17 January 2014

IASB/Pacter: Global accounting standards - From vision to reality

As a consequence, in 2001 the old part-time, poorly resourced IASC was restructured into the full-time, better-financed IASB, under the oversight of a new IFRS Foundation. In the 12 years since the reform of the IASC, the IASB has produced many new standards under IFRS and has overhauled the standards it inherited from the IASC. More than 100 jurisdictions have now adopted IFRS. But during that time, an odd thing was happening: the producer of the IFRS product (the IASB and IFRS Foundation) did not pay close attention to exactly who the consumers were or exactly how they were using the product. Adoption of IFRS is not black or white (yes or no)—it is shades of gray. For example, is IFRS for listed companies only or unlisted as well? Is it only for some unlisted companies, such as financial institutions? Is it required or permitted? Is it for consolidated financial statements only or also for separate company statements? Is it for domestic listed companies only or foreign listed companies as well? Are IFRSs written into law? Is there some sort of endorsement process and, if so, is that done on a timely basis? Did the jurisdiction add any disclosures or other requirements? Did it make any modifications to IFRSs? Did it change the effective dates? Does the process for translating IFRSs from the original English ensure a faithful translation? In February 2012, the Trustees of the IFRS Foundation completed a strategy review and published their report. They reaffirmed their commitment to achieving the vision of global accounting standards.

Nearly all jurisdictions have publicly stated a commitment in support of global accounting standards

Of the 122 jurisdictions studied, 115 have made such a public statement. Only 7 have not: Albania, Bermuda, Cayman Islands, Egypt, Macao, Paraguay, and Switzerland.

Nearly all jurisdictions have publicly stated that IFRS should be the global accounting standard

All but five of the 122 jurisdictions have made such a public statement; the exceptions are Bermuda, the Cayman Islands, Egypt, Macao, and Switzerland. Although Switzerland has not made a formal public statement that IFRS should be the global accounting standard, the Swiss government accepts IFRS as issued by the IASB (in addition to the IFRS for SMEs, US GAAP, IPSAS, and Swiss GAAP FER) as an acknowledged accounting framework in accordance with the Swiss Code of Obligations. In addition, 84 per cent of the companies on the main board of the Swiss stock exchange use IFRS. Similarly, although Bermuda and the Cayman Islands have not made a formal public statement that IFRS should be the global accounting standard, IFRS is permitted and frequently used in both jurisdictions.

IFRS is required for listed companies in most jurisdictions

In total, 101 (83 per cent) of the 122 jurisdictions profiled require IFRS for most or all domestic listed companies. This includes several jurisdictions that do not have stock exchanges but require IFRS for banks and other publicly accountable entities.

Most of the remaining jurisdictions eo use IFRS to some extent

The remaining 21 jurisdictions that do not yet require IFRS for all or most domestic listed companies do, nonetheless, use IFRS to some extent:

• 10 permit IFRS for at least some listed companies (including Japan and India).
• 2 require IFRS for financial institutions (including Saudi Arabia and Uzbekistan).
• 2 others are in process of adopting IFRS (including Thailand and Indonesia).
• 7 use national standards (including China and the United States).

The majority of jurisdictions requiring IFRS for listed companies also require IFRS for certain unlisted companies

Approximately 60 per cent of the 101 jurisdictions that require IFRS for listed companies also require IFRS for unlisted financial institutions or large unlisted companies. Those jurisdictions regard banks, insurance companies, and other economically significant companies, as publicly accountable.

Nearly all of the jurisdictions that have adopted IFRS for listed companies also permit IFRS for unlisted companies

Approximately 90 per cent of the 101 jurisdictions that have adopted IFRS for listed companies also require or permit IFRS for many unlisted companies.

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