
SA GAAP was withdrawn as it was very similar to IFRS – now small and med entities must
prepare their financial statements in accordance with IFRS.
- SA GAAP was rule-based, industry-specific rules and guidelines
- IFRS is principle-based, principles that require judgment and interpretation to
determine how they are to be applied in a given situation
IFRS is becoming the global standard for preparation of company financial statements.
1.2 The need for a regulatory framework – LO1
Regulatory frameworks (accounting standards) provide a foundation of how to translate an
entity’s activities into a set of financial statements on which users can base their economic
and investment decisions.
Users of financial statements
- Investors - Financial - Suppliers
- Lenders institutions - Customers
- Government - Employees
By asking people to apply standards like IFRS, it ensures that the financial info provided to
the stakeholders meets their info needs and is relevant, reliable, comparable and
understandable.
1.3 International harmonization of accounting standards
Different countries have their own accounting rules based on local needs. So, the same
transaction might be recorded in different ways depending on the country.
Transactions that make up profit or loss may be accounted for differently under US GAAP
when compared to German GAAP, this challenges the comparability of financial statements.
1
,ACBP6221 LU1
1.4 The standard setters – LO2
Standard setters = IFRS foundation + its subsidiary bodies
- responsible for development, implementation and enforcement of IFRSs.
- not-for-profit, public interest org which ensures that the independence of the standard-
setting process is preserved
Mission of the standard setters:
- Improve transparency by making financial information more comparable and
reliable, helping investors make informed decisions.
- Strengthen accountability by reducing the information gap between shareholders
and management, ensuring better oversight.
- Boost economic efficiency by helping investors assess risks and opportunities
worldwide, leading to better capital allocation.
Standard setters’ org structure consists of:
the IFRS Foundation Monitoring Board
the IFRS Foundation Trustees
the IFRS Foundation
the International Accounting Standards
Board (IASB)
the IFRS Advisory Council
the IFRS Interpretations Committee
1- Org structure of the standard setters
1.4.1 IFRS Foundation Monitoring Board
Created in Jan 2009.
The monitoring board provides a formal link btwn the trustees and public authorities w
purpose of enhancing public accountability of the IFRS foundation.
The Monitoring board consists of capital market authorities responsible for setting the form
and content of financial reporting.
Primary responsibilities of the monitoring board include:
- Ensuring that the trustees discharge their duties in accordance w the IFRS
foundation constitution
- Approving the appointment and reappointment of trustees
The monitoring board meets the trustees at least once a year.
2
, ACBP6221 LU1
1.4.2 IFRS Foundation Trustees
Trustees oversee the activities of the IFRS foundation and IASB.
There are 22 members (Asia/Oceania region (6), Europe (6), Americas (6), Africa (1) and
those appointed from any area (3).
Responsible for:
- Appointing members for the IASB, IFRS interpretations committee and the IFRS
advisory council
- Establishing and amending operating procedures, consultative arrangements and
due process for the IASB, the Interpretations Committee and the Advisory
Council.
- Reviewing the IASB strategy annually and assessing its effectiveness
- Ensuring the financing of the IFRS Foundation and approving annual budgets.
- Safeguarding the independence of the IASB.
1.4.3 IFRS Foundation
IFRS foundation is an independent, not-for-profit private sector org working in the public
interest.
Principle objectives of IFRS Foundation:
- Develop a single set of high quality, understandable, enforceable and globally
accepted IFRSs through the IASB.
- Promote the use and rigorous application of those standards
- Take account of the financial reporting needs of emerging economies, including small
and medium-sized entities (SMEs).
- Promote and facilitate the adoption of IFRSs through the convergence of national
accounting standards (international harmonisation).
1.4.4 The international Accounting Standards Boards (IASB)
= independent, standard-setting body of the IFRS foundation.
14 board members, all over the world, all should be experts in standard-setting, preparing,
auditing and using financial statements.
IASB is responsible for:
- development and publication of IFRSs
- IFRS for SMEs
- approving interpretations of IFRS developed by the IFRS Interpretations committee
IASB meetings are held at least once a month.
IASB’s voting procedure, which formalises their decision:
- Simple majority in favour of a decision
- 9 votes in favour of a decision
3
