International GAAP 2016: Generally Accepted Accounting Principles Under International Financial Reporting Standards
The IASB reported earlier this year that 116 of the 140 jurisdictions they have researched require the use of IFRS for all or most listed companies and financial institutions, and a further 12 permit the use of IFRS. IFRS is clearly maturing and is now used in more countries than ever before. While there are some very large economies – China, India, Japan and the United States – that do not require IFRS for all or most of their listed companies, considerable progress has been made in these and other countries to move towards IFRS or to converge with IFRS. Although convergence between IFRS and US GAAP is no longer a primary objective of the IASB, there is a broad-based appreciation that companies around the world are best served by keeping the differences between IFRS and US GAAP to a minimum.
There have been a number of noteworthy developments regarding the governance of IFRS in the past year. In April 2015, the IFRS Foundation and the IASB presented their new mission statement, which is ‘to develop International Financial Reporting Standards that bring transparency, accountability and efficiency to financial markets around the world. Our work serves the public interest by fostering trust, growth and long-term financial stability in the global economy.’ The mission statement rightly puts accounting standard setting in its broader context of supporting the public interest and development of the global economy.
In July 2015, the trustees of the IFRS Foundation issued a request for views on the structure and effectiveness of the organisation. There have already been five reviews dealing with the constitution, strategy or governance of the IFRS Foundation. This is considerably more than for comparable international organisations and illustrates the fine balance that the IFRS Foundation needs to strike between its organisation as a private sector body and its public interest mission.
The existing three-tier model of the IASB, the Trustees and the Monitoring Board aims to achieve an appropriate balance between independence and accountability. Though it is structured as a private sector body, the IASB’s increasing commitments to public authorities – for example, its membership of the Financial Stability Board, its link to the Monitoring Board, and memoranda of understanding with IOSCO and ESMA – have enhanced its legitimacy as a global standard setter. Although the three-tier structure was broadly supported in previous reviews of the IFRS Foundation, the Trustees are seeking views on the functioning of the structure and suggestions in the spirit of continuous improvement. In our view, the IFRS Foundation will need to continue to demonstrate to public authorities that it is able to operate an independent, yet responsive, standard-setting process within a framework of public accountability.
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