The International Financial Reporting Standards (IFRS) is an international accounting standard that was developed to make recording and organizing the accounting data of a company easier. IFRS allows for a fair representation of the accounting data of the company and also takes care that the business is compliant with the various rules and regulations of the country.
The UAE Commercial Companies Law No 2 of 2015, which came into force on 1 July 2015, requires all companies to apply international accounting standards and practices when preparing their accounts.
So, let’s have a look on the regulatory environment of IFRS.
IFRS Foundation
In 1997 it was decided to restructure the International Accounting Standards Committee (IASC) into two components
1. The Trustees
2. IASB
The IFRS Foundation was established in March 2001 as a not-for-profit organisation with 22 trustees.
Duties of the trustees
- Appoint members of the IASB, the International Financial Reporting Standards Interpretations Committee (IFRSIC) and the IFRS Advisory Council (IFRSAC);
- Review on an annual basis the strategy of the IASB and its effectiveness;
- Approve the budget of the IASB and determine the basis for funding;
- Review broad strategic issues affecting accounting standards and promote the work of the IASB
- Publish annual report on its activities.
- Promote the objective of rigorous application of the IASB’s standards;
- Establish operating procedures for the IASB, the IFRSIC and the IFRSAC;
- Approve amendments to the constitution of the IASC.
International Accounting Standards Board
- The trustees of the IASC Foundation have appointed 15 members to the IASB. They are responsible for the Issuing of accounting standards called International Financial Reporting Standards (IFRS)
- All members are appointed for 5 years.
- IASB decisions do not require unanimity: a simple majority suffices
- The IASB assumed its duties on 1 April 2001, replacing the International Accounting Standards Committee (IASC). One of its first actions was to adopt the existing canon of international accounting standards (IAS). In future it will issue international financial reporting standards (IFRSs).
The IASB’s objectives are:
(a) to develop, in the public interest, a single set of high-quality, understandable and enforceable global accounting standards that require high-quality, transparent and comparable information in financial statements and other financial reporting to help participants in the world’s capital markets and other users make economic decisions;
(b) to promote the use and rigorous application of those standards;
(c) to bring about convergence of national accounting standards and international accounting standards to high-quality solutions.
IFRS Advisory Council
The IFRS Advisory Council has approximately 30 members and provides a forum for organisations and individuals to participate in the standard setting process. The members are appointed by the trustees from various backgrounds for a renewable terms of 3 years and meet three times a year.
It has the following objectives:
- Giving advice to the IASB on agenda decisions and priorities in the Board’s work;
- Informing the Board (IASB) of the views of its member organisations and individuals about standard setting projects;
- Giving other advice to the Board or to the trustees. IFRS Interpretations Committee (IFRSIC) The IFRSIC’s principal duties are to:
- Review on a timely basis, new financial reporting issues not specifically addressed in IFRS’s
- Clarify issues where unsatisfactory or conflicting interpretations have developed, with a view to reaching a consensus on most appropriate treatment.