Why should I choose AnalystNotes?
AnalystNotes specializes in helping candidates pass. Period.
Subject 2. Financial Reporting Standard-Setting Bodies and Regulatory Authorities PDF Download
Private sector standard-setting bodies and regulatory authorities play significant but different roles in the standard-setting process. In general, standard-setting bodies make the rules and regulatory authorities enforce the rules. However, regulators typically retain legal authority to establish financial reporting standards in their jurisdictions.
International Accounting Standards Board (IASB)
This is essentially the international equivalent of the Financial Accounting Standards Board (FASB).
- It was preceded by the International Accounting Standards Committee (IASC), which was established in 1973.
- It is comprised of 14 members (12 full-time, 2 part-time); seven members are liaisons with a national board.
- It works toward harmonization of international accounting standards.
- The standard development process is open.
- Standards are principles-based.
- Since the establishment of the IASB, the focus is on global standard-setting rather than harmonization per se.
International Organization of Securities Commissions (IOSCO)
This is essentially the international equivalent of the U.S. Securities and Exchange Commission (SEC).
- It works to achieve improved market regulation internationally.
- It works to facilitate cross-border listings.
- It advocates for the development and adoption of a single set of high-quality accounting standards.
Financial Accounting Standards Board (FASB)
The FASB is a non-governmental body that sets accounting standards for all companies issuing audited financial statements. All FASB pronouncements are considered authoritative; new FASB statements immediately become part of GAAP.
U.S. Securities and Exchange Commission (SEC)
In the U.S., the form and content of the financial statements of companies whose securities are publicly traded are governed by the SEC through its regulation S-X. Although the SEC has delegated much of this responsibility to the FASB, it frequently adds its own requirements. The SEC functions as a highly effective enforcement mechanism for standards promulgated in the private sector.
Audited financial statements, related footnotes, and supplementary data are presented in both annual reports sent to stockholders and those filed with the SEC. These filings often contain other valuable information not presented in stockholder reports.
Convergence of Global Financial Reporting Standards
As capital markets become more international in scope, the need for global accounting standards and the demand for multiple listings has grown. The IASB and FASB, along with other standard-setters, are working to achieve convergence of financial reporting standards.
- Expedite the integration of global capital markets and make the cross-listing of securities easier.
- Facilitate international mergers and acquisitions.
- Reduce investor uncertainty and the cost of capital.
- Reduce financial reporting costs.
- Allow for easy adoption of high-quality standards by developing countries.
- Significant differences in standards currently exist.
- The political cost of eliminating differences.
- Overcoming nationalism and traditions.
- Will cause "standards overload" for some firms.
- Diverse standards for diverse places are acceptable.
User Contributed Comments 0
You need to log in first to add your comment.