The International Financial Reporting Interpretations Committee IFRIC
Chapter 1 – Financial Reporting Context Page 11
IFRIC consists of 12 members who are required to operate on the basis of their own independent views and not as representatives of the organisations with which they are
associated.
6 The IASB’s “Stable Platform”
The IASB issued in July 2006 a Press Release setting out that it would not enforce the introduction of any new accounting standards until 2009; instead there would be a period of
stability. This period of stability is to assist entities as they implement international standards for the first time and to encourage countries that have yet to adopt IFRS to do so. The IASB
may still issue new standards or major amendments during this period, and indeed has done so, although their mandatory implementation date will not be until 2009. Entities are
permitted to adopt a new standard early if they wish. Interpretations or minor amendments that arise from existing standards during their implementation will continue to be published
under the current process.
Following an extensive consultation process the IASB has also agreed to the following actions:
increased lead time to prepare for the implementation of new standards – the
mandatory implementation date of new standards or major amendments to existing standards will be a minimum of one year from the publication date of the standard or
amendment. This is in response to entities’ pleas that they are given longer to introduce a standard into their reporting systems, as well as providing Governments
and other national authorities with sufficient time to translate any new requirements. The European Commission alone is required to translate new international standards
into its 23 official languages;
increased opportunity for input on conceptual issues – to allow users, preparers
and other interested parties time to reflect and comment on proposals, publications of a conceptual nature will generally be issued as a discussion paper in the first
instance, rather than immediately as an exposure draft. This will allow commentators two opportunities at the discussion paper stage as well as at the exposure draft
stage to influence the discussions and outcomes, as well as having an official role at an earlier stage in the process and therefore increasing their ability to influence the
early decisions; and
public roundtables on key topics – the IASB is using the roundtable forum to
improve interested parties’ ability to influence early discussions. These forums have been used on several occasions since 2004 as an effective vehicle to bring together
both interested and knowledgeable people from different organisations. Two such roundtable events were specifically mentioned in the July 2006 Press Release; these
were to take place in early 2007 in the areas of the proposed amendments to the recognition and measurement principles in IAS 37 Provisions, contingent liabilities
and contingent assets and the measurement phase of the Conceptual Framework.
Chapter 1 – Financial Reporting Context Page 12
7 Chapter Review
This chapter has been concerned with the factors leading to the development of international harmonisation through financial reporting standards, and the institutions and structures that
have developed to implement and enforce these standards.
The chapter has covered: the nature, concepts and purposes underlying the international harmonisation of
financial reporting, as well as its progress; the structure of financial reporting within the EU;
the regulatory and institutional structures within which the IASB operates and the major bodies within that structure; and
the IASB’s approach to continuing its period of stability for the implementation of IFRS.
Chapter 1 – Financial Reporting Context Page 13
8 Self Test Questions
Chapter 1
1. Are the following statements about the Norwalk Agreement true or false? 1
The Norwalk Agreement requires the consolidated financial statements of all listed United States companies, starting after 1 January 2005, to be
prepared in accordance with International Accounting Standards.
2 The Norwalk Agreement was an agreement for short-term financial
reporting convergence between the European Commission and the United States government.
Statement 1 Statement 2
A
False False
B False
True
C
True False
D
True True
2. In order to adopt an IFRS, the European Commission satisfies itself that the IFRS results in a true and fair view of the financial position and performance of an
entity. Which TWO of the following organisations assist the European Commission with
this decision?
A
Accounting Regulatory Committee ARC
B International Accounting Standards Committee Foundation IASCF
C European Financial Reporting Advisory Group EFRAG
D
Standards Advisory Council SAC
3. Which ONE of the following is a statutory body that has responsibility for the endorsement of International Accounting Standards in the European Union?
A European Financial Reporting Advisory Group EFRAG
B
International Federation of Accountants IFAC
C
Accounting Regulatory Committee ARC
D Committee of European Securities Regulators CESR
4. Which ONE of the following bodies is responsible for reviewing accounting issues that are likely to receive divergent or unacceptable treatment in the absence of
authoritative guidance, with a view to reaching consensus as to the appropriate accounting treatment?
A
International Financial Reporting Interpretations Committee IFRIC
B
Standards Advisory Council SAC
C International Accounting Standards Board IASB
Chapter 1 – Financial Reporting Context Page 14
D
International Accounting Standards Committee Foundation IASC Foundation
5. Trustees of the International Accounting Standards Committee Foundation are responsible for appointing members to which TWO of the following bodies?
A
International Financial Reporting Interpretations Committee IFRIC
B
Standards Advisory Council SAC
C European Financial Reporting Advisory Group EFRAG
D
Accounting Regulatory Committee ARC
6. Which ONE of the following is a private sector organisation which is made up of key interest groups associated with financial reporting and consists of two bodies:
a Technical Expert Group; and a Supervisory Board?
A International Federation of Accountants IFAC
B
Standards Advisory Council SAC
C European Financial Reporting Advisory Group EFRAG
D
Accounting Regulatory Committee ARC
7. The International Financial Reporting Interpretations Committee IFRIC issues interpretations as authoritative guidance.
For which TWO of the following should IFRIC consider issuing an Interpretation?
A
Narrow, industry-specific issues
B Newly identified financial reporting issues not specifically addressed in
IFRSs
C
Issues where unsatisfactory or conflicting interpretations have developed, or seem likely to develop
D Areas where members of the IASB cannot reach unanimous
agreement
8. Are the following statements true or false? 1
The Norwalk Agreement outlines the commitment of the IASB and FASB towards harmonisation of International and US Accounting Standards.
2 IOSCO requires mandatory preparation of financial statements in
accordance with IFRS. Statement 1
Statement 2
A
False False
B False
True
C
True False
D
True True
Chapter 1 – Financial Reporting Context Page 15
9. According to the Preface to International Financial Reporting Standards, which TWO of the following are objectives of the IASB?
A
To harmonise financial reporting between IFRS and US GAAP
B
To work actively with national standard setters
C To promote the use and rigorous application of accounting standards
D
To harmonise financial reporting within the European Union
Chapter 2 – The IFRS Framework Page 17