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International Accounting Standards

reporting, intangible assets, employee benefits, impair- differences in the requirements to qualify as professional
ment of assets, contingent liabilities, financial instru- accountants in its member countries. In 2005 it had a
ments, investment property, and agriculture. Of the membership of 163 national professional organizations in
forty-one IASs, only thirty-one were already in force, the 120 countries, representing over 2.5 million accountants.
remaining being withdrawn or replaced by later standards. The IFAC issues international standards on auditing and
The IASB also added to its agenda a project to jointly assurance services, education, public-sector accounting,
develop with the Financial Accounting Standards Board quality-control standards, and ethics. In June 1999 the
of the United States a single conceptual framework that IFAC launched the International Forum on Accountancy
converges and improves upon the existing frameworks of Development to promote transparent financial reporting.
both boards.
United Nations. Several organizations within United
RELATIONSHIPS WITH OTHER Nations have been involved in the IASs. Its Group of
STANDARD-SETTERS Experts published in 1976 a four-part report titled “Inter-
national Standards of Accounting and Reporting for
In addition to issuing accounting standards, the IASB
Transnational Corporations,” which listed financial and
cooperates with national accounting standard-setters to
nonfinancial items that should be disclosed by multina-
achieve convergence in accounting standards around the
tional corporations to host governments. Since then, it has
world. Seven of the full-time members of the IASB have
worked to promote the harmonization of accounting stan-
formal liaison responsibilities with leading national
accounting standard-setters (in Australia, Canada, Ger- dards by discussing and supporting best practices in a vari-
many, France, Japan, the United Kingdom, and the ety of areas, including environmental disclosures.
United States) and are resident in their jurisdiction.
Organization for Economic Cooperation and Develop-
IFRSs are not mandatory. Their acceptability, how-
ever, has been on the rise—more than ninety countries ment. The Organization for Economic Cooperation and
Development (OECD), which was formed in 1960, had
claimed that they would be following IFRSs by 2005.
thirty of the world’s developed, industrialized countries as
Many stock exchanges accept IFRSs for cross-border list-
its members in 2005. A valuable contribution of the
ing purposes. The International Organization of Securities
OECD is its surveys of accounting practices in member
Commissions (IOSCO), an organization comprising of countries and its assessment of the diversity or conformity
securities regulators from over 100 countries, has recom-
of such practices. Its Working Group on Accounting Stan-
mended that all its members allow multinational issuers to dards supports efforts by regional, national, and interna-
use IFRSs, as supplemented by reconciliation, disclosure, tional bodies promoting accounting harmonization. In
and interpretation where necessary to address outstanding 2004 OECD revised its Principles of Corporate Gover-
substantive issues at a national or regional level. Notably, nance, which support the development of high-quality,
some countries that do not permit the use of IFRSs with-
internationally recognized standards to improve the com-
out a reconciliation to domestic generally accepted
parability of information between countries.
accounting principles (GAAP) are Canada, Japan, and the
United States. In September 2004 the chief accountant of
European Union. The European Union (EU), a powerful
the U.S. Securities and Exchange Commission (SEC)
stated at an IASB meeting that the SEC was considering regional alliance of twenty-five nations, aims to bring
the steps needed to eliminate the reconciliation from about a common market that allows free mobility of peo-
ple, capital, and goods between member countries. To
IFRSs to U.S. GAAP.
promote the cross-country economic integration, the EU
has made significant progress in the harmonization of laws
OTHER ORGANIZATIONS and regulations. Its commission establishes standardiza-
PARTICIPATING IN tion and harmonization of corporate and accounting rules
INTERNATIONAL STANDARDS through the issuance of directives.
Many other organizations have also played an important Directives incorporate uniform rules (to be imple-
role in the march toward IASs. Among the more impor- mented exactly in all member states), minimum rules
tant are: (that may be strengthened by individual governments),
and alternative rules (from which members can choose).
International Federation of Accountants. The Interna- Directives are mandatory in that each member country
tional Federation of Accountants (IFAC) is a worldwide has the obligation to incorporate them into its respective
association formed in 1977 to develop the accounting national laws. Each country, however, is free to choose the
profession, harmonize the auditing practices, and reduce form and method of implementation and also to add or

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