IFRS Funding, Regulation, and Enforcement
Long-term funding commitments to the IFRS Foundation and the IASB from over 30 countries and/or organizations are shown on the IASB website. The Foundation's goal is to have broad-based funding that is open-ended (no strings attached), compelling (shared by all), and country-specific (measurement based on GDP). As of 2012, a majority of the Foundation's funding is voluntary. However, levy systems and regulatory contributions have been introduced in various countries. Presently, the most significant sources of funding include: 48 percent from publicly sponsored/nationally administered financing regimes, 26 percent from international accounting firms, and 15.5 percent through publications and related activities.
The IASB and the IOSCO have agreed to a list of necessary accounting issues to address in a core set of international accounting standards for use in cross-border offerings and multiple listings. Ideally, establishing a core set of international accounting standards should reduce the costs of doing business and help companies raise capital across borders, streamline internal accounting and auditing functions for multinational companies, increase the efficiency of market regulations, and decrease the costs of international financial statement analysis and investment.
The SEC has expressed three conditions for accepting international accounting standards for all public companies:
As previously discussed, during 2011, the SEC issued several staff papers related to the 2010 Work Plan outlining the process the SEC will follow to make an IFRS adoption determination. The SEC continues to make progress toward the Work Plan completion.
Because local regulations govern the preparation and issuance of financial statements in most countries, differences of form and content persist among countries. The following provides a listing of organizations impacting the international environment, many of which are discussed throughout the chapter.
| Organization | Website |
| Asian-Oceanian Standards-Setters Group (AOSSG) | www.aossg.org |
| Business Europe | www.businesseurope.eu |
| European Financial Reporting Advisory Group (EFRAG) | www.efrag.org |
| European Securities and Markets Authority (ESMA) | www.esma.europa.eu |
| European Union (EU) | europa.eu |
| Federation of European Accountants (FEE) | www.fee.be |
| Financial Accounting Standards Board (FASB) | www.fasb.org |
| International Accounting Standards Board (IASB) | www.ifrs.org |
| International Association for Accounting Education Research (IAAER) | www.iaaer.org |
| International Federation of Accountants (IFAC) | web.ifac.org |
| International Organization of Securities Commissions (IOSCO) | www.iosco.org |
| National Standard Setters (NSS) | www.frc.org.uk/asb/about/nss.cfm |
| Organisation for Economic Co-operation and Development | www.oecd.org |
| Public Interest Oversight Board (PIOB) | www.ipiob.org |
| Securities and Exchange Commission (SEC) | www.sec.gov |
| World Trade Organization (WTO) | www.wto.org |
Although the IASB does not have the authority to require compliance with IFRS, the success of international accounting harmonization and convergence will depend upon the recognition and support of interested groups such as the European Union (EU). The EU consists of 27 member states (Belgium, Germany, France, Italy, Luxembourg, the Netherlands, Denmark, Ireland, the United Kingdom, Greece, Spain, Germany, Austria, Finland, Sweden, the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia, Slovakia, Bulgaria, and Romania). Two of the EU's objectives are to create a single market for goods in the EU and to have the EU become a world power.
The EU has taken several measures to ensure consistency with IFRS. For example, roundtables and forums such as the Europeans Enforcers Coordination Sessions (EECS) are utilized, and committees such as the European Securities and Markets Authority (ESMA) (formerly CESR) and the European Securities Committee (ESC) have been established to act as advisory groups. Roundtables identify potential IFRS application issues. The roundtable collects views from member states through the various audit firms, standard setters, and other interested bodies because membership includes the IASB, ESMA, the Interpretations Committee, EFRAG, FEE, Business Europe (formerly UNICE), audit firms, national standard setters, preparers, and the SEC. If divergence from an IFRS is identified, the roundtable makes a timely recommendation to the Interpretations Committee to eliminate the divergence.
In 2001, the CESR (now known as ESMA) and the ESC were established. These organizations have assisted the EU in adopting IFRSs. ESMA provides opinions as to the progress non-EU countries are making toward IFRS conversions and on agreements with the IASB. For instance, Japan has made two agreements with the IASB, as depicted in Exhibit 3-1. The CESR filed a report in March 2008 stating it had no reason to believe that Japan's Accounting Board (ASBJ) could not complete convergence in the time stated and that the EU should then consider Japanese GAAP as equivalent.
The SEC Office of International Affairs (OIA) works with a global network of securities regulators and law enforcement to promote cross-border regulatory compliance. The OIA advises the Commission with respect to SEC and non-U.S. initiatives on cross-border activities of U.S. issuers and U.S. financial service providers. The OIA also examines the impact of SEC rules on foreign market participants.
The IOSCO regulates international markets through its working committees: the Technical Committee, for developed markets, and Emerging Markets Committee, for less developed markets. Each IOSCO committee is further divided into the following functional groups: disclosure, regulation, enforcement, and investment.