In this article, we will look at the due process followed by the International Accounting Standard Board in developing (IASB) the International Financial Reporting Standards (IFRS).
First of all, you should know that the IASB and its interpretation committee comply with the formal procedure in developing accounting standards. The procedures are set out in the Due Process Handbook. The handbook was issued in February 2013 under the Due Process Oversight Committee (DPOC).
Aside from complying with these formal procedures, there are informal steps that are followed. Several staff meetings among departments are held using staff documents papers. More so, there will be private meetings with certain accounting and finance groups such as the Capital Markets Advisory Committee (CMAC) and the Global Preparers Forum (GPF).
The Six Processes used to Developed Accounting Standards by IASB
According to a source, the following are the six procedures followed in developing IFRS standards.
- Setting the agenda
The first step is to set out the agenda. That is, what are the current financial reporting needs that must be addressed. Which standards need to be reversed or any new interpretation to be developed. This will lead to establishing a project.
- Project planning
The next stage is planning the project. Planning is an important aspect of success. Therefore, the IASB or its Interpretation committee will plan out how the proposed project for a new accounting standard will be done.
- Developing and publishing a discussion paper.
Next, a discussion paper will be published and distributed to the public for review and corrections. This is usually done on a set period. Upon completion, the board will make the necessary adjustments.
- Developing and publishing an Exposure
After the necessary adjustments are done, an exposure draft will be developed and published to the public. The exposure draft is part of the international due process of IASB. And it is like a prototype of the main IFRS standard. It is made available to the public for review before the main standard is published.
- Developing and publishing the IFRS standard
The fifth stage is the development and publishing of the approved standard. The new or reversed IFRS is made available in the ifrs.org website. And are free to download.
- Procedures after an IFRS is issued.
The published IFRS in use recently does not come up by chance.Series of planning was done to make it possible. In addition, a discussion paper and exposure drafts are developed and published to the public for amendments. All the due process results in new or modified standards.