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'What kind of accounting standards should the IASB write?'

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02 Nov 2015

The IASB makes available a paper by IASB member Mary Tokar published in the Journal of Accounting and Management Information Systems (JAMIS). The paper focuses on a long-standing challenge for standard setters: What kind of standards should they write?

In her paper, Ms Tokar splits the question into several subquestions:

  • How specific and prescriptive should standards be?
  • How should cost considerations influence requirements?
  • How should standard setters balance comparability with effective communication of an entity’s strategy and business model?
  • What are reasonable expectations for the use of judgement?
  • What is the interaction of the types of standards with the training – both skills and subject matter knowledge – of accountants?

Ms Tokar primarily uses revenue recognition and IFRS 15 to illustrate the subject and writes about comparability versus communication and the role of the business model, the role of judgement in financial reporting in general, mutual expectations, and the role of feedback. She concludes that there is no single answer to all the questions she touched upon but states:

The objective of IFRS is to provide useful information to users of financial statements. To achieve this goal, they need to be a communication tool and not a compliance exercise. Setting standards that support this goal requires the participation of many stakeholders, as does interpreting and applying the standards after they have been issued. Good faith application of judgement, seeking to realise the objectives of the standard and questioning established practice are all part of achieving this goal.

Please click to access the paper on the JAMIS website (please note that you need to use the Download button on the far right, otherwise you cannot access the full text of the paper). Ms Tokar's article is based on a speech that she gave at Bucharest University in June. The transcript of the speech is available on the IASB website.

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