ASB, EFRAG to Standard Setters: Consider the Effects of Accounting Standards to Improve Due Process
The Accounting Standards Board (ASB) of the FRC and the European Financial Reporting Advisory Group (EFRAG) have recommended ways for standard setters to improve implementation of accounting standards.
The proposal, Considering the Effects of Accounting Standards, which is the result of the discussion between ASB and EFRAG and is open for public comment until August 31, 2011, calls on standard setters to consider the effects of accounting standards in order to improve their due process in its end to end implementation.
The ASB has observed that there has been a lack of satisfactory resolution to how accounting standards boards take into account the effects of accounting standards.
The issue of implementing accounting standards “has received more attention in recent years with public policy makers around the world increasingly challenging the lack of evidence to support new accounting standards and to assess the effectiveness of those that have been implemented,” the ASB said.
On October 2008, regulators have introduced the ‘Due Process Handbook for the IASB’, which included requirement for an analysis of the anticipated effects of a new IFRS or a major amendment to an IFRS.
While regulators have acknowledged the improvements brought about by the IASB, they still look for ways to best implement the requirements in accounting standards in the long run.
With the newly published discussion paper, the ASB said the primary purpose of the recommendations in it is to strengthen the due process of accounting standards and improve the standard setters’ transparency, accountability, and credibility. This will lead to a positive contribution from the standard setters to financial reporting, the ASB continued.
The recommendations follow the stimulus for accounting debate worldwide and the direction for the International Financial Reporting Standards (IFRS) set by the European proactive agenda to “encourage discussion of the issues set out in the DP and to use feedback from the consultation process to assess support for the proposals and enhance them.”
The discussion paper will form the basis for “possible improvements to the International Accounting Standards Board’s (IASB) due process,” the ASB said.