Regulation framework
1.1 IFRS - Advantages
A business can present its financial statements on the same
basis as its foreign competitors, making comparison easier.
Cross-border listing will be facilitated, making it easier to
raise capital abroad.
Companies with foreign subsidiaries will have a common,
company-wide accounting language.
Foreign companies which are targets for takeovers or
mergers can be more easily appraised.
1.2 IFRS - Disadvantages
The cost of implementing IFRS
The lower level of detail in IFRS
2. Principles-based versus Rules-based
Principles-based (IFRS)
• professional judgment
• low level of details
• ensures standards to be consistent with each other
• avoid fire-fighting standards setting
Rules-based (USGAAP）
• judgment is minimised
• a large mass of regulation designed to cover every
eventuality
Quiz 7
Which one of the following would not be an advantage of adopting
IFRS?
A. It would be easier for investors to compare the financial statements
of companies with those of foreign competitors.
B. Cross-border listing would be facilitated.
C. Accountants and auditors would have more defense in case of litigation.
D. Multinational companies could more easily transfer accounting staff across
national borders.
Quiz 7
Which one of the following would not be an advantage of adopting
IFRS?
A. It would be easier for investors to compare the financial statements
of companies with those of foreign competitors.
B. Cross-border listing would be facilitated.
C. Accountants and auditors would have more defense in case of litigation.
D. Multinational companies could more easily transfer accounting staff across
national borders.
Quiz 8
Which TWO of the following statements regarding systems of
regulation of accounting are true?
A. A rules-based system will require more detailed regulations than a
principles-based system.
B. A principles-based system will tend to give rise to a larger
number of accounting standards than a rules-based system.
C. A rules-based system seeks to cover every eventuality.
D. A rules-based system requires the exercise of more judgement in
application than a principles-based system.
Quiz 8
Which TWO of the following statements regarding systems of
regulation of accounting are true?
A. A rules-based system will require more detailed regulations than a
principles-based system.
B. A principles-based system will tend to give rise to a larger number
of accounting standards than a rules-based system.
C. A rules-based system seeks to cover every eventuality.
D. A rules-based system requires the exercise of more judgement in application
than a principles-based system.
3. The International Accounting Standards Board (IASB)
The IASB’s predecessor body, the IASC, had issued 41
International Accounting Standards (IASs) and on 1 April
2001 the IASB adopted all of these standards and now issues
its own International Financial Reporting Standards
(IFRSs).
So far 17 new IFRSs have been issued.
Regulatory framework
1.Enforceable & globally accepted accounting standards
2.Promote use & rigorous application
IFRS Foundation 3.Bring about convergence
(IFRS F) 4.Focus on emerging economics and SMEs
Appoints Appoints Appoints
Advises Oversight Reports to
IFRS Advisory International Accounting IFRS Interpretation
Council Advises Standards Board Committee
(IFRS AC) (IASB) (IFRS IC)
Advice Develop/approve Guidance/interpret
Consult with formulate/prepare
2016/9 Q1
Which of the following is NOT a duty of the IFRS Interpretations Committee?
A. To interpret the application of International Financial Reporting Standards
B. To work directly with national standard setters to bring about convergence
with IFRS
C. To provide guidance on financial reporting issues not specifically addressed in
IFRSs
D. To publish draft interpretations for public comment
2016/9 Q1
Which of the following is NOT a duty of the IFRS Interpretations Committee?
A. To interpret the application of International Financial Reporting Standards
B. To work directly with national standard setters to bring about convergence with
IFRS
C. To provide guidance on financial reporting issues not specifically addressed in
IFRSs
D. To publish draft interpretations for public comment
4. Setting of International Financial Reporting Standards
Step 1 During the early stages of a project, the IASB may establish an
Advisory Committee to give advice on issues arising in the project.
Consultation with the Advisory Committee and the IFRS Advisory
Council occurs throughout the project.
Step 2 IASB may develop and publish Discussion Papers for public
comment.
Step 3 Following the receipt and review of comments, the IASB would
develop and publish an Exposure Draft for public comment.
Step 4 Following the receipt and review of comments, the IASB would
issue a final International Financial Reporting Standard.
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