2.1 The standard-setting structure

The diagram below illustrates the structure within which standards are set by the International Accounting Standards Board (IASB).

The various elements of the structure are discussed further below.

Unless indicated otherwise, references to IFRS include the following:

• International Financial Reporting Standards – standards developed by the IASB;
• International Accounting Standards (IAS) – standards developed by the International Accounting Standards Committee (IASC), the predecessor to the IASB;
• Interpretations developed by the IFRS Interpretations Committee (Interpretations Committee) or its predecessor, the Standing Interpretations Committee (SIC); and
• International Financial Reporting Standards for Small and Medium-sized Entities (IFRS for SMEs) – a stand-alone standard for general purpose financial statements of small and medium-sized entities (as defined).

2.2 The IFRS Foundation

The governance of the IFRS Foundation primarily rests with the Trustees of the IFRS Foundation (Trustees) who, in turn, act under the terms of the IFRS Foundation Constitution (the Constitution).² Section 17 of the Constitution requires a review, every five years, of the structure and effectiveness of the IFRS Foundation. The last review was completed in 2016 and, as a result, the Constitution was revised in the same year. In addition, in October 2018, the Trustees approved a narrow-scope amendment to the IFRS Foundation's Constitution to extend the term of the Trustee Chair and Vice-Chairs up to a maximum of nine years, taking into account any previous term already served as Trustee, Vice-Chair or Chair, as the case may be. The Trustees also approved an amendment to allow for the Trustee Chair to be appointed from among the Trustees or to be recruited externally. This amendment to the Constitution came into effect on 1 December 2018.³

It is a requirement of the Constitution that, in order to ensure a broad international basis, there must be:⁴

• six Trustees appointed from the Asia/Oceania region;
• six Trustees appointed from Europe;
• six Trustees appointed from the Americas;
• one Trustee appointed from Africa; and
• three Trustees appointed from any area, subject to maintaining overall geographical balance.

The appointment of Trustees to fill vacancies caused by routine retirement or other reasons is the responsibility of the remaining Trustees but subject to the approval of the Monitoring Board as discussed at 2.3 below. The appointment of the Trustees is normally for a term of three years, renewable once.⁵

The Constitution requires that the Trustees comprise individuals that, as a group, provide a balance of professional backgrounds, and have an interest in promoting and maintaining transparency in corporate reporting globally. This includes individuals with global experience at a senior level in securities market regulators, firms representing investors, international audit networks, preparers, users, academics and officials serving the public interest. To achieve such a balance, Trustees are selected after consultation with the accounting and audit profession, the securities market and other public interest bodies, regulators, investors, preparers, users and academics. The Trustees are required to establish procedures for inviting suggestions for appointments from these relevant organisations and for allowing individuals to put forward their own names, including advertising vacant positions.⁶

The Constitution provides that ‘all Trustees shall be required to show a firm commitment to the IFRS Foundation and the IASB as a high quality global standard-setter, to be financially knowledgeable, and to have an ability to meet the time commitment. Each Trustee shall have an understanding of, and be sensitive to, the challenges associated with the adoption and application of high quality global accounting standards developed for use in the world's capital markets and by other users’.⁷

The Trustees are responsible also for appointing the members of the IASB, Interpretations Committee, IFRS Advisory Council (the Advisory Council)⁸ and the Accounting Standards Advisory Forum (ASAF).⁹ In addition, their duties include the following:¹⁰

• appointing the Executive Director, in consultation with the IASB Chair, and establishing his or her contract of service and performance criteria;
• reviewing annually the strategy of the IFRS Foundation and the IASB and its effectiveness, including consideration, but not determination, of the IASB's agenda;
• assuming responsibility for establishing and maintaining appropriate financing arrangements;
• approving annually the budget of the IFRS Foundation and determining the basis for funding;
• reviewing broad strategic issues affecting financial reporting standards, promoting the IFRS Foundation and its work and promoting the objective of rigorous application of IFRS, provided that the Trustees are excluded from involvement in technical matters relating to financial reporting standards;
• establishing or amending operating procedures for the Trustees;
• establishing and amending operating procedures, consultative arrangements and due process for the IASB, the Interpretations Committee and the Advisory Council and reviewing their compliance;
• approving amendments to the Constitution after following a due process, including consultation with the Advisory Council and publication of an exposure draft for public comment and subject to the voting requirements given in the Constitution;
• exercising all powers of the IFRS Foundation except for those expressly reserved to the IASB, the Interpretations Committee and the Advisory Council;
• fostering and reviewing the development of educational programmes and materials that are consistent with the IFRS Foundation's objectives; and
• publishing an annual report on the IFRS Foundation's activities, including audited financial statements and priorities for the coming year.

The IFRS Foundation's funding is derived primarily from voluntary contributions from jurisdictions that have put in place national financing regimes. While funding mechanisms differ, most jurisdictions have established either a levy on companies or a system of publicly supported financing. The IFRS Foundation is continuing its work towards a global funding system characterised by a long-term commitment by jurisdictions, public sponsorship (either direct or implicit governmental or regulatory support), flexibility, proportionally allocated contributions and public accountability in the budget process.¹¹ In 2017, the major funders of the IFRS Foundation were the international accounting firms, the European Commission, Japan and China.¹²

2.3 The Monitoring Board

The Monitoring Board was created to address a perceived lack of accountability and responsiveness by the IASB and the IFRS Foundation to the concerns of its constituents.

The Monitoring Board provides a formal link between the Trustees and public authorities. This relationship seeks to replicate, on an international basis, the link between accounting standard-setters and those public authorities that have generally overseen accounting standard-setters.¹³

The Charter of the Monitoring Board notes that the Monitoring Board's mission is:¹⁴

• to cooperate to promote the continued development of IFRS as a high quality set of global accounting standards;
• to monitor and reinforce the public interest oversight function of the IFRS Foundation, while preserving the independence of the IASB. In that regard;
  • to participate in the selection and approval of the Trustee appointments;
  • to advise the Trustees with respect to the fulfilment of their responsibilities, in particular with respect to regulatory, legal and policy developments that are pertinent to the IFRS Foundation's oversight of the IASB and appropriate sources of IFRS Foundation funding; and
  • to discuss issues and share views relating to IFRS, as well as regulatory and market developments affecting the development and functioning of these standards.

The responsibilities of the Monitoring Board are to:¹⁵

• participate in the process for appointing Trustees and approve the appointment of Trustees;
• review and provide advice to the Trustees on the fulfilment of their responsibilities – there is an obligation on the Trustees to report annually to the Monitoring Board; and
• meet with the Trustees or a sub-group thereof at least annually; the Monitoring Board has the authority to request meetings with the Trustees or separately with the chair of the Trustees and with the chair of the IASB to discuss any area of the work of the Trustees or the IASB.

At the time of writing, the Monitoring Board comprises representatives of:¹⁶

• the IOSCO Board;
• the Securities and Exchange Commission (SEC), United States of America;
• the European Commission;
• the Financial Services Agency, Japan;
• the IOSCO Growth and Emerging Markets Committee;
• the Comissão de Valores Mobiliários, Brazil;
• the Financial Services Commission, Republic of Korea;
• the Ministry of Finance, People's Republic of China;
• the Basel Committee on Banking Supervision (observer);
• the IOSCO Africa and Middle-East Regional Committee (observer); and
• the IOSCO Inter-American Regional Committee (observer).

The current chairman is the representative of the IOSCO Board.

Membership of the Monitoring Board is assessed based on the following criteria:¹⁷

• the member must be a capital market authority responsible for setting the form and content of financial reporting in its jurisdiction;
• the jurisdiction has made a clear commitment to moving towards application of IFRS and promoting global acceptance of a single set of high-quality international accounting standards as the final goal;
• the IFRS standards to be applied should be essentially aligned with IFRS standards developed by the IASB;
• the jurisdiction can be regarded as a major market for capital-raising based on the size of market capitalization, the number of listed companies and capital market activity;
• the jurisdiction makes financial contributions to setting IFRS;
• the jurisdiction has a robust enforcement mechanism to ensure proper implementation of relevant accounting standards; and
• the relevant national or regional standard-setting body is committed to contributing actively to the development of IFRS.

Historically the motivation for the use of IFRS was to facilitate cross-border capital raising and, therefore, the membership of the Monitoring Board was focused on capital markets authorities that were committed to the development of high-quality global accounting standards. While this continues to be a criterion for membership, beginning with the 2016 review of its members, the Monitoring Board will evaluate the integration of IFRS for domestic issuers in that member's jurisdiction.¹⁸

2.4 The International Accounting Standards Board (IASB)

The members of the IASB are appointed by the Trustees.¹⁹ Currently, the IASB comprises 14 members as required by the Constitution. The main qualifications for membership of the IASB are professional competence and recent relevant professional experience.²⁰

The Trustees are required to select IASB members so that the IASB, as a group, will comprise the best available combination of technical expertise and diversity of international business and market experience, including auditors, preparers, users, academics and market and/or financial regulators. No individual should be both a Trustee and a member of the IASB at the same time.²¹ Furthermore, the IASB, in consultation with the Trustees, is expected to establish and maintain liaison with national standard-setters and other official bodies concerned with standard-setting to assist in the development of IFRS and to promote the convergence of national accounting standards and IFRS.²²

The IASB will normally be required to comprise:²³

• four members from Asia/Oceania;
• four members from Europe;
• four members from the Americas;
• one member from Africa; and
• one member appointed from any area, subject to maintaining overall geographical balance.

The responsibilities of the IASB are listed in Section 36 of the Constitution. Its primary role is to have complete responsibility for all IASB technical matters including preparing and issuing IFRS standards (other than interpretations) and exposure drafts, each of which is required to include any dissenting opinions; and final approval of and issuing interpretations developed by the Interpretations Committee.²⁴

Approval by at least eight members of the IASB is required for the publication of an exposure draft and IFRS (which includes final interpretations of the Interpretations Committee), if there are fewer than 14 members of the IASB. If there are 14 members, approval is required by at least nine members.²⁵ Other decisions of the IASB, including the publication of a discussion paper, require a simple majority of the members present at a meeting that is attended by at least 60% of the members.²⁶ The IASB has full discretion over its technical agenda and over project assignments on technical matters. It must, however, consult the Trustees on its agenda, and the Advisory Council on major projects, agenda decisions and work priorities. In addition, the IASB is required to carry out public consultation every five years in developing its technical agenda.²⁷ The most recent agenda consultation took place in August 2015. In November 2016, the IASB published the IASB® Work Plan 2017‑2021 (Feedback Statement on the 2015 Agenda Consultation) on its agenda consultation and its five-year plan. The IASB adopted a central theme for its activities: ‘Better Communication in Financial Reporting’.²⁸

The IASB meets monthly, but not in August. These meetings are open to the public and meeting materials are available on the IASB's website.

2.5 The IFRS Interpretations Committee (the Interpretations Committee)

For IFRS to be truly global standards, consistent application and interpretation is required. The objectives of the Interpretations Committee are to interpret the application of IFRS, provide timely guidance on financial reporting issues that are not specifically addressed in IFRS and undertake other tasks at the request of the IASB.²⁹

The national accounting standard-setting bodies and regional bodies involved with accounting standard-setting are normally consulted on issues referred to the Interpretations Committee.³⁰ The Interpretations Committee is expected to address issues:³¹

1. ‘that have widespread effect and have, or are expected to have, a material effect on those affected;
2. where financial reporting would be improved through the elimination, or reduction, of diverse reporting methods; and
3. that can be resolved efficiently within the confines of existing IFRS standards and the Conceptual Framework for Financial Reporting.’

In addition to developing interpretations, the Interpretations Committee develops minor or narrow scope amendments, including ‘Annual Improvements’. The ‘Annual Improvements Process’ is designed to deal with ‘non-urgent, minor amendments to IFRSs’. Issues dealt with in this process arise from matters raised by the Interpretations Committee and suggestions from IASB staff or practitioners, and focus on areas of inconsistency in IFRS or where clarification of wording is required.

The premise behind the Annual Improvements Process is to streamline the IASB's standard-setting process. If a number of minor amendments are processed together, there will be benefits both to constituents and the IASB. The Interpretations Committee assists the IASB by reviewing and recommending potential amendments to IFRS. ‘Annual Improvements’ is on the IASB's work plan like its other projects and is subject to the same due process.

If the Interpretations Committee does not plan to add an item to its work programme, it publishes a tentative rejection notice in the IFRIC Update and on the IFRS Foundation website and requests comments on the matter. The comment period for rejection notices is normally at least 60 days. After considering comments received, the Interpretations Committee will either confirm its decision and issue a rejection notice, add the issue to its work programme or refer the matter to the IASB. Rejection notices do not have the authority of IFRS standards and, therefore, do not provide mandatory requirements. However, they should be seen as helpful, informative and persuasive. The IASB does not ratify rejection notices.³²

The Interpretations Committee has 14 voting members. The chair, who is appointed by the Trustees, is a member of the IASB, the Director of Technical Activities or an appropriately qualified individual. The chair does not have the right to vote. The Trustees may appoint representatives of regulatory organisations, who have the right to attend and speak at meetings but not the right to vote.³³ Currently, the Basel Committee on Banking Supervision, European Commission and IOSCO have observer status. The quorum for a meeting is 10 members,³⁴ and approval of draft or final interpretations requires that not more than four voting members vote against the draft or final interpretation.³⁵

The Interpretations Committee meets six times a year. All technical decisions are taken at sessions that are open to public observation. The Interpretations Committee supports the IASB in improving financial reporting through timely identification, discussion and resolution of financial reporting issues within the IFRS framework.³⁶ Although the Interpretations Committee develops interpretations, because they are part of the respective IFRS standards, they must be ratified by the IASB.³⁷

2.6 The Due Process Handbook

The Trustees’ Due Process Oversight Committee (DPOC) is responsible for overseeing the due process procedures of the IASB and Interpretations Committee throughout all the development stages of a standard or an interpretation, including agenda-setting and post-implementation reviews (PIRs).⁴¹

The Handbook describes the due process requirements of the IASB and Interpretations Committee.⁴² The requirements are built on the following principles:⁴³

• transparency – the IASB conducts its standard-setting process in a transparent manner;
• full and fair consultation – considering the perspectives of those affected by IFRS globally; and
• accountability – the IASB analyses the potential effects of its proposals on affected parties and explains the rationale for why it made the decisions it reached in developing or changing a standard.

In order to gain a wide range of views from interested parties throughout all stages of the development of IFRS, the Trustees and the IASB have established consultative procedures with the objective of ensuring that, in exercising its independent decision-making, the IASB conducts its standard-setting process in a transparent manner.⁴⁴ The Trustees of the IFRS Foundation published an updated version of the Handbook in June 2016 which includes an enhanced due process for the development and maintenance of the IFRS Taxonomy.⁴⁵ The Handbook specifies some minimum steps that the IASB and the Interpretations Committee are required to follow before a standard or interpretation can be issued.⁴⁶ The following due process steps are mandatory:⁴⁷

• debating any proposals in one or more public meetings;
• exposing for public comment a draft of any proposed new standard, proposed amendment to a standard or proposed interpretation with minimum comment periods;
• considering in a timely manner those comment letters received on the proposals;
• considering whether the proposals should be exposed again;
• reporting to the IFRS Advisory Council (see 2.7 below) on the technical programme, major projects, project proposals and work priorities; and
• ratification of an interpretation by the IASB.

The steps specified in the Constitution that are ‘non-mandatory’ include:⁴⁸

• publishing a discussion document (for example, a discussion paper) before an exposure draft is developed;
• establishing consultative groups or other types of specialist advisory groups;
• holding public hearings; and
• undertaking fieldwork.

If the IASB decides not to undertake any of the non-mandatory steps, it is required to inform the DPOC of its decision and reason (known as the ‘comply or explain’ approach). Those explanations must be published in the decision summaries and in the basis for conclusions with the exposure draft or IFRS in question.⁴⁹

Although not mandatory, the IASB conducts public meetings and roundtables to ensure that it has appropriate input from its constituents.

The IASB normally allows a minimum period of 120 days for comment on an exposure draft. If the matter is narrow in scope and urgent, the IASB may consider a comment period of no less than 30 days, but it will only set a period of less than 120 days after consulting, and obtaining approval from, the DPOC.⁵⁰

Under a ‘fast track’ comment process, if the matter is exceptionally urgent, and only after formally requesting and obtaining prior approval from 75% of the Trustees, ‘the IASB may reduce the period for public comment on an exposure draft to below 30 days but may not dispense with a comment period’.⁵¹

2.7 The IFRS Advisory Council (the Advisory Council)

The Advisory Council (whose members are appointed by the Trustees) provides a forum for geographically and functionally diverse organisations and individuals with an interest in international financial reporting to:

• provide input on the IASB's agenda, project timetable and project priorities; and
• give advice on projects, with emphasis on application and implementation issues, including matters that may warrant the attention of the Interpretations Committee.⁵⁵

A secondary objective of the Advisory Council is ‘to encourage broad participation in the development of IFRS as high-quality, globally-accepted standards.’⁵⁶

The Advisory Council comprises thirty or more members, having a diversity of geographical and professional backgrounds. The chair of the Council is appointed by the Trustees, and may not be a member of the IASB or a member of its staff.⁵⁷ The Advisory Council normally meets at least two times a year, and its meetings are open to the public. It is required to be consulted by the IASB in advance of the IASB's decisions on major projects and by the Trustees in advance of any proposed changes to the Constitution.⁵⁸

Members are appointed for an initial term of three years and may be asked to remain for up to three additional years.⁵⁹

2.8 Accounting Standards Advisory Forum (ASAF)

The ASAF, established in 2013, is an advisory group consisting of national accounting standard-setters and regional bodies, the purpose of which is to provide technical advice and feedback to the IASB.

The membership of the ASAF consists of 12 non-voting members (appointed by the Trustees), plus the chair, who is the IASB chair or vice-chair. To ensure a broad geographical representation, the members are from the following geographic regions:⁶⁰

• one member from Africa;
• three members from the Americas (North and South);
• three members from the Asia/Oceania region;
• three members from Europe (including non-EU); and
• two members appointed from any area of the world at large, subject to maintaining overall geographic balance.

The ASAF meets four times a year, and its meetings are open to the public.

The objective of the ASAF is ‘to provide an advisory forum where members can constructively contribute towards the achievement of the IASB's goal of developing globally accepted high-quality accounting standards.’ The ASAF was established to:⁶¹

• support the IFRS Foundation in its objectives, and contribute towards the development, in the public interest, of a single set of high quality understandable, enforceable and globally accepted financial reporting standards to serve investors and other market participants in making informed resource allocations and other economic decisions;
• formalise and streamline the IASB's collective engagement with the global community of national standard-setters and regional bodies in its standard setting process to ensure that a broad range of national and regional input on major technical issues related to the IASB's standard setting activities are discussed and considered; and
• facilitate effective technical discussions on standard-setting issues, primarily on the IASB's work plan but which may include other issues that have major implications for the IASB's work, in sufficient depth, with representatives at a high level of professional capability and with a good knowledge of their jurisdictions/regions.

As required by the ASAF's Terms of Reference, the Trustees completed their second review of the ASAF in 2018, following the first review undertaken in 2015. There was very positive feedback from the review, highlighting that the ASAF continues to be a key component of the IFRS Foundation's engagement strategy with national standard-setters. Actions taken following the 2015 review have resulted in positive change and there were improvements made to the ‘feedback loop’ between the Board and the ASAF. As a result of the review, the Trustees have decided not to incorporate consultation with the ASAF as a mandatory due process step in the Handbook. The Trustees also found no compelling reason to amend the Constitution to incorporate an explicit reference to the ASAF. The Trustees are amending the Terms of Reference to permit one ASAF meeting a year to be held via videoconference. In addition, the Trustees decided that formal three-yearly reviews of ASAF are no longer necessary and will amend the ASAF Terms of Reference accordingly.⁶²

2.9 Other advisory bodies

In addition to the Advisory Council and the ASAF, discussed in 2.7 and 2.8 above, respectively, above, the IASB has a number of other formal advisory bodies that provide input on its work and resources to consult. Meetings with the advisory bodies are held in public and meeting materials are available on the IASB's website.

The IASB's other advisory bodies are as follows:⁶³

• Capital Markets Advisory Committee – provides the IASB with regular input from the international community of users of financial statements;
• Emerging Economies Group – enhances the participation of emerging economies in the development of IFRS standards;
• Global Preparers Forum – provides the IASB with input from companies preparing financial statements;
• IFRS Taxonomy Consultative Group – helps develop the IFRS Taxonomy;
• Islamic Finance Consultative Group – focuses on potential challenges in applying IFRS to Shariah-compliant instruments and transactions;
• SME Implementation Group – supports the international adoption of the IFRS for SMEs and monitors its implementation;
• World Standard-setters Conferences –helps achieve the G20-endorsed objective of global accounting standards;
• Transition Resource Group for IFRS 17 Insurance Contracts – aids the implementation of IFRS 17 – Insurance Contracts;
• Transition Resource Group for Revenue Recognition – supports the implementation of IFRS 15 – Revenue from Contracts with Customers;
• Consultative Group for Rate Regulation – informs the project on rate regulation; and
• Management Commentary Consultative Group – informs the project on management commentary.

2.10 Cooperation with other standard-setters

The IFRS Foundation acknowledges that developing high-quality IFRS standards hinges on collaboration. In order to achieve its objective to develop a single set of high-quality, understandable, enforceable and globally accepted accounting standards, the IFRS Foundation cooperates with other standard-setters. In its 2018 annual report, the IFRS Foundation identified the following standard setters as stakeholders:⁶⁴

• International Actuarial Association (IAA) – the IAA and the IFRS Foundation signed a memorandum of understanding in April 2015. Among others, the IAA is committed to providing input, as appropriate, to the IASB on proposed amendments to IFRS standards and developments in financial reporting that are relevant to the areas on which actuaries advise;⁶⁵
• International Federation of Accountants (IFAC) – the IFAC and the IFRS Foundation signed a memorandum of understanding in March 2015 under which both parties will continue to liaise to identify opportunities to work together and support one another's public interest objectives;⁶⁶
• International Integrated Reporting Council (IIRC) – the IIRC and IFRS Foundation signed a memorandum of understanding in November 2014, based on which they will work proactively with each other to identify ways and means by which Integrated Reporting and financial reporting standards can be aligned to strengthen corporate reporting;⁶⁷ and
• International Valuation Standards Council (IVSC) – the memorandum of understanding signed between the IVSC and the IFRS Foundation in March 2014 highlighted the co-operation between the parties to ensure that standards and guidance developed by the IVSC on the measurement of fair value is consistent, where appropriate, with IFRS (for example IFRS 13 – Fair Value Measurement) and is comprehensive and well-developed.⁶⁸

3.1 The IASB's current priorities and future agenda

The IASB's 2019 activities focused on:⁶⁹

• developing a new accounting model to give users of financial statements better information about a company's incremental rights and obligations arising from its rate-regulated activities;
• exploring how companies should account for combinations of businesses under common control. Such transactions are outside the scope of IFRS 3 – Business Combinations – and accounted for in different ways;
• exploring whether the Board can develop an accounting model that will enable investors to understand a company's dynamic risk management activities and to evaluate the effectiveness of those activities;
• deciding the direction of the Financial Instruments with Characteristics of Equity project;
• investigating improvements to IFRS 3 and IAS 36 – Impairment of Assets – after feedback from the Post-implementation Review of IFRS 3;
• developing improvements to the structure and content of the primary financial statements, with a focus on the statement(s) of financial performance; and
• addressing research findings about accounting policy disclosures, the implications of technology on financial reporting as part of the IFRS Foundation's broader work in this area, and the use of performance measures in financial statements in its Primary Financial Statements project.

At the time of writing, the IASB's work plan reflects that work on a number of these projects will continue into 2020 and beyond.

The IASB conducted its most recent agenda consultation in August 2015, the outcome of which set the technical priorities until 2021. The work plan has been revised in response to feedback received during the agenda consultation. The IASB has adopted the theme ‘Better Communication in Financial Reporting’ and much of the work will focus on making the financial information more relevant and improving the communication of that information.

3.2 IFRS/US GAAP convergence

‘Convergence’ is a term used to describe the coming together of national systems of financial reporting and IFRS. Between 2002 and 2013, the IASB and FASB had various projects to both improve IFRS and US GAAP, respectively, and to achieve their convergence. In addition, the US Securities and Exchange Commission (SEC) have taken some steps towards the acceptance of IFRS in the US. In 2007, the SEC began permitting foreign private issuers to file IFRS financial statements without reconciliation to US GAAP. In 2008, the SEC set out a proposed roadmap outlining the milestones and conditions that, if met, could lead to the use of IFRS in the US by domestic registrants. In 2011, the SEC staff issued a work plan to explore the incorporation of IFRS into the US financial reporting system. The SEC staff has since published its final report on the IFRS work plan that raised significant concerns about the further incorporation of IFRS in the US capital markets.

In 2013, the convergence process between the IASB and the FASB largely came to an end. One of the messages the IASB staff received from respondents outside of the US to the 2011 agenda consultation was for the IASB to consider whether convergence should continue to be a priority. Ultimately, developing ‘a single set of high-quality, understandable, enforceable and globally accepted financial reporting standards’ has largely superseded convergence as a significant driver of the IASB's agenda setting process. In fact, the Handbook, which was revised in 2013, removed convergence from the list of factors that are influential in setting the agenda.

4.1 Worldwide adoption

Since 2001, there has been a tremendous increase in the adoption of IFRS around the world. The precise way in which this has happened has varied among jurisdictions. This section sets out a brief description of how a number of key jurisdictions in each continent have approached the adoption. Some have adopted full IFRS, i.e. IFRS as issued by the IASB. Other jurisdictions have converged, or have a plan to converge, their standards with IFRS.

An entity is required to apply IFRS 1 – First-time Adoption of International Financial Reporting Standards – when it first asserts compliance with IFRS. The IASB has, therefore, established unambiguously the principle that full application of its standards and related interpretations is necessary for an entity to be able to assert that its financial statements comply with IFRS (as issued by the IASB). Consequently, it is necessary for countries that align their national standards with IFRS to require the application of IFRS 1 so that entities reporting under those standards can assert compliance with IFRS. In addition, an entity that applies IFRS as amended by a local authority cannot assert compliance with IFRS.

The following table summarises IFRS adoption (generally for consolidated financial statements) in jurisdictions with domestic market capitalisation exceeding US$500 billion as at 30 June 2019. For further details on selected locations, see 4.2 to 4.6 below. In addition, the IFRS Foundation is developing profiles of application of IFRS. At the time of writing, profiles for 166 jurisdictions have been completed and are available on the IASB's website.

4.2 Europe

4.3 Americas

4.4 Asia

4.5 Australia

Australia has a regime in which IFRS standards are issued under its legal framework as Australian Accounting Standards. These are essentially word-for-word copies of IFRS (‘IFRS equivalent’). Australian Accounting Standards also include some additional Australian specific paragraphs for not-for-profit and public sector entities.

In addition to the IFRS equivalent Australian Accounting Standards, there are some additional Australian specific standards for entities such as superannuation entities, general insurance and life insurance entities (the insurance standards will be replaced by AASB 17 – Insurance Contracts, which is equivalent to IFRS 17, once effective), not-for-profit entities and public sector entities and some additional disclosures exist within certain standards.

Compliance by Australian private sector for-profit reporting entities with Australian Accounting Standards will result in compliance with IFRS as issued by the IASB, unless they are not publicly accountable and elect to apply the Reduced Disclosure Regime (RDR) framework. Explicit statements of compliance with IFRS – when they are compliant – are required to be made by the preparers (in the notes to the financial statements and in the Directors’ Declaration required by the Corporations Act), as well by the auditors in their reports. Not-for-profit and public sector entities cannot make an explicit statement of compliance with IFRS.

Australia has not adopted IFRS for SMEs, and does not appear likely to in the near future because of measurement differences and the removal of options as compared to IFRS. Australia has a Reduced Disclosure Regime (RDR) for reporting entities that are not publicly accountable (per the IFRS for SMEs definition). This framework requires such entities to apply all of the recognition and measurement requirements of Australian Accounting Standards, but have reduced disclosure requirements. The Reduced Disclosure Regime disclosures are specified and were chosen based on the principles adopted by the IASB in its development of the IFRS for SMEs. Financial statements prepared under the Reduced Disclosure Regime are general purpose financial statements but will not comply with IFRS as issued by the IASB.

Australia also permits non-reporting entities (as defined by Australian Accounting Standards) to prepare special purpose financial statements. Preparers are encouraged to follow the recognition and measurement requirements of Australian Accounting Standards but have flexibility as to the level of disclosure they choose to provide. The Consultation Paper Applying the IASB's Revised Conceptual Framework and Solving the Reporting Entity and Special Purpose Financial Statement Problems, issued by the Australian Accounting Standards Board in May 2018, proposes to eliminate special purpose financial statements for entities required by legislation or otherwise to comply with Australian Accounting Standards. The affected entities may therefore be required in the future to prepare general purpose financial statements in accordance with Australian Accounting Standards. Depending on the nature of the entity, these general purposes financial reports may be fully compliant with IFRS or may be prepared under the RDR.

4.6 South Africa

For periods beginning on or after 1 January 2005, the South African securities exchange, JSE Limited (JSE), has required that all listed companies prepare financial statements under IFRS.

Effective 1 May 2011, the South African Companies Act permits different accounting frameworks to apply to different categories of companies based on their ‘public interest score’. Listed companies are required to use IFRS, however other companies (depending on their public interest score) may apply IFRS, IFRS for SMEs, or in certain situations (introduced, in particular, for micro-entities) entity specific accounting policies as determined by themselves.

In addition to the disclosure requirements of IFRS and IFRS for SMEs, the South African Companies Act and the JSE impose certain additional disclosure requirements on reporting entities. Further, the previous South African standard setter – the Accounting Practices Board – has issued three Financial Reporting Guides. While these interpretations are specific to issues in the South African environment, IFRS reporters in South Africa make use of them as they are based on a framework equivalent to that used for IFRS. These are updated for developments in IFRS.