Page 412 - Introduction to Business

386 PART 4 Accounting

The IASB is an independent, privately funded accounting standard-setter based
in London. Board members come from nine countries and have a variety of func-
tional backgrounds. The Board is committed to developing, in the public interest, a
single set of high-quality, understandable, and enforceable global accounting stan-
dards that require transparent and comparable information in general purpose
financial statements. In addition, the Board cooperates with national accounting
standard-setters to achieve convergence in accounting standards around the
world. The IASB represents over 100 worldwide accounting and financial organiza-
tions, from over 80 counties. Most projects require a minimum of three years from
formation to standard issuance. Each IASB member has one vote on technical and
other matters. The publication of a Standard, Exposure Draft, or final SIC Interpre-
tation requires approval by 8 of the board’s 14 members.

International Financial Reporting Standards
The objectives of international standards include
• Increasing harmonization of accounting standards and disclosures to meet the
needs of the global market
• Providing an accounting basis for developing or newly industrialized countries
to follow as the accounting profession emerges in those countries
• Increasing the compatibility of domestic and international accounting
requirements
The rapid growth in international capital markets and cross-border mergers
and acquisitions, as well as other international developments, has created pres-
sures for harmonization of accounting standards beyond those contemplated at
the formation of IASB. Arthur Wyatt, chairperson of the IASB, indicated that har-
monization is no longer merely a philosophical notion about which to argue but
rather is essential to global trade and commerce.
The goal of the IASB is to formulate and publish standards to be observed in the
presentation of audited financial statements and to promote their worldwide
acceptance and observance, that is, to achieve internationally recognized or harmo-
nized standards of accounting and reporting. These standards are designed to reflect
the needs of the professional and business communities throughout the world.
International standards have been created in broad terms. The standards are
not definitive or detailed enough to cause problems in the application of accounting
practice in the United States, given the level of detail and specificity to which the
United States has become accustomed. The international standards encompass the
most frequently encountered business transactions. Accounting issues such as
joint ventures, inventory, and depreciation are addressed in the standards. A partial
list of international accounting standards is provided in Exhibit 11.5.
Each country’s accounting rules and regulations are a result of the cultural, eco-
nomic, political, and legal systems of that country. These four factors have the
potential to restrict economic development and international trade. The accept-
ance and implementation of international accounting standards has been impeded
by these cultural and ethnic differences. The IASB seeks to resolve these differences
in a manner that benefits everyone.
The international standards often provide two or more options for the selection
of accounting methods. The number and variety of accounting choices were
reviewed and reduced under a project titled “The Comparability and Improve-
ments Project.” This program was designed to revise current international account-
ing standards to permit fewer alternative accounting treatments for the same

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