The International Financial Reporting Standards is an accounting system that provides financial reporting guidelines for entities around the world. It includes specific standards on topics like income, cash flow, and investments.
There are some common challenges when dealing with the IFRS: for example, it is ambiguous about how to account for leases. One of the main jobs of an IFRS consultant is to help clients determine whether they are ready to file in accordance with IFRS or need more time or training. This task is done either before or after the client’s audit (if one happens).
When accounting is done in accordance with the IFRS, all transactions are recorded on the same basis. This may result in lower income taxes, especially since many countries have a tax system that is based on revenues rather than profits.
There are other issues that arise when accounting is done in accordance with IFRS, such as double-accounting of legal entities, which can be problematic.
The International Accounting Standards Board (IASB) is the organization that creates the IFRS. The IASB is split into two groups: the Technical Advisory Group and the Standing Committee. These groups have members from many different countries, including Canada, US, China, France, Germany, and Britain. The most important work done by these groups involves establishing the new standards created by IASB.
The IASB was formed in 2001 following the merger of IASC and ISA boards (see below). It also has a technical advisory group that provides advice on new standards as they are being formed. It also establishes standard-setting principles to be used when developing new standards or modifying existing ones.
The IASB is headed by the Chair of the Board, who is elected for a one-year term and has the power to appoint officers. The IASB consists of:
The role of the IASB technical committee is to provide advice (on issues such as accounting standards, regulatory reform) when called upon by the Chairman. It also looks at other matters arising as a result of work done by IASB committees that report to it. The technical committee also provides guidance on matters relating to IFRSs in areas such as standard setters and auditors. It makes recommendations to the Board on issues such as:
The role of the IASB secretariat is to carry out administrative tasks such as:
The secretariat also handles legal, financial and human resource matters.
In 1947, many countries started working on standardizing accounting between several nations. They created two major organizations: IASC (International Accounting Standards Committee) and ISA (International Accounting Standards Association). until 2001 when these two organizations merged to create the current IASB.
The merger of IASC and ISA occured because of members of both organizations growing concern about their conflicting visions for accounting standards in light of the convergence towards a global economy.