Importance of the International Accounting Standards Board (IASB)

International Accounting Standards Board (IASB) is an independent body responsible for the setting of standards for the International Financial Reporting Standards (IFRS).

The primary role of this standard-setting body is to set high quality, enforceable, understandable and globally acceptable standards for the IFRS.

The IASB has 16 members who are responsible for the development and publication of IFRSs (IFSR, 204). IASB is also responsible for the approvals of the interpretations of IFRSs as developed by the IFRS Interpretations Committee. Meetings of the IASB are held through webcast or in public.

In order to set accounting standards effectively, IASB follows a transparent, thorough and open process. This includes the publication of consultative documents such as exposure drafts and discussion papers for the public to discuss.

The role of IASB is also enhanced through engagement with several stakeholders across the world including regulators, accounting standard setters, investors, the accountancy profession, business leaders and analysts. IASB framework also helps in the harmonization of regulations, procedures, and accounting standards. This is done by reducing the alternative accounting treatments that are allowed by international standards.

IASB provides various aims and objectives of financial reporting. Financial reporting is aimed at providing information about the financial performance and position of an organisation as well as changes in the financial position of the organisation. These financial statements are useful for various economic agents in making economic decisions, e.g. the purchase of shares by the investment society.

The 2010 framework of the IASB provides that financial reporting provides financial information about the firm producing such financial reports. This financial information is then used by key stakeholders such as investors, creditors and lenders to make decisions about their engagement with the entity. Such decisions include buying, holding or selling shares/equity.

The two fundamental qualitative characteristics of useful financial information for the conceptual framework of the IASB are: relevance and faithful representation. Relevance entails the applicability of the financial information by its users in decision making while faithful representation refers to the accountability and accuracy of the preparers of financial reports. Relevance depends on the decision to be made. Financial reports may be important for a certain decision but not important for another. Financial or accounting information is relevant if it results in positive decision by the users. Faithful representation is necessary in order to provide accurate accounting information which will lead to informed and non-biased decisions by the users of such information.

The IFRS conceptual framework has various implications and benefits to the key users of financial reports.

Investors

First, it enables investors to make good decisions relating to the resources they give to the firm that prepares the financial statements.

Auditors

The framework is also useful to auditors who use it to form opinions about the financial reports of their clients. Auditors usually use the IFRSs as benchmarks to audit the accounts of organisations.

Employees

Employees also use the conceptual of the IFRS to see the financial position and performance of their organisations in respect to the international standards (Wiehle et al, 2006).

Customers

Customers also use the IFRS conceptual framework to determine if the company follows the required international standards in preparing their financial reports; hence their products and services can be reliable.

Government

Lastly, the government benefits from the conceptual framework because it ensures that firms in the country follow the right standards in preparing financial statements; hence it becomes easier for the government to regulate firms in the economy.

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