Fleckner (2008) states, to address the increasing challenges of legislating that governments face in modern societies, countries all over the world have begun to outsource rulemaking to bodies consisting of people familiar with the subject. One of the most instructive examples of the challenges today's legislators face is accounting: hardly anyone except professional accountants understand it, and it would be naive to assume that government officials or members of parliament could draft, discuss, and enact accounting rules. For that reason, policymakers rely on private entities to establish financial accounting and reporting standards. The two most influential standard-setters are the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB).
The International Financial Reporting Standards (IFRS) are standards developed by the International Accounting Standards Board (IASB). The IASB is an independent accounting standard-setting body based in London, UK. On the 1st of March 2001, it took over the role of setting standards from its predecessor, the International Accounting Standards Committee (IASC), which was founded in June 1973 in London. According to the IASB Due Process Handbook April 2006, the foremost objective of the IASB is to develop, in the public interest, a single set of high quality, understandable and enforceable global accounting standards.
According to the IASB Due Process Handbook, the IASB considers the following factors when adding agenda items: (a) The relevance to users of the information involved and the reliability of information that could be provided (b) Existing guidance available
(c) The possibility of increasing convergence
(d) The quality of the standards to be developed
(e) Resource constraints.
Furthermore, the IASB Due Process Handbook states that the IASB considers whether the project [the standard setting process] would address the needs of users across different jurisdictions, taking into account the following factors: • Changes in the financial reporting and regulatory environment— whether the issue is internationally relevant, and has emerged as a result of changes in the financial reporting environment and regulatory requirements across jurisdictions. • Pervasiveness—whether the issue is one that (a) affects more than a few entities and more than a few jurisdictions, (b) gives rise to problems that are frequent and material and (c) will persist if not resolved.
• Urgency—whether requests have been received from constituents, with reasonable justifications, that the IASB should address the issue as a matter of priority. • Consequences—whether the absence of a new standard might cause users to make suboptimal decisions.
THE IASB’S FRAMEWORK AND FINANCIAL STATEMENTS
The IASB's Framework, which deals with the preparation and presentation of financial statements, describes the basic concepts and criteria by which financial statements are prepared and presented. The Framework serves as a guide to the IASB in developing accounting standards, known as the International Financial Reporting Standards, previously called the International Accounting Standards. It is also used to resolve accounting issues that are not expressly addressed by any of the current accounting standards. “Financial reporting, done annually by private enterprises and quarterly by public companies, offers essential information about the financial health of an organization. Interested parties often use this information to support investing and financing decisions. Companies prepare their reports in an agreed format, including a balance sheet, income statement, cash flow statement, and footnotes as required”- bnet.com According to paragraph 9 of the Framework, the primary categories of users of financial statements are present and potential investors, lenders, employees, suppliers and other trade creditors, customers, governments and their agencies...