Introduction
The ‘International Accounting Standards Board (IASB) develops relevant standards for different accounting practices’ (Saudagaran 2011, p. 27). The IASB also promotes the application and use of different accounting standards. This agency identifies, develops, supports, and approves various International Financial Reporting Standards (IFRSs).
The IFRS Foundation monitors the operations and activities of the IASB. The IASB has been developing and promoting new IFRSs in an attempt to change the nature of accounting. This discussion explores how the IASB has become less relevant and representative today.
How Representative and Relevant is the IASB?
Many corporations and accountants are currently criticizing the role and relevance of this agency (Harper et al. 2012). For instance, the IASB released new accounting standards between 2011 and 2014. Such standards have the power to change the manner in which corporations record their revenues. According to Zeff (2012, p. 812), ‘such standards will force companies to speed up the rate of revenue booking’.
These practices will also defer revenues. This approach can also result in new accounting scandals or frauds. The issue of Revenue Reporting (RR) is another source of controversy. This is undeniable because it is impossible to establish when a company gets its revenues.
The other issue arises from the use of International Financial Reporting Standards. This practice will have numerous implications on many companies and countries. For example, ‘the new standards will affect revenues because companies will have to examine the implications of different taxation laws’ (Harper et al. 2012, p. 469). These new changes do not examine the implications of different trade-offs and political interferences.
These standards will ensure every company loses its quality. This development ‘will also increase the costs of capital’ (Saudagaran 2011, p. 59). The above situation explains why these new changes might not produce the targeted goals.
Every market has its economic frameworks and factors. This fact explains why such international standards will have numerous impacts on different markets (Zeff 2012). Those who are opposed to the transparency of the original standards might not get the best results. The best practice is focusing on new accounting practices that have the potential to produce positive results.
These new accounting standards ‘have the potential to make the earnings of companies more volatile’ (Danjou 2014, p. 4). The standards will encourage more accountants and companies to change the time when they earned their revenues.
Companies might incur numerous costs in an attempt to provide the required financial disclosures. The new practice will become extremely difficult for more companies. Most of these new rules will complicate the lives of different accountants and managers.
As mentioned above, these new IASB accounting standards are detestable. The agency’s main goal was to identify new standards that can produce uniform accounting practices. However, this new move has not yielded much fruits. This is the case because such changes are currently under attack.
This situation explains why the IASB has become less relevant today (Danjou 2014). This is the case because the new composition and governance of the IASB fails to consider the issues affecting different markets, regions, and companies (Zeff 2012).
Conclusion
The agreeable fact is that the IASB has been critical towards producing and supporting the most appropriate accounting principles. However, this idea of convergence will affect many corporations in different corners of the world. This problem explains why the agency should identify new changes. This approach will be critical towards making the IASB more relevant and representative.
List of References
Danjou, P 2014, An update on international financial reporting standards (IFRSS). Web.
Harper, A, Leatherbury, L, Machuca, A, Philips, J 2012, ‘The Impact of Switching to International Financial Stands on United States Businesses’, Journal of International Education Research, vol. 8, no. 4, pp. 467-472.
Saudagaran, S 2011, International Accounting: A User Perspective, CCH, New York.
Zeff, S 2012, ‘The Evolution of the IASC into the IASB and the Challenges it Faces’, The Accounting Review, vol. 87, no. 3, pp. 807-837.