Chapter 4: The Regulatory Environment

Question 1

Why do we need regulation?

Answer 1

Consistency

Confidence in financial information

Question 2

What are the elements in the regulatory environment?

Answer 2

• Local law
• Local accounting standards
• International accounting standards
• Conceptual frameworks e.g., Statement of Principles in the UK, IASB’s Conceptual Framework
• Requirements of international bodies e.g., EU, IOSCO

Question 3

What are the responsibilities of the IFRS Foundation?

Answer 3

• Oversees IFRS Interpretations / IASB / IFRS Advisory Council
• Appointing the members of the IASB, the International Financial Reporting
• Interpretations Committee and IFRS Advisory Council
• Reviewing annually the strategy of the IASB and its effectiveness
• Approving annually the budget and determining the funding of the IASB
• Reviewing broad strategic issues affecting accounting standards
• Promoting the IASB and its work and the rigorous application of international accounting standards
• Establishing and amending operating procedures for the IASB, IFRS, Interpretations Committee and IFRS Advisory Council

Question 4

What are the responsibilities of the International Accounting Standards Board?

Answer 4

Responsible for developing international accounting standards, now referred to as IFRS Standards
All members are appointed for a term of 5 years, renewable once.

Has complete responsibility for all IASB technical matters, including the preparation and publication of IFRS Standards, Exposure Drafts, withdrawal of IFRS Standards and final interpretations by the IFRS Interpretations Committee

Question 5

What are the responsibilities of the IFRS Advisory Council?

Answer 5

Give advice to the IASB on agenda decisions and priorities in its work

To inform the IASB of the views of organizations and individuals on the Council on major standard setting projects

To give other advice to the Board or Trustees

Question 6

What are the responsibilities of the IFRS Interpretations Committee?

Answer 6

Assists the IASB by reviewing accounting issues that are likely to receive unacceptable treatment in the absence of authoritative guidance

• Review, on a timely basis, new financial reporting issues not specifically addressed in IFRSs
• Clarify issues where unsatisfactory or conflicting interpretations have developed, with a view to reaching a consensus on the most appropriate treatment

Question 7

What is the standard setting process?

Answer 7

• Advisory committee established
• IASB develops and publishes a Discussion Paper for public comment
• Receipt and review of comments on Discussion Paper
• Exposure draft and review of feedback is published
• Receipt and review of comments on Exposure Draft
• Final Standard issued

Question 8

How can companies adopt international standards?

Answer 8

Adoption of international standards as local GAAP – the international standards with little or no amendments
International standards used as a model to create local GAAP – amending the standards to reflect the countries’ needs
International standards used as persuasive influence in preparing local GAAP – a country already has its own standards but may differ to IFRS standards