INTERNATIONAL FORUM FOR ACCOUNTANCY DEVELOPMENT (IFAD)
What IFAD Was
The International Forum on Accountancy Development ("IFAD") was created as a working group between the Basel Committee, the International Federation of Accountants, IOSCO, the large Accounting Firms, OECD, UNCTAD, and the World Bank and regional development banks, which flowed from the East Asian crisis. Its mission was to improve market security and transparency, and financial stability on a global basis. IFAD completed its work with the publication of GAAP Convergence 2002.
IFAD Members
The members and observers of IFAD included: International Federation of Accountants and its regional bodies in Asia Pacific, Africa, Europe and the Americas International Accounting Standards Committee International Monetary Fund Organisation for Economic Co-operation and Development World Bank and the regional development banks for Africa, Asia, the Americas and Central and Eastern Europe The Big 5 accounting firms Basel Committee on Banking Supervision Financial Stability Forum International Organisation of Securities Commissions International Association of Insurance Supervisors International Organisation of Supreme Audit Institutions United Nations Conference on Trade and Development United Nations Development Programme USAID Bureau for Global Programmes US Securities and Exchange Commission Ministry of Foreign Affairs of Italy International Association of Financial Executives Institutes
Objectives of IFAD
To promote understanding by national governments of the value of transparent financial reporting, in accordance with sound corporate governance; To assist in defining expectations as to how the accountancy profession (in both the public and private sectors) should carry out its responsibilities to support the public interest; To encourage governments to focus more directly on the needs of developing countries and economies in transition (hereinafter referred to jointly as 'developing countries'); To help harness funds and expertise to build accounting and auditing capacity in developing countries; To contribute to a common strategy and framework of reference for accountancy development; and To promote co-operation between governments, the accountancy and other professions, the international financial institutions, regulators, standard setters, capital providers and issuers.
IFAD's Vision
In early 1999, the seven largest accounting firms formed a vision to develop and implement a response to market place needs and regulatory concerns, elevating worldwide reporting and auditing practices to international benchmark levels. The vision is based on achieving a rational framework of reporting on the performance of economic entities, which serves the objectives of issuers and users across the world. Inherent in this vision is not merely the question of accounting and reporting standards but also a generally accepted framework for corporate governance, for the accounting and audit profession, for regulation and for education embracing both the private and public sectors. The vision has world-wide application and should be applied equally to developed and developing countries. To accomplish the vision several key points must be addressed. All general-purpose financial information must be prepared using a single world-wide framework using common measurement criteria and fair and comprehensive disclosure. The framework must provide users with a transparent representation of the underlying economics of transactions. All of this must be done rigorously and on a consistent basis. The vision will not be achieved overnight and will require significant long-term efforts. National accounting standards of most countries should be raised with IAS as the benchmark or minimum standards. The exception would be where national GAAP is more developed than IAS. Blind adoption of IAS by unprepared countries, may be more detrimental than beneficial. Such countries must be given time to develop a sufficient infrastructure to effectively adopt IAS. This change will take time. In the meantime, there is a need to ensure that the financial statements, which are used across borders, are clearly marked as being in accordance with the national standards of the issuer rather than international or other national standards. This disclosure would be included in the notes to the financial statements as well as the audit report. To achieve the vision a strong world-wide audit profession must be developed. The vision is for all general purpose financial statements to be audited in compliance with a single world-wide framework of auditing standards that provides users with assurance regarding the results, financial position and changes in financial position of entities and that is applied rigorously and consistently. The implementation of international standards on auditing will result in significant enhancement in national standards in many countries. The common high standards on ethics and specifically on independence required in the profession will be obtained through implementing new global standards developed by IFAC. It is also essential to have strong common external as well as internal quality assurance and disciplinary processes. The corporate governance requirements of the country must specifically address the respective roles and responsibilities of management, directors, audit committees, and auditors, consistent with the financial reporting model of the Vision. Financial accountability and reporting laws must transcend cultural beliefs and practices and must specifically address the issues of corruption, fraud, and misrepresentation. Regulators must establish rules of conduct that are consistent with the Vision. They must act as enforcers of the adopted standards and ensure that divergence from the established rules are addressed quickly and effectively. Regulators must support the use of common standards and reporting requirements for financial, insurance and other institutions within their control. A significant obstacle to the achievement of the Vision is a lack of education or knowledge of high quality accounting and auditing standards on the part of preparers of financial information, users of financial information, governments, accountants, auditors, and regulatory bodies. Without proper education or knowledge, implementation of a plan that would lead to achieving the Vision is impossible. The education process must address not only what is achieved by the implementation of high quality standards and their proper application to financial information but must also educate users and accounting professionals about the inherent limitations in their application. Achieving the vision will involve many interested and affected parties who must commit to the implementation of policies and procedures - the Vision cannot be achieved solely by the accounting profession or by any other participant acting alone: it requires the establishment of strong co-operative relationships or a "partnership" between many international and national organisations. There are many parties that must work together to effect change. Governments are responsible for promulgating laws under which accounting and auditing operate, for setting the tone regarding transparency and disclosure and for reporting the results of government activities and government owned organisations. Regulators and standard setters provide the standards that are used in each country and are more or less effective to the extent to which they have adequate processes in place to ensure compliance. Governments, regulators and standard setters must raise accounting, auditing and ethical standards locally and strengthen the way they operate co-operatively on a global basis. Capital providers, in setting the criteria that they use in making their financing decisions, are a very strong influence on what accounting is used and what auditing standards are practised. International financial institutions have a strong ability to influence by conditions attached to sovereign debt or by the provision of finance to infrastructure projects or may have a more general role in acting as a catalyst of change. Issuers are responsible for preparing and issuing financial reports and are therefore the first place to go if there are deficiencies in reporting. Implementation of clearly defined corporate governance practices is needed. Supreme audit institutions have a key direct role in the audit of government and government owned entities. The accounting and auditing profession acting through its international, regional and national professional bodies and the large firms collectively or individually must continue to work to raise standards.
Relationship to IASB
As noted in IFAD's vision statement, it is IFAD's view that the national accounting standards of most countries should be raised with IAS as the benchmark or minimum standards, but in an orderly way that ensures development of a sufficient infrastructure to effectively adopt IAS.
GAAP 2000 - Survey of National Accounting Rules
In January 2001, as part of their commitment to implementing the IFAD Vision, the large accounting firms published a study, GAAP 2000: A Survey of National Accounting Rules in 53 Countries. The study demonstrates the continuing problems of cross border interpretation of company financial data. It provides an overview of some of the differences between national accounting rules and 60 key accounting measures (including a few areas of disclosure) under International Accounting Standards. The study highlights instances where a country's rules at December 2000 would not allow, or would not require, the IAS accounting treatment. The 53 countries taking part in the survey were chosen for their economic importance and represent some 95% of the world's Gross National Product. The objective of GAAP 2000 is to alert as many players as possible in each country to the need for progress towards the convergence of accounting standards on a worldwide basis (governmental agencies, standard-setters, regulators, preparers, analysts and users of financial information). This takes on even greater importance with the European Commission's February 13th response regarding the proposed regulation to impose IAS on all European listed companies by 2005. You may download the GAAP 2000 Report in PDF Format here, 285k. However, the GAAP 2000 report has now been updated – see the next section of this page. Note: IFRSs and national GAAPs have changed significantly since this survey was done. Consequently the overview of national GAAPs and comparisons with IFRSs are outdated. We leave the report here for historical reasons.
GAAP 2001 - Survey of National Accounting Rules
In December 2001, the International Forum for Accountancy Development updated and expanded its GAAP 2000 survey of national accounting rules. The GAAP 2001 study highlights instances where a country's rules either do not allow or do not require the IAS accounting treatment. The 2001 report includes 62 countries, compared to 53 in the 2000 report. Also, the revised report covers approximately 80 accounting and disclosure requirements, compared to 60 in the 2000 report. You may download the GAAP 2001 Report in PDF Format here, 792k. Also available is a separate six-page Introduction to GAAP 2001, including an overview. key findings, and a description of the survey methodology. Click to Download the Introduction (PDF 199k). Note: IFRSs and national GAAPs have changed significantly since this survey was done. Consequently the overview of national GAAPs and comparisons with IFRSs are outdated. We leave the report here for historical reasons.
GAAP Convergence 2002
A study titled GAAP Convergence 2002 released in February 2003 by the world's six largest accountancy firms shows a marked leap forward in worldwide movement towards convergence with IFRS from previous years. In 58 percent of the 59 countries surveyed, national accounting standards will be replaced with IFRS for all listed companies, except where national issues remained not covered by the new standards. Another 22 percent said they were adopting IFRS on a standard by standard basis, and a further 20 percent said they were eliminating differences between national standards and IFRS as and when practical. 57 percent of those planning to adopt IFRS were driven by a government or regulatory requirement and 13 percent by standard setters. 51 percent of the 59 countries indicated that the complex nature of some of the international standards - in particular, those relating to financial instruments, and others incorporating fair value accounting - is a barrier to convergence in their country. In addition, 49 percent of the countries surveyed also cited the tax-driven nature of their national accounting regime as a hurdle. Consequently, many countries are at present limiting implementation of IFRS to listed companies, rather than extending it to all companies. Survey respondents also stressed the importance of getting better and more timely access to national language translations of the new standards and interpretations. While translations of IAS were available in 70 percent of the countries covered, in many cases the translations were not sanctioned by the IASB, and in nearly one-third of the countries where IFRS are available in the national language, the translations were not considered to be available quickly enough. Another area of challenge identified was the availability of IFRS training, for which demand is expected to build up significantly as the world moves towards new standards. GAAP Convergence 2002 is a joint project of six large international public accounting firms, including Deloitte Touche Tohmatsu. Click to: Download the Report (PDF 2,262k, download may take a while for 56k modem users). Note: IFRSs and national GAAPs have changed significantly since this survey was done. Consequently the overview of national GAAPs and comparisons with IFRSs are outdated. We leave the report here for historical reasons.