Proactive - Considering the Effects of Accounting Standards
- Rasmus Sommer
EFRAG and the ASB finalised the position paper and the feedback statement that they jointly developed on 'Considering the Effects of Accounting Standards'. Comment letters were received from Europe, but also from a wider audience, in the public consultation to the Discussion Paper 'Considering the Effects of Accounting Standards', published in January 2011, and that input proved to be invaluable to EFRAG and the ASB.
EFRAG and the ASB expressed the view that 'effect analysis' should be integrated into the standard setting process over the life-cycle of projects, from the agenda proposal stage through to the final standard stage, so as to further enhance the transparency of the due process and to increase the accountability and credibility of the standard setter. Effect analysis may be used to assess the extent to which a standard will meet its intended outcomes, as defined at the outset of the project.
The paper affirmed that the standard setter should primarily assess the effects of a standard from the standpoint of whether it contributes to the delivery of improved financial reporting. Micro-economic effects that are the effects on investors and reporting entities, should be the focus of the standard setter. Potential macro-economic effects, if identified, should trigger communication with relevant authorities, so that appropriate actions or coordination can take place.
Reflecting on comments received, EFRAG and the ASB limited their recommendations to setting out an outline process (objective and key steps) for effect analyses. A detailed methodology should be developed by the standard setter, after gaining benefit from practical experience. The IFRS Foundation asked the IASB to take action to that end in their February 2012 report Strategy Review 2011. EFRAG and the ASB were ready to contribute to this effort and welcome the establishment of the IASB Consultative Group on the Methodology for Fieldwork and Effects Analyses to develop a methodology for fieldwork and effect analyses. Therefore, EFRAG and the ASB decided not to perform additional work on this project.
EFRAG and the ASB would like to thank all the respondents to the Discussion Paper, and the National Standard Setters in Europe who supported the positions reached in the Position Paper, for their contribution to influencing the development of IFRS.
Following consultation by the FRC and the UK Department for Business, the FRC announced plans earlier this year to streamline its governance and structure. The changes took effect on 2 July 2012. As part of this process the Accounting Standards Board ceased to exist and the powers previously delegated to the ASB, has been delegated to the FRC.
The Position Paper and the Feedback Statement can be downloaded below.