International Accounting Standards Board (IASB) is an independent international accounting standard setting body to develop a single set of high-quality accounting standards that are acceptable and implemented by all member states. Since its establishment, IASB has issued several accounting standards and technical papers through a process that involves an independent group of experts selected through recommendations made by the Trustee Nominating Committee (IASB, 2009). These experts are involved in six stages of developing accounting standards as set out by IASB (IASCF, 2008). In the following, these stages are assessed for the possibilities of issuing a new accounting standard within the next ten years that would address the compulsion of detailed environmental and social disclosures by businesses.Let our writers help you! They will create your custom paper for $12.01 $10.21/page 322 academic experts online
The first stage of this process is setting the agenda that is to address the accounting issues raised in the Kyoto Agreement which placed great emphasis on developing a standard that deals with measurement and reporting of obligations related to GHG emission. IASB has planned the project of setting the new standard in collaboration with FASB. Where technical staff from both regulatory bodies is working together and various issues related to Emission Trading Scheme (ETS) as proposed by both bodies are discussed. Both bodies had previously issued respective accounting standards but were rejected by businesses as they were argued based on capture theory that governments have imposed on these standards businesses with no real benefit to the general public and increased burden on businesses which would simply add cost to their operations (Deegan, 2009). On the whole, it would make them less competitive compared to those companies operating in less regulated economies. This could be viewed using capture theory which suggests that those regulated through the standard-setting process can impose influence on regulators to amend standards to make them acceptable (Porwal, 2001). In 2008 both bodies decided to carry out a commitment phase to develop a single accounting standard on environmental obligations of businesses. Since the announcement of a joint agreement between FASB and IASB several discussion meetings have been held till now and discussion papers have been developed for their review. Decisions made during these meetings are based on discussions regarding proposed approaches on the treatment of obligations and allowances to be imposed and offered respectively under ETS. Joint efforts are also being drafted based on the guidelines used by the EU for its Cap & Trade Program (Fornaro, Winkelman, & Glodstein, 2009). However, it has been observed that culture and environment differences between IASB and FASB are surely considered as a hurdle in a single accounting standard-setting process. Both regulatory bodies are far apart from each other on this issue as FASB is under pressure from the local business community to opt for easier regulation where IASB is driving for the much stricter rule for compliance (Sawani, 2009). There is still no specified method of capturing issues related to determining businesses’ obligations environmental and social disclosures. However, businesses have started to make environmental and social disclosures to legitimize their existence and operations in society as members of these societies are becoming increasingly aware of corporate responsibilities and expect them to contribute to communities from which they are extracting resources (Khor, 2009). Yet not a single measure for assessing environmental obligations has been developed. The latter three stages which involved developing a draft exposure, publication of IFRS, and issues after issuance of IFRS are far from being achieved. Implementation of this IFRS could also face resistance as regulatory bodies and governments could view it to be overburdening and not suitable for businesses operations (Belkaoui, 2004). However, it could be suggested that it is in the public interest that businesses are held responsible for the effects of their operations on the environment and other social issues including employees’ welfare and community service. It could therefore be suggested that although the process of development of a single account standard is slow and painstaking IASB should be able to reach its objective of accounting standard on detailed environmental and social disclosures by businesses within the next 10 years.
Belkaoui, A. R. (2004). Accounting Theory. New York: Cengage Learning EMEA.
Deegan, C. (2009). Financial Accounting Theory. North Ryde : McGraw-Hill.
Fornaro, J. M., Winkelman, K. A., & Glodstein, D. (2009). Accounting for Emissions.
IASB. (2009). About Us. Web.Order now, and your customized paper without ANY plagiarism will be ready in merely 3 hours!
IASCF. (2008). Due Process Handbook for the IASB. London: International Accounting Standards Committee Foundation.
Khor, A. K. (2009). Social Contract Theory, Legitimacy Theory and Corporate Social and Environmental Disclosure Policies: Constructing a Theoretical Framework. Nottingham: Nottingham University Business School.
Porwal, L. S. (2001). Accounting Theory. New Dehli: Tata McGraw-Hill.
Sawani, A. (2009). The Changing Accounting Environment: International Accounting Standards and US implementation. Journal of Finance and Accountancy , 1-9.