Background
The Preface to Statements of International Accounting Standards, originally adopted by the IASC in 1975 and last revised in 1982, had set out, among other things:
- the objectives of IAS
- the definition of financial statements
- the definition of accounting standards
- the scope of accounting standards
- IASB operating procedures (including steering committees, discussion and issues papers, and voting)
- the authority of IAS
The Preface is out of date in light of IASB's new structure and operating procedures under the new Constitution and as a result of IASB decisions on its operating procedures and on the format and style of future International Financial Reporting Standards. Consequently, IASB developed a revised Preface.
Exposure Draft 8 November 2001
On 8 November 2001, IASB invited comments on an exposure draft of the Preface to International Financial Reporting Standards. This was IASB's first exposure draft. The Board had approved the ED at its July meeting. IASB posted the exposure draft on its website. Click for:
Comment deadline was 15 February 2002.
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Key Provisions of the Proposed Preface
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We have maintained these proposals here for historical interest. Please note that these proposals differ in a few respects from the IASB's conclusions in its final Preface to IFRS.
- IASB Standards will be known as International Financial Reporting Standards (IFRS).
- IFRS will include IAS issued by IASC from 1973-2000.
- IFRS will apply to the general purpose financial statements and other financial reporting of all profit-oriented entities regardless of their legal form (corporate, mutual, cooperative, etc.).
- Other financial reporting includes information provided outside financial statements that assists in the interpretation of a complete set of financial statements or improves users' ability to make efficient economic decisions.
- IFRS will apply to individual company and consolidated financial statements.
- A complete set of financial statements includes a balance sheet, an income statement, a statement showing either all changes in equity or changes in equity other than those arising from investments by and distributions to owners, a cash flow statement, and accounting policies and explanatory notes.
- If an IFRS allows both a 'benchmark' and an 'allowed alternative' treatment, financial statements may be described as conforming to IFRS whichever treatment is followed.
- IAS issued by IASC distinguished between main principles (printed in bold typeface) and explanation of the main principles (set in plain typeface). IFRS issued by IASB will not make such a distinction.
- The provision of IAS 1 paragraph 11 that conformity with IAS requires compliance with every applicable IAS and Interpretation requires compliance with all IFRS as well.
- Due process steps for a Standard will normally include (* means required by IASB Constitution):
- Staff work to identify and study the issues and existing national standards and practices
- IASB consults with SAC*
- IASB forms an advisory group
- IASB publishes a discussion document for comment
- IASB considers comments received on the discussion document
- IASB publishes an exposure draft with at least 8 affirmative votes* (ED will include dissenting opinions and basis for conclusions)
- IASB considers comments received on the exposure draft
- IASB considers the desirability of holding a public hearing and of conducting field tests
- IASB approves the final Standard with at least 8 affirmative votes* (the Standard will include dissenting opinions and basis for conclusions)
- Interpretations of IFRS will be developed by the International Financial Reporting Interpretations Committee (IFRIC) for approval by IASB
- Due process steps for an Interpretation will normally include (* means required by IASB Constitution):
- Staff work to identify and study the issues and existing national standards and practices
- IFRIC studies national standards and practices
- IFRIC publishes a draft Interpretation for comment if no more than 3 IFRIC members have voted against the proposal*
- IFRIC considers comments received on the draft Interpretation within a reasonable period of time
- IFRIC approves the final Interpretation if no more than 3 IFRIC members have voted against the proposal* and submits it to IASB
- IASB approves the final Interpretation by at least 8 affirmative votes of IASB*
- IASB and IFRIC meetings will be open to public observation
- Each IFRS and Interpretation will set out its own effective date and transition provisions
- English is the official language of IASB discussion documents, exposure drafts, IFRS, and Interpretations. IASB may approve translations if the process assures the quality of the translation, and IASB may license other translations.
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Board Decisions in April 2002
At its April 2002 meeting, the Board approved (vote 11 yes and 3 no) to approve publication of a final revised Preface to International Financial Reporting Standards. In approving the Preface, the Board agreed that:
- Presenting fundamental principles in bold face type and other guidance in non-bold type (the 'black-letter' / 'grey-letter' distinction) should be used in IFRS.
- Black-letter and grey-letter standards have equal authority, and both will be written using 'shall'.
- IFRS will be designed to be applied to the general purpose financial statements of business enterprises, but not-for-profit and public-sector entities that want to publish financial statements labelled as conforming to IAS must also follow all of the Standards.
- The Board's involvement in IFRIC draft and final Interpretations will be clarified in the Preface to IFRIC Interpretations (currently being developed), and the IFRIC Preface will be included in the annual IASB Bound Volume.
Decisions at the December 2007 IASB Meeting
The Board discussed some proposed technical amendments to the Preface to IFRSs necessitated by the recent enlargement of IFRIC from 12 to 14 members. As a consequence, publication of draft Interpretations and approval of final Interpretations now require that not more than four IFRIC members have voted against them (previously 3 members).
The Board approved the amendments to the Preface.
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