International Accounting Standards Board System

Question: Discuss about the International Accounting Standards Board System. Answer: Introduction: The International Accounting Standards Board (IASB) is a private sector organization that approves and develops the International Financial Reporting Standards, which is well known as IFRSs in short. IASB is an independent body that operates its operations under the oversight of IFRS Foundation. In the year 2001, the IASB was established in order to replace the International Accounting Standards Committee. The total numbers of members of IASB is 16 as per the record of 1 July 2012 (Aasb.gov.au, 2016). The main role of IASB under IFRS Foundation Constitution is to complete the responsibility regarding all the technical matters of the particular foundation. These include firstly, the development of full discretion and to pursue the technical agenda that is subjected to the requirements of consultation along with the public and the Trustees (Collings, 2012). Secondly, the issue and the preparation of the IFRSs rather than the exposure drafts and the Interpretations that follows the due process, which is stipulated in the Constitution. Lastly, the IFRS Interpretations Committee develops the issue and the approval of the Interpretations (Fasb.org, 2016). The Fair Value Measurement project was completed on May 2011 and at that time; the IASB issued IFRS 13 Fair Value Measurement. This is effective from the year 2013 and defines the term fair value, described about a single framework of IFRS for measurement of fair value and the disclosure about the measurements of fair value (Collings, 2012). According to the IASB conceptual framework 10F (a) measurement, draft discussion paper, the discussion of the staffs of the IFRS foundation in a public meeting of IASB has been presented. This particular paper represents the views of the individual member of the IASB. The particular section mainly discusses about the concept that guides the IASB at the time of selection of the measurement according to the revised or new IFRS (Fasb.org, 2016). This is important because the existing Conceptual Framework provides a little numbers of methods of measurement guidance and it indicates the particular method that should be used in order to run the business smoothly. Generally, the IASB proposes three principles of measurement. Firstly, the Principle 1 states that the particular measurement method provides the relevant information and it depends on the method of affecting the position of financial statement, profit and loss statement and the comprehensive income (Iasplus.com, 2016). It also includes the statements that show the changes in the notes and equity to the financial statements. Secondly, Principle 2 states that the cost of the measurement should be justified based on the advantages of reporting the particular information to the potential and existing investors, creditors, and other lenders. Thirdly, the Principle 3 states that the use of total numbers of various measures should be minimized in order to provide information that is relevant (Aasb.gov.au, 2016). It also includes the unnecessary changes should be avoided in the measurement methods and the particular changes should be explained in details. The IASB believes that the relevant method of measurement is depended on the process of fulfillment of the liability of an entity and the other is the process by which the asset is contributed to the cash flows of the future (Iasplus.com, 2016). The financial statements involve amounts and descriptions of the particulars that fit the elements of the statements. Measurement is the process of determination of amount that are presented on the each financial statements face (Collings, 2012). In other words it can be said that measures indicate the disclosed or presented amounts. Mainly three types of measurement methods that include fair value and various current prices, cost, and the measures based on the cash flow (Icaew.com, 2016). The particular discussion paper does not discuss only about the equity instruments measurement but also about the factors that are related to the initial measurement of the fair value that might be applicable to the equity instruments initial measurement. The equity method of the translation of the denominated amount in the foreign currency has also not been discussed in the particular paper, as the IASB believes that the particular issues might be dealt in a form of a project with the aim to repla ce or revise the existing IFRS regarding the particular topics (Icaew.com, 2016). There are various principles to measure these are to achieve the aim and objective of financial reporting, and the IASB proposed to involve a revised Conceptual Framework (Mackenzie et al., 2012). As rightly put forward by Ifrs.org (2016), the IASB follows various principles in the revised conceptual framework for appropriate financial reporting and explain the alliterative characteristics of the important financial information. The issues of measurement in the financial reporting needs to have proper relevance of the information that is given by a definite measurement method (Ifrs.org, 2016). The measurement method relies on the influence it exerts on the financial declaration of the financial position (Aasb.gov.au, 2016). In addition to this, the measurement method also exerts immense influence on the statements of [profit and loss], financial statement for the equity as well the notes to the pecuniary statements. The second principle of measurement can e suitable justified by the advantages of financial reporting that provides information from the data of the financial statements to the potential investors, creditors as well as the debtors (Collings, 2012). In addition to this, the measurement principle of IASB also includes the number of diverse measures that are considered to be minimum necessity in order provide pertinent information; convey information regarding the changes in the procedures of measurement and many more (Ifrs.org, 2016). The principles also help to alleviate the unnecessary modifications in the methods of measurement and explain the necessary modifications instead. The principle of relevance is derived from the concept of faithful representation given in the QC13 of chapter 3 that explains the conceptual framework (Ifrs.org, 2016). The principle essentially refers to the depiction of all the required information that an user can utilize by understanding the particular phenomenon that has been represented by including all the requisite illustrations as well as the descriptions (Mackenzie et al., 2012). However, IASB also needs to select all the suitable and most appropriate measures for avoiding the measurement issues and to depict the correct information in the financial declarations (Collings, 2012). The transactions and dealings are settled in cash and this appears either in the cash or in the short term accounts receivable section of the financial statement (Pwc., 2015). The business entity that involves in only the said economic activity of financial transactions faces certain measurement issues. Therefore, in that case the measurement criteria become significant as the business unit participates in complicated activities. Furthermore, the major proponents of fair value concentrate on the statement of financial position whereas units that prefer cost based measure concentrate on the statement for profit and loss (Ifrs.org, 2016). Therefore, the selection of the measurement on the foundation of either the statement of financial position or the profit and loss statement will not lead to the relevant information and can make way for fallacy (Collings, 2012). The discussion paper therefore analyses the different measurement methods that can be categorized as the cost based measures, fair value and the current market price and the other measures that are dependent on the expected cash flows (Iasplus.com, 2016). The discussion paper also concentrates on the principle that concentrates on avoiding the measurement issues such as the alleviation of the unnecessary information, selection of the measurement methods and modification of the measurement principles in a bid to enhance the relevance of the financial information (Icaew.com, 2016). References Aasb.gov.au, (2016).Australian Accounting Standards Board (AASB) - Home. [online] Available at: https://www.aasb.gov.au [Accessed 3 Jan. 2016]. Collings, S. (2012).IFRS for dummies. Chichester: Wiley. Fasb.org, (2016).FASB: Financial Accounting Standards Board. [online] Available at: https://www.fasb.org/ [Accessed 3 Jan. 2016]. Iasplus.com, (2016).IAS Plus. [online] Available at: https://www.iasplus.com/ [Accessed 3 Jan. 2016]. Iasplus.com, (2016).IAS Plus. [online] Available at: https://www.iasplus.com [Accessed 3 Jan. 2016]. Icaew.com, (2016).Welcome to ICAEW.com | ICAEW. [online] Available at: https://www.icaew.com [Accessed 3 Jan. 2016]. Ifrs.org, (2016).Fair Value Measurement. [online] Available at: https://www.ifrs.org/Current-Projects/IASB-Projects/Fair-Value-Measurement/Pages/Fair-Value-Measurement.aspx [Accessed 3 Jan. 2016]. Ifrs.org, (2016).IFRS - Home. [online] Available at: https://www.ifrs.org [Accessed 3 Jan. 2016]. Mackenzie, B., Coetsee, D., Njikizana, T., Chamboko, R. and Colyvas, B. (2012).Wiley IFRS 2012. Hoboken: John Wiley Sons. Pwc., (2015).Manual of accounting ifrs 2015 supplement. [S.l.]: Bloomsbury Professional.