IFRSs Convergence through Cooperation

1
IFRSs Convergence through Co-operation

• Tricia OMalley
• Former Board Member/IFRIC Coordinator
• IASB

The views expressed in this presentation are
those of the presenter, not necessarily those of
the IASB
2
Outline

• Overview of the organisation
• Setting standards
• Co-operating with national standard setters
• Writing principle-based standards
• Participating in the process

3
Overview of the organisation
4
IASB objectives

• Develop a single set of high quality global
  accounting standards
• Understandable
• Enforceable
• Transparent and comparable information
• To co-operate with national accounting standard
  setters to achieve convergence
• to help users make economic decisions

5
Benefits of global standards

• Better investment decisions/returns
• Enhanced comparability
• Reduced investment risk
• More international capital flows
• Diversification opportunities
• Reduced financial reporting costs
• Reduced burden on regulators

6
Setting standards
7
IASC Foundation structure
Trustees
Standards Advisory Council
IASB 12 Full time 2 Part time
Interpretations Committee (IFRIC)
Advisory Committees
Technical Staff
8
Independent standard setting

• Independent board members
• All board meetings in public
• Webcast live and archived
• Private funding

9
Principle-based standards
Principles
Rules
10
Thorough due process ...
9-15 months
9-15 months
6-18 months
Standard
Exposure Draft
Comment analysis
Comment analysis
Discussion Paper
Effective Date
Research

• Post implementation review

National Standard Setter
Others
11
and extensive consultation
Comment letters
Individual consultations with stakeholders
Round tables
Proposed Standard
Working groups
Field-tests
Co-operation with national standard setters
not part of the official due process but
often done in big projects
12
IFRICs role

• Interpretation and clarification of principles
• Criteria for IFRICs agenda
• Widespread and practical relevance?
• Significantly divergent interpretations?
• Unrelated to a Board project to be completed in
  the near future?

13
Co-operating with national standard setters
To achieve convergence
14
Challenges of convergence

• IASB helps countries that want to adopt not adapt
• Identify and overcome national impediments
• Identified problems will be included in joint
  projects if possible
• Interpretations and unique circumstances

15
Working with national standard setters

• Mutual understanding of roles
• Statement of Best Practice
• Clarifying expectations
• Managing the research agenda

16
MoU between IASB FASB

• Align conceptual framework
• Short term
• Remove major differences
• Medium term
• New joint standards where significant improvement
  required

17
Working with FASB

• Need strong joint teams
• Talent is everywhere
• Two heads are better than one!
• Everything takes longer than you think

18
Setting principle-based standards
19
Principle-based standards

• Follow Conceptual Framework
• Capital market perspective
• Standards apply concepts to specific topic
• State underlying objective and how it will depict
  economic reality
• Develop principles and guidance to achieve it
• Minimize scope exceptions and treatment
  alternatives
• Avoid bright line rules

20
Tweedie tests

• Plain English
• Can you explain the fundamentalsin a minute?
• Does it make intuitive sense?
• Will it help management understand and manage the
  economic activity?

21
Process to develop PBS

• Principles police
• Reconsider exceptions
• No theoretical justification
• Prohibit analogies
• Scope creep vs inconsistency

22
Participating in the process

• The earlier the better
• Help others get involved
• Tell us about different points of view
• Ask for more guidance only when its really needed

23
Thank you!