The convergence of the standards boards
For many years accounting standard setting was largely a national process, with the International Accounting Standards Committee "following on behind". Following a series of economic and financial crises in 1998, G7 Finance Ministers and Central Bank Governors committed themselves to endeavour to ensure that private sector institutions in their countries complied with internationally agreed principles, standards and codes of best practice. They called on all countries which participate in global capital markets similarly to commit to comply with these internationally agreed codes and standards.
Once the EU decided that the best way to secure common accounting practices across its domain was to adopt IASs (instead of starting work on European Accounting Standards!) the authority of the Committee's successor body, the International Accounting Standards Board (IASB) was assured, and it is now generally accepted as the leading body. Indeed, an increasing number of countries do not have national accounting standards at all.
However, preparing an up to date and universally acceptable set of common accounting standards for all countries is no small task given the divergence of existing practices around the world and the "trailing" nature of the standards inherited from the Committee. The IASB has a very large and sometimes controversial agenda, requiring the creation of new standards, or the modification or acceptance of old standards, according to whether there are new needs, unsolved problems, fresh perspectives, seemingly irreconcilable differences or existing commonalities.
The IASB's programme includes, for example
- a proposed standard on share based payments, which will require the issue of share options to be treated as expenses
- revised standards on acquisition accounting, that may eliminate merger accounting and replace goodwill amortisation with an impairment test and
- controversial amendments to the "hedge accounting" rules in IAS 39 that have largely delayed its revision.
In order to provide clarity to preparers of accounts facing the EU deadline, the IASB is expected to announce in the Spring of 2004 that further changes to international accounting standards announced thereafter will not have to be implemented prior to 2006.
Meanwhile, within the UK, our own Accounting Standards Board (ASB) is fully supportive of the IASB in its aim to harmonise international financial reporting. To this end it has, for example, published a UK exposure draft of the IASBs share based payment proposals, and also issued a large number of relatively uncontroversial exposure drafts by which it seeks to take the easy steps towards alignment. We expect that all UK companies and LLPs will in time be preparing their accounts in accordance with international standards albeit that private companies may find that they have been allowed a piecemeal transition.
Both of the IASB and ASB websites give comprehensive information on their current projects. Visit them at www.iasb.org.uk and www.asb.org.uk.
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