Do you want to access the full text of articles?

Please see our digital edition archive for the full text of articles.

Alternatively:

If you are a Chartered Accountants Ireland member, please visit the RIS service where Accountancy Ireland is available free of charge via the EBSCO databases.

If you are an Accountancy Ireland subscriber (i.e. you pay each year to receive your copy of Accountancy Ireland) please contact our Subscriptions Department quoting your subscription number and include details of the article you want.

All other users should enquire from their local public or college library about accessing full text Accountancy Ireland articles.

Home / ...

On a cold, wet June morning, Accounting Standards Board Chairman Ian Mackintosh and Board Secretary David Loweth were in Dublin to communicate to Irish constituents their perspective on the convergence of global accounting standards.

The ASB is the organisation responsible for drawing up the accounting standards (FRSs) most readers in Ireland will be familiar with. The ASB’s standards have been published here by the Institute of Chartered Accountants in Ireland and are distributed to ICAI members via the ICAI’s website.

One of the interesting questions at the moment is whether the ASB’s role in Ireland will change when Section 41 of the Companies Act 2003 is commenced. The expressed wish of Irish stakeholders at the Dublin meeting is that the ASB's role should continue. For his part, Mr Mackintosh indicated that the ASB would be happy to continue its standard-setting role in this jurisdiction ‘if that is what Ireland decides’.

But, back to convergence where, for global standards - for now at least - read International Financial Reporting Standards (IFRS). IFRS are a bit like cod liver oil - everyone knows they’re good for you but not too many of us are fond of the taste.

The aim of the game is ensuring confidence in financial markets. The battle is Principles vs Rules. The interesting, political bit is about who wields most influence in shaping the standards.

The key players, from an Irish perspective, are: - International Accounting Standards - Accounting Standards Board - Financial Accounting Standards Board - European Financial Reporting Advisory Group

The International Accounting Standards Board (IASB) is an independent, privately-funded accounting standard-setter. It replaced the International Accounting Standards Committee and has been the driving force behind IFRS since its establishment in 2001. The Board members come from nine countries and have a variety of functional backgrounds. The IASB is committed to developing, in the public interest, a single set of high quality, understandable and enforceable global accounting standards that require transparent and comparable information in general purpose financial statements. In addition, the IASB co-operates with national accounting standard-setters to achieve convergence in accounting standards around the world.

On the Principles side (i.e. this side of the world) the Accounting Standards Board (ASB) took over the task of setting accounting standards for the United Kingdom and Ireland from the Accounting Standards Committee (ASC) in 1990. It is recognised for that purpose under the (UK) Companies Act 1985. The ASB also collaborates with accounting standard-setters from other countries and with the International Accounting Standards Board (IASB) both in order to influence the development of international standards and in order to ensure that its own standards are developed with due regard to international developments.

On the Rules side (i.e. the United States) the Financial Accounting Standards Board (FASB) has been the designated organization in the private sector for establishing standards of financial accounting and reporting since 1973. Their standards are officially recognized as authoritative by the Securities and Exchange Commission. The new kid on the block is the European Financial Reporting Advisory Group (EFRAG) which was created by the main parties interested in financial reporting in Europe, namely the users, the preparers, and the accountancy profession, (supported by the national standard setters).

EFRAG's main aim is to give a pro-active contribution to the work of IASB (International Accounting Standards Board). It also advises on the technical assessment of the IASB standards and interpretations for application in Europe. EFRAG has two tiers: a Technical Expert Group (TEG) of highly qualified experts who carry out the technical work and a Supervisory Board of European Organizations who guarantee representation of the full European interest and enhance the legitimacy and credibility of EFRAG. EFRAG operates independently of each of the European organizations involved. The European Commission, IASB and CESR are observers on the TEG.

Convergence

Most readers know that EU regulations require the consolidated financial statement of publicly quoted companies within the EU to be prepared in accordance with IFRS for accounting periods beginning on or after 1 January 2005.

From the outset, there was hard-won agreement that the IFRS issued by the IASB would be principles-based standards. That is still the case but, as the process moves forward, on this side of the world, some stakeholders are expressing concern IFRS are being developed too quickly, that there isn't enough consultation or time for consideration, and that there is too much influence from the US. The transition to IFRS has met various obstacles - one of the most controversial was IAS 39 Financial Instruments: Recognition and Measurement, where the European Commission ‘carved out’ the parts it didn't approve of. Too much of that and we could end up with a set of ‘european’ standards alongside IFRS. The ASB believes the more closely it can work with Europe the more influence it will have with the IASB.

Hot topics

There are concerns in some quarters about the speed at which the IFRS are being developed and frustration with the perceived lack of opportunity for proper consideration of important questions.

The ‘hot’ topics include:

- pensions - fair value measurement, - the conceptual framework project, - business combinations, and - performance reporting and liabilities.

ICAI members interested in the detail will find more online at www.icai.ie.

Smaller companies

Then there is the question about which companies should be obliged to use global standards. IASB has an SME project under way considering, amongst other issues, whether a separate set of international standards for smaller entities is needed. There is a view that the IASB’s proposals are overly complex. EFRAG, for example, has argued that the proposals need simplification. The ASB's own tentative proposals offer four possible variations or solutions to the SME problem but with no consensus yet on which way to go. A particularly telling - and fundamental - question that got sympathetic murmurs from the audience at Collins Barracks was posed by Mr Terry O'Rourke of PricewaterhouseCoopers, a member of the ICAI’s Accounting Standards Committee, who asked who the users of the FRSSE are - if any? The consensus in the room seemed to be that most people would take a degree of comfort if the ASB rather than the IASB was setting the standard for smaller companies. But questions of scale arise since what is a small company in one country may be a very large one elsewhere, and in the brave new world of global standards, there is also the question of definitions. 'Publicly accountable', for example, presents problems in countries where most entitoles are in state ownership of some kind.

Which brings us back to Europe. Readers who have had too many late nights preparing for the transition to IFRS will take some comfort from the fact that internal market commissioner, Charlie McCreevy is looking for a period of bedding down of IFRS before any further changes are introduced.

The ASB got a warm welcome in Dublin. At the close of the seminar representatives of the ICAI’s Accounting Committee thanked Mr Mackintosh and his predecessors, Sir David Tweedie and Mary Keegan, for their role in bringing high quality accounting standards to Ireland and for their assistance in progressing Irish issues and expressed the hope that the ASB will continue its standard-setting role in Ireland.