Introducing the IASB

1. Introducing the IASB • Objectives • Structure • Procedures

2. IASB: A Refocused Objective • Development of a single set of high quality, understandable and enforceable global accounting standards that require high quality, transparent and comparable information in financial statements;… • Bringing about convergence of national accounting standards and International Accounting Standards…

3. IASB’s Organisation Trustees (19) Standards Advisory Council Board (14) Steering Committees & Other Advisors SIC Staff

4. The IASB – Members • Sir David Tweedie – Chair • ‘Liaison’ Responsibilities: • Australia/New Zealand, Canada, France, Germany, Japan, UK and USA • Others: • Public practice (1); Preparers (2); Users (2); Academic (1)

5. Standards Advisory Council • Appointed by the Trustees • Broad-based constituents • Advises the Board and/or the Trustees • Appointments announced in June 2001

6. SAC - Distribution

7. IASB: Interpretations • Standing Interpretations Committee • Appointed by the Trustees • Reports to the Board • IASB has requested that SIC review its role and make suggestions for improvements to mandate and operating procedures

8. IASB: Due Process • Board, SAC and SIC meet in public • IASB will solicit comments via: • Discussion Documents • Exposure Drafts • Draft SIC Interpretations • Public hearings

9. IASB: Achieving Convergence • IASB is to bring about “convergence of national accounting standards and IAS…” • Formal liaison with national standard setters • Sharing technical staff and resources • Coordinating agendas and due process • Regular meetings between IASB and national chairs

10. IASB: Fundamentals for Success • IASB is a ‘global’ standard setter • Independent • Partnership with national standard setters • Not dominated by any regional or professional interest • Accessible

11. IASB: Work Programme 2001 • IASB Agenda likely to feature: • Improvements project • Transition to IAS as a primary basis • Fundamental projects • Leadership projects • Convergence projects

12. IASB Agenda: Priority Projects • Business combinations • Financial instruments - derecognition • Consolidation policy • Insurance contracts • Measurement and impairment • Reporting income and expenses • Share-based payment

13. Global Acceptance • Basel Committee • IOSCO • European Commission • U.S. Securities and Exchange Commission • Canada

14. Basel Committee • Supported IASC Standards • Pledged to continue ‘close dialogue’ • Concerns with two standards: • IAS 30 • currently under revision • IAS 39 • IAS 39 Implementation Guidance has helped

15. IOSCO • Supported the use of IASC Standards “as supplemented where necessary to address outstanding substantive issues at a national or regional level”

16. IOSCO (ii) • Supplemental Treatments: • Reconciliation • Showing the effect of applying different accounting method, in contrast to that applied under IASC Standards • Disclosure • Additional disclosure - either in presentation or in the footnotes

17. IOSCO (iii) • Supplemental Treatments (continued) • Interpretation • IOSCO members may specify a particular alternative provided in an IASC Standard, or a particular interpretation where the IAS is silent or unclear • Waivers • Where a national or regional requirement conflicts with an IAS requirement, a waiver of that requirement may be granted

18. European Commission • Regulation (February 2001) • IAS required in consolidated financial statements of publicly-traded companies by 2005 • US GAAP will no longer be permitted • ‘Endorsement Mechanism’ • Technical and political levels • Will seek to be pro-active and work within IASB’s due process

19. EU – Endorsement Mechanism

20. EU: Use of Fair Value • EU Directives changed to permit use of fair value accounting for: • financial assets; and • derivative financial instruments generally • Extends to banks and other financial institutions

21. U.S. SEC • Concept Release (February 2000) • Asked questions about IAS and international environment generally • Are IAS: • Sufficiently comprehensive • Of sufficient high quality • Capable of rigorous application and interpretation • Supporting reporting infrastructure

22. U.S. SEC (ii) • Staff have concluded analysis of the comments received • Opinion was heavily divided • Non-US respondents favoured use of IASC Standards without reconciliation • US respondents were generally opposed • Next stage in rule-making has not been announced

23. U.S. SEC (iii) • Current situation – either: • Prepare full U.S. GAAP financial statements; or • Prepare full IAS financial statements and provide a reconciliation to U.S. GAAP

24. Canada • Discussion Paper (March 2001) • Should accounting standards other than Canadian GAAP (i.e., US GAAP or IAS) be permitted in Canada? • Implementation issues: • Professional capacity, comparability, statutes

25. Enforcement • IASB has no power to enforce compliance • Auditing profession • IFAC, IFAD, major international accounting firms • Regulators and governments • IOSCO (securities markets) • Basel Committee (banks) • EU • Stock exchanges