One example is in the availing of depreciation. In the United Kingdom, depreciation is determined according to, "convention and pragmatism, rather than exact rules[determining] the method of depreciation, estimates of the scrap value and the expected length of life (Ferrari L 2005). Germany, on the other hand, lays down exact rules and regulations for all these aspects in detail, leaving no room for manipulation.
There is thus a need to introduce common internationally accepted norms, which would minimize such differences. The International Accounting Standards Board (IASB) is one such institution that has undertaken the responsibility of formulating such standards to remove the anomalies between the 'generally accepted accounting practices' of different countries, through a process of harmonization of accounting standards.
The IASB was founded in April 2001, as a successor to the International Accounting Standards Committee (IASC). The IASC was an independent body formed in 1973, with the broad objective of, " [furthering] harmonization of accounting practices through the formulation of accounting standards to promote their worldwide acceptance" (Encyclopedia of Business and Finance [EBF]). In May 2000, a new structure for the IASC was approved, leading to the establishment of the IASB. As per KEWL (Knowledge Environment of Web-based Learning), the main objectives of the IASB are: -
Develop, in the public interest, a single set of high quality understandable and enforceable global accounting standards that require high quality transparent and capable information in financial statements and other financial reporting to help the participants in the various capital markets of the world and other users of the information to make economic decisions.
Promote the use and rigorous application of those standards.
Work actively with national standards-setters to bring convergence of national accounting standards and International Financial Reporting Standards (IFRS) to high quality solution.
In order to most objectively achieve the above aims, the organization of the IASB has been structured as follows (KEWL): -
Trustees. Comprises of nineteen individuals from all geographical regions of the world, of whom at least five should represent the accounting profession. The primary responsibility of the Trustees is to appoint Board members, exercise oversight and raise funds for the organization.
Board. Consists of fourteen individuals (twelve full time members and two part-time members) and has the sole responsibility of setting accounting standards in the form of International Financial Reporting Standards (IFRS).
Standards Advisory Council (SAC). This is another body of experts from different geographical regions and functional backgrounds with expertise required to contribute to the formulation of accounting standards. There are about fifty members of the Council.
International Financial Reporting Interpretations Committee (IFRIC). This is a committee of the IASB that assists the IASB in establishing and improving standards of financial accounting and reporting for the benefit of users, preparers and auditors of financial statements. The IFRIC assists the IASB in achieving international convergence of accounting standards.
The IASC had introduced 41 International Accounting Standards (IAS) during its tenure