FEDERATION OF EURO-ASIAN STOCK EXCHANGES > YEARBOOK 2002/2003 > PAGE 14
THE INTERNATIONAL ACCOUNTING STANDARDS BOARD
Global convergence is not simply an academic
discussion about arcane accounting
methods—it is about facilitating investment,
and thereby encouraging economic growth
and employment!
Sir David Tweedie Chairman
I am delighted to send you this message in
my capacity as the chairman of the
International Accounting Standards Board.
As an independent, privately-funded
accounting standard-setter the Board 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 September between the US Financial
Accounting Standards Board and the IASB,
both boards unanimously agreed that they
would work together and consult other
national and regional bodies to remove the
differences between international standards
and US generally accepted accounting
principles (US GAAP). This decision was
embodied in a memorandum of
understanding—the Norwalk Agreement—
that committed the boards to:
The events of 2002 have added both urgency
and momentum to the work of the IASB.
The logic behind the need for a single set of
high quality global accounting standards for
the world’s integrating capital markets has
been clear for some time. However, the
collapse of Enron and other corporate failures
that raised questions about financial reporting
shocked the financial community and led to
the re-evaluation of financial reporting
practices that had once been thought to be
sound. Accounting standards played a part
in these failures, but many involved serious
lapses by executive directors, non-executive
directors, audit committees, auditors,
analysts, regulators, investment banks and
journalists. Greed, deceit and a failure to
observe the public rather than personal
interest were at the heart of much of the
problem. a short-term convergence project run by their
joint staffs to eliminate a range of differences
between IASB and FASB standards, identified
by reference to the statements reconciling
international standards to US GAAP for filing
purposes in the United States. These
differences are to be removed by selecting
the better alternative or, if neither is
satisfactory, adopting another standard-
setter’s position.
The IASB works within a partnership of
national standard-setters. Seven of the full-
time Board members have formal links with
national standard-setters in Australasia,
Canada, France, Germany, Japan, the United
Kingdom, and the United States. Regular
meetings are held with the chairmen and
senior technical staff from those standard-
setters each year. The foundations for much
of the Board’s future work are already being
laid by those standard-setters, which will
enable the Board, once it completes its
present programme, to take up new issues
with extensive initial research having already
been done by its partners.
During 2002, our efforts gained significant
momentum. At a historic meeting in Norwalk
Contact Information
the promotion of consistent interpretations
of standards.
coordination of their future work
programmes to ensure that compatibility,
once achieved, is maintained. To that end,
a series of joint projects to deal with issues
of common concern is being instituted.
Further evidence of the global financial
market’s desire to have a common financial
reporting architecture became obvious in
June 2002 when the Council of Ministers of
the European Union approved the adoption
of a Regulation proposed by the European
Commission and supported by the European
Parliament, requiring that by 1 January 2005
the consolidated accounts of the great
majority of listed companies in the European
Union should conform to the IASB’s
standards after a formal endorsement
process, and the remainder of listed EU
companies to comply with the IASB’s
standards by 1 January 2007. A month later
the Financial Reporting Council of Australia
formally agreed that the 2005 deadline for
compliance with IASB standards should also
apply to Australian companies. Recently
New Zealand has announced a similar change
Sir David Tweedie
Chairman
by 2007 with the option to change in 2005.
The convergence process is not limited to
countries with official liaison bodies. The
Russian Prime Minister announced that all
companies and banks in Russia would be
required to prepare their financial statements
in accordance with IASB standards in a similar
time frame, and many of the Central Asian
republics have followed suit. China has
announced that it is taking the path to
convergence with IASB standards.
During 2002, the Board published a number
of proposals, including proposed
amendments to twelve standards issued by
our predecessor body, the IASC. A parallel
project proposed changes to two standards
on financial instruments also issued by the
IASC. The IASB also issued proposals on
the first-time application of International
Financial Reporting Standards, share-based
payment (share options) and business
combinations. The Board hopes to issue final
standards for these projects during 2003. It
is also working on a convergence project
examining the possible elimination of
differences between the IASB’s standards
and US GAAP. Further work is ongoing on
business combinations, reporting
performance and insurance. The Board
expects to issue exposure drafts on all these
topics during 2003.
The historic agreement with the FASB should
ensure that the world is not split into two
accounting camps but instead transactions
taking place throughout the world will be
accounted for in the same way, thereby
removing a major risk element from the
analysis of companies’ results and
consequently reducing the cost of capital.
Global convergence is not simply an
academic discussion about arcane accounting
methods—it is about facilitating investment,
and thereby encouraging economic growth
and employment! The developments of 2002
represent a major step towards achieving
this goal.
The Federation of Euro-Asian Stock Exchanges has
adopted the International Accounting Standards Board
standards as the preferred guideline for financial
reporting.
[email protected]
www.iasb.org.uk