If IASBs movement towards the worldwide adoption of IFRS is to be successful, the establishment of a more coherent international concept framework

is necessary Discussion the issues raised in the question and comment on: Roles Development Objective Characteristic Convergence The accounting standard used in Bangladesh [focuses on the standards adopted from IFRS]

IASB and IFRS IASB IASB stands for International Accounting Standard Board, a London-based organization which seeks to set and enforce standards for accounting procedures. Over 100 countries currently require or permit companies to comply with IASB standards. It is responsible for maintaining the International Financial Reporting Standards (IRFS). The organization was founded on April 1, 2001 as the successor to the International Accounting Standards Committee (IASC). IFRS IFRS refers to International Financial Reporting Standards which is a set of accounting standards developed by an independent, not-for-profit organization called the International Accounting Standards Board (IASB). IAS (International Accounting Standards) is the older standards that IFRS has replaced has replaced. The goal of IFRS is to provide a global framework for how public companies prepare and disclose their financial statements. IFRS provides general guidance for the preparation of financial statements, rather than setting rules for industry-specific reporting. Why IFRS is to be adopted: Having an international standard is mainly important for large companies that have subsidiaries in different countries. Adopting a single set of world-wide standards will simplify accounting procedures by allowing a company to use one reporting language throughout. A single standard will also provide investors and auditors with a cohesive view of finances. Currently, over 100 countries permit or require IFRS for public companies, with more countries expected to transition to IFRS by 2015. Proponents of IFRS as an international standard maintain that the cost of implementing IFRS could be offset by the potential for compliance to improve credit ratings.

Conceptual framework The Financial Accounting Standards Board in the US defined its conceptual framework as a coherent system of inter-related objectives and fundamentals that should lead to consistent standards that prescribe the nature, function and limits of financial accounting and financial statements. (AT Foulks Lynch)

The main reasons for developing an agreed conceptual framework are that it provides: a framework for setting accounting standards; a basis for resolving accounting disputes; Fundamental principles which then do not have to be repeated in accounting standards.

However, the main draw-back of a conceptual framework is that it can be too general in nature and the principles may, therefore, not help when actually producing the financial statements. In addition, there may be further disagreement as to the content of the framework and the contents of standards.

Comments on: Roles, Development, Objective, Characteristic, Convergence

Roles The Framework actually depicts the basic concepts that bring about the preparation as well as presentation of financial statements for outside users. The IFRS Framework serves as a guide to the Board in developing prospect IFRSs and as a guide to resolving accounting issues that are not addressed directly in an International Accounting Standard or International Financial Reporting Standard or Interpretation. In the absence of a Standard or an Interpretation that specifically applies to a transaction, management must use its judgment in developing and applying an accounting policy that results in information that is relevant and reliable. In making that judgment, IAS requires management to consider the definitions, recognition criteria, and measurement concepts for assets, liabilities, income, and expenses in the IFRS Framework. Objective: The conceptual Framework project aims to update and refine the existing concepts to reflect the changes in market, business practices and the economic environment that have occurred in the two or more decades since the concepts were first develop. The projects overall is to create a sound foundation for future accounting standards that are principles based, internally consistent and internationally converged. Therefore the IASB and the US FASB are undertaking the project.

Qualitative Characteristics:

The conceptual framework of accounting specifies four principal qualitative characteristics that serve as both guide and basis in the preparation of financial statements. These qualitative characteristics include relevance, reliability, understandability and comparability. Relevance

The term relevance simply means that useful information should have the capacity to make a difference in the decision making process of entrepreneurs and managers. It should help data users in predicting the outcome of different business undertakings. on the other hand, relevance is affected by its nature and materiality. A non-material transaction cannot influence a business decision thus it isn't relevant.

In addition, relevance requires that financial accounting information should be pertinent to economic decisions. In order to achieve relevance, financial information should have the ingredients of predictive value, feedback value and timeliness.

Reliability Reliability refers to the degree of confidence data users put on the faithfulness and truthfulness of the financial accounting information. It is an attribute of financial information making it neutral, free from bias and error and complete. The concept of prudence or conservatism also has a direct impact upon the reliability of the financial information. Under conservatism, when options exist, the option which has the least effect on equity should be chosen. Likewise, transactions should also be recorded in accordance of their economic substance and not merely on their legal form.

Understandability

The third qualitative characteristic, understandability requires that financial accounting information must facilitate understanding. Moreover, it should be intelligible and comprehensible to the point that it can be flexible and be understood by not just business executives and stockholders but as well as the general public. It should be presented and expressed in business languages that all data users understand.

However, complex business activities make it impossible to reduce the preparation and presentation of financial statements in simplest terms, thus, the conceptual framework assumes that data users have a reasonable knowledge of business and accountancy.

Comparability

Comparability simply means the ability to compare, to bring together financial accounting information for the purpose of noting similarities, difference and to monitor the growth of the business entity.

It should be comparable horizontally and dimensionally meaning it should be comparable within the entity and across entities. Comparability is necessary to identify current trends in the market, the growth of the company, the performance, benchmarking and to make accurate predictions about future transaction.

These four qualitative characteristics relate to the content and the presentation of quantitative financial accounting information. By applying the concept of these qualitative characteristics in good faith, the effectiveness and usefulness of financial information is ensured. Thus, satisfying the diverse needs of both external and internal data users.

Convergence: The IASB and the US Financial Accounting Standards Board (FASB) have been working together since 2002 to achieve convergence of IFRSs and US generally accepted accounting principles (GAAP). A common set of high quality global standards remains a priority of both the IASB and the FASB. The FASB has undertaken the following six key initiatives to further the goal of convergence of U.S. GAAP with International Financial Reporting Standards (IFRS): 1. Joint projects being conducted with the IASB: Joint projects are those that standard setters have agreed to conduct simultaneously in a coordinated manner. Joint projects involve the sharing of staff resources, and every effort is made to keep joint projects on a similar time schedule at each Board. 2. The short-term convergence project: The short-term convergence project is an active agenda project that is being conducted jointly with the IASB, and it is expected to result in one or more standards that will achieve convergence in certain areas. 3. Liaison IASB member on site at the FASB offices: One of the most visible features of the FASBs daily operations that promote convergence is the presence of a full time IASB member in residence at the FASB offices. James J. Leisenring, a former FASB Board member, is the IASB member currently filling the role of liaison Board member to the FASB. 4. FASB monitoring of IASB projects: IASB projects are monitored by the FASB based upon the FASBs level of interest in the topic being addressed 5. The convergence research project: The FASB staff is currently working on a research project related to convergence. The project seeks to identify all of the substantive differences between U.S. GAAP and IFRS and to catalog those differences according to the Boards strategy for resolving them. The project scope includes differences in standards addressing recognition, measurement, presentation or disclosure. 6. Explicit consideration of convergence potential in all Board agenda decisions: Within the framework of the Boards agenda criteria, all topics formally considered for addition to the FASBs agenda need to be assessed for the possibilities for cooperation with the IASB (or another standard setter). Factors that the Board considers in assessing topics for the agenda include (a) the possibility that resolution would increase convergence of standards worldwide, (b) the opportunities the topic presents for cooperation with other standard setters, and (c) whether appropriate and sufficient resources are available for a joint or other cooperative effort.

Accounting Standards Used In Bangladesh: In Bangladesh, the profession of accountancy developed during the British colonial period. Today it is represented by two professional bodies, the Institute of Cost & Management Accountants of Bangladesh (ICMAB) and the Institute of Chartered Accountants of Bangladesh (ICAB). Chartered Accountants complete their training in practicing firms and specialize in financial accounting, financial audit and tax. CMAs receive particular training in cost audit, management audit and management accounting, as well as general accounting and taxation. Both the ICMAB and ICAB are under the administrative control of the Ministry of Commerce. The Generally Accepted Accounting Principles (GAAP) in Bangladesh is based upon standards set by the ICAB, which has stated its intention to adopt International Financial Reporting Standards (IFRS). As of 2001, 23 such standards had already been adopted, and listed companies are required to use IFRS. Accounting standards regulators in Bangladesh adopted IFRS through three phases, and so far since the full implementation has not completed yet, the adoption is in Stage III. In August 1999, the International Accounting Standards (IASs) adoption process was initiated following a US$200,000 World Bank grant to Bangladeshi Government (Mir & Rahaman, 2005, P826). By the end of 1999 the Institute of Chartered Accountants of Bangladesh (ICAB) has adopted 21 IASs and 16 were under consideration (Mir & Rahaman, 2005, P819). Starting from 2005, all domestic listed companies in Bangladesh were required to use IFRS (UNCTAD, 2006, P8). In addition, IFRS 3 and 5 were adopted as Bangladesh Financial Reporting Standards (BFRS) in December 2005, and IFRS 1, 4, 7 and 8 were adopted as BFRS in 2008 (ICAB, 2007). In 2009, Bangladesh has adopted 8 IFRSs and 26 IASs (Shil, Das & Pramanik, 2009, P5). The adoption and implementation of IFRS are an ongoing program till 2009, and ICAB plan to maintain this ongoing process till June 2010 (ICAB, 2009, P19-20).

Understandability:

Understandability refers to information being readily understandable by users who have a reasonable knowledge of business and economic activities and accounting and a willingness to study the information with reasonable diligence.

Relevance:

To be relevant to investors, creditors, and others for investment, credit, and similar decisions, accounting information must be capable of making a difference in a decision. Relevant information should have predictive value, feedback value, and timeliness.

Reliability:

Reliability is the quality of information that permits users to depend on it with confidence. This means it is verifiable, has faithful representation, and is reasonably free of errors and bias.

Comparability:

Accounting information about an enterprise is extremely useful if it can be compared to accounting information about other enterprises. Comparability results when different enterprises apply the same accounting treatment to similar events.

Consistency: Consistency means conformity from period to period with unchanging policies and procedures. Conformity can be achieved be applying the same accounting treatment to similar events from period to period.

Cost Benefit Relationship: Most decision makers assume that information is a cost free commodity, while providers know it is not. The costs of providing the information should be weighed against the benefits of using the information.