The International Accounting Standards Board (IASB) is an independent body of the International Financial Reporting Standards (IFRS) Foundation, which is a non-profit organization for the accounting profession. The standards board is overseen by members of the industry who have expertise in various accounting disciplines, including auditing, reporting, and preparation. The main purpose of the board is the publication, development, and clarification of the IFRS Standards. These standards cover a wide range of accounting issues and are comparable, but not always equivalent, to the generally accepted accounting principles (GAAP) used in the United States.
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Foundation and History
The standards board was officially born on April 1, 2001 as a replacement for the International Accounting Standards Committee (IASC), which was originally founded in 1973. The IFRS Foundation has overseen the IASB since its inception as part of its core mission. The foundation also traces its roots to 1973, although it was known as the International Accounting Standards Committee (IASC) until 2001. Since its founding, the board has continued to create, maintain and promote the IFRS Standards for application in dozens of countries.
Governance and Membership
The foundation has a three-tier system of governance that includes a board of experts, foundation trustees, and a monitoring board of public authorities, according to the IFRS Foundation. The standards board launched with 14 board members, although this number has changed several times since then. Board members come from a variety of accounting backgrounds and the selection process encourages international diversity. Trustees of the IFRS Foundation place members on the board through an open and publicized process.
Setting IFRS Standards
Setting international standards for accounting is the core mission of the International Accounting Standards Board. These standards are broken down into dozens of sections that encompass many types of accounting topics, issues, and activities. This includes over a dozen IFRS sections and roughly 40 International Accounting Standards (IAS). Each section contains standards and principles regarding a particular situation, activity or industry, like guidelines for joint arrangements, standards for leasing, and presentation of financial statements. The standards also include a preface and a section dedicated to conceptual framework for all of the international reporting standards.
The IFRS Standards have gained significant recognition by the international community and are now mandatory for domestic companies in dozens of countries. Canada, Russia, Australia, and the European Union are among the many global entities that have adopted it for national use. While the United States allows foreign companies to report according to IFRS Standards in some situations, domestic companies are required to use the US GAAP instead.
Businesses routinely cross state and national borders in their ventures and are often required to report their finances to multiple authorities. The continued rise of international commerce has only fueled the need for global standards that allow businesses and governments to efficiently and accurately share financial information. Even though the IFRS Standards set by the IASB are not the standard for every country, their widespread recognition and adoption is evidence of a real need for common international accounting standards.