Structure of the International Accounting Standard Setting

The International Accounting Standard Committee (IASC) foundation was established in 1973 as a way of bringing about convergence in accounting policies and practices around the world. It has evolved since its foundation but, currently, the duties of its trustees are as follows:

The IASC foundation serves, through its trustees, the purpose of appointing members of the International Accounting Standard Board (IASB); the International Financial Reporting Interpretation Committee (IFRIC) and the Standards Advisory Council (SAC). It also evaluates and reviews the effectiveness of the IASB, on an annual basis. And, also to finance the activities of the IASB. It makes an assessment on the financial budget submitted by the IASB and stipulate the basis for funding. It also reviews broad strategic issues affecting accounting standards and to promote the work of the IASB, as well as promoting the objective of rigorous application of the IASB's standards.

On the other hand, the SAC gives advice to the IASB on agenda decisions and priorities in the IASB's work. It also informs the IASB board of the views of its member organisations and individuals about standard-setting projects, as well as giving other advice to the board or trustee.

The IASB's objectives, however, can be summarised as being:

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. It also promotes the use and rigorous application of those standards; bring about convergence of national accounting standards and international accounting standards to high-quality solutions

The IFRIC's mainl duties can be described as being to consider, on a timely basis, accounting issues that are likely to receive divergent or unacceptable treatment in the absence of authoritative guidance. And, to publish draft interpretations for public comment; to report to the IASB and obtain approval for final interpretations.

The IASC framework is built upon the fundamental understanding that harmonisation can best be pursued by focusing on financial statements that are prepared for the purpose of providing information that is useful in making economic decisions. Its principal purposes are to assist the board of the IASC in the development of international accounting standard; in promoting harmonisation of regulations, accounting standards and procedures relating to the presentation of financial statements by providing a basis for reducing the number of alternative treatments permitted by international standards

The IASC framework contains the following principal sections: Objective of financial statements; Underlying assumptions; Qualitative characteristics of financial statements; Elements of financial statements; Recognition of the elements of financial statements; Measurement of the elements of financial statements; Concepts of capital and capital maintenance

The IASC framework notes that financial statements principally convey the financial effects of past events with regard to performance, position and changes in financial position so that the information is useful to a wide range of users in making economic decisions.

The IASC framework also defines the 4 principal qualitative characteristics of financial statements as understandability, relevance, reliability and comparability. It also notes that the most commonly adopted basis of measurement in financial statements is historical cost, but it does not prohibit the adoption of other bases of measurement. The framework highlights that the elements of financial statements related to the measurement of financial position are income and expenses.

Recognition in the statement of financial position or income statement of the elements depends upon the criteria that: It is probable that any future economic benefit associated with the item will flow to or from the entity; the item has a cost or value that can be measured reliably.

The fundamental requirement for the presentation of financial statements is that the financial statements should present fairly the financial position, performance and cash flows of an entity. IAS 1 Presentation of Financial Statements prescribes that a complete set of financial statements should include the following:  A statement of financial position ; A statement of comprehensive income or an income statement; A statement of changes in equity; A statement of cash flows; Accounting policies and explanatory notes

IAS 1 prescribes minimum disclosure requirements for the content of the statement of financial position, income statement, statement of changes in equity and provides details of what should be disclosed in the supporting notes to the accounts. That is, notes should present information about the bases of preparation of the financial statements, the accounting policies selected and applied, information required by international standards which is not presented elsewhere and any other information required for a fair presentation.