The International Accounting Standards Committee (IASC) is an independent private-sector organization. In the organization’s own words, it describes itself as a:
“body working to achieve uniformity in the accounting principles that are used by businesses and other organizations for financial reporting around the world.”
According to its constitution, the organization’s goal is to:
“formulate and publish in the public interest accounting standards to be observed in the presentation of financial statements and to promote their worldwide acceptance,” and to “work for the improvement and harmonization of regulations, accounting standards and procedures relating to the presentation of financial statements.”
IASC works with other accounting organizations to establish global standards for business, including identifying the needs of users and establishing appropriate guidance.
Mission of the Organization
The IASC’s mission is to develop, in the public interest, a single set of high-quality, understandable, enforceable, and globally accepted accounting standards that require transparent information in order to ensure fairness for investors and other users of financial information.
Functions of the Organization
The functions of the International Accounting Standards Committee are to monitor, review, and improve the standards that are used in reporting financial information.
The organization also works with other accounting organizations in order to develop global standards for business. It works with user groups and standard setters around the world to make sure that their needs are met when developing new guidance.
Additionally, IASC is responsible for creating a single set of high-quality standards that can be used by all reporting entities.
History of the Organization
In June 1973, the International Accounting Standards Committee was established in London spearheaded by Sir Henry Benson, the former president of the Institute of Chartered Accountants in England and Wales.
The committee was formed because of an agreement between the professional accountancy bodies from countries such as the United States of America, Australia, Germany, France, Netherlands, Ireland, Canada, Mexico, Japan, and the United Kingdom. Their goal was to harmonize the differences in reporting practices in accounting. In 1998, the organization was joined by 143 accounting organizations from different countries all over the world.
From its establishment in 1973 to 2001 when it was moved for dissolution, the committee was able to come up with the International Accounting Standards (IAS) which was accepted by countries around the world.
These standards transformed into the International Financial Reporting Standards (IFRS) and were adopted by countries such as India, Australia, New Zealand, Sweden, Germany, Japan, and Russia.
In April 2001, the committee was then replaced by the International Accounting Standards Board (IASB) which was approved by the International Organization of Securities Commission.
Restructuring of IASC into IASB
After 25 years in operation, IASC came to a decision to conclude its existence in order to cater to growing demands in the harmonization of global accounting standards with national accounting standards and practices.
In 1997, IASC re-examined its structure and strategy to come up with a better organization. After a series of meetings which ran from 1997 to 1999, the proposals were unanimously approved specifically in December 1999.
Formally in July 2000, a new IASB Constitution had fully taken effect and in the year following that, IASC was restructured into what is now known as the International Accounting Standards Board (IASB).
The IASB is supervised by the International Accounting Standards Committee Foundation or what is now named the International Financial Reporting Standards (IFRS) Foundation.
IASB | An Overview
The International Accounting Standards Board was created to take the responsibility of the International Accounting Standards Committee. It serves as an independent body that aims to become a single global body for setting high-quality, understandable, and enforceable standards for business.
As mentioned earlier, it is supervised by the IFRS Foundation which was created in 2001 by its parent organization, IASC. Today, the IFRS Foundation focuses on developing principles of accounting and financial reporting standards to promote transparency within business enterprises.
The IASB is comprised of 14 finance experts who have outstanding accounting education, proven experience in formulating accounting standards, and thorough background in auditing financial reports.
In addition, it is also required that one should have broad geographical diversity in order to qualify. The members have been duly appointed by the IFRS Foundation Trustees.
The members are responsible for the development of IFRS Accounting Standards and the approval of its interpretations.
Formulation of IFRS Standards
The IASB is in charge of the formulation of IFRS Standards which are primarily used by publicly accountable companies.
To formulate these standards, the board follows its standard-setting procedures such as:
- Public Board meetings broadcast live from our London office;
- Agenda papers that inform the Board’s deliberations;
- Discussion and decision summaries that are made available after meetings; and
- Comment letters received on our consultation documents.
The steps in the standard-setting process are as follows:
- Agenda consultation
- Research programme
- Standard-setting programme
- Maintenance programme
The International Accounting Standards Committee (IASC) is recognized as one of the first international groups to create and distribute widely accepted accounting standards.
By 2001, the IASC was eventually restructured into the International Accounting Standards Board (IASB). The new establishing body aimed to address the issues that the IASC was unable to resolve, particularly in relation to growing global demands for harmonization of reporting standards in accounting.
Today, it is up to the International Accounting Standards Board (IASB) to come up with globally suitable accounting standards that are applicable across all financial markets.
International Accounting Standards Committee (IASC) FAQs
What is the International Accounting Standards Committee?
The International Accounting Standards Committee (IASC) was a non-profit organization that was established to create a platform for international cooperation in setting global accounting standards.
What is the International Accounting Standards Board?
The International Accounting Standards Board (IASB) was established to serve as an independent body that aims to become a single global body for setting high-quality, understandable, and enforceable standards for business. It replaced what was then known as the International Accounting Standards Committee (IASC) in 2001.
Who are the members of the IASB?
The members of the board should have outstanding accounting education, proven experience in formulating accounting standards, and thorough background in auditing financial reports. In addition, it is also required that one should have broad geographical diversity in order to qualify.
Why was the International Accounting Standards Committee replaced by the International Accounting Standards Board?
The IASC was struggling to handle the growing global demands for harmonization of reporting standards in accounting. Through its restructuring, it aimed to address such challenges and make globally suitable accounting standards.
Where does the International Accounting Standards Board (IASB) get its authority?
The IASB derives its authority from the IFRS Foundation Trustees.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.