Author Update- Summer 2002

Chapter 8 – International Accounting Harmonization

Page 302 – Exhibit 8-3

As of June 2002, no International Financial Reporting Standards (IFRS) had been

issued by the IASB. However, the IASB has issued an exposure draft that would amend
IAS 1, 2, 8, 10, 15, 16, 17, 21, 24, 27, 28, 31, 33, and 40. Among the amendments are:
 IAS 1 – Added accounting policy disclosures: (a) judgments made by
management in applying the accounting policies that have the most significant
effect on the amounts of items recognized in the financial statements; (b) key
assumptions about the future, and other sources of measurement uncertainty, that
have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year.
 IAS 2 – LIFO will be eliminated.
 IAS 8 – All material errors and voluntary changes in accounting policies will be
accounted for retroactively; cumulative effect recognition in the income statement
will be prohibited. The extraordinary item classification on the income statement
will be eliminated.
 IAS 15 – Will be withdrawn.
 IAS 16 – Exchanges of similar items of property, plant, and equipment will be
recorded at fair value, and a gain or loss recognized.

The Exposure Draft is available on the IASB’s web site (www.iasb.org.uk) and a
summary is available at www.iasplus.com.

Page 306 – Recognition and Support for the IASB

In December 2001, the European Council of Ministers confirmed the European

Commissions requirement that EU companies listed on recognized stock exchanges will
prepare their consolidated financial statements using IAS. However, European
companies currently using U.S. GAAP will have until 2007 to switch to IAS. Member
states also have the option of requiring international standards for non-listed companies.

Pages 307-308 – Comparisons between IAS and Other Comprehensive Bodies of

Accounting Principles

GAAP 2001 is a survey of national accounting rules benchmarked against IAS. It

is available online at www.ifad.net.

Page 313 – The EU’s New Approach and the Integration of European Financial Markets
 The European Financial Reporting Advisory Group (EFRAG) was established in June
2001. EFRAG will promote “European interests” as the IASB develops and deliberates
accounting standards and will act as the EU’s accounting technical committee for
purposes of evaluating IAS. The main functions of EFRAG are:
 Proactive contribution to the work of the IASB, including submissions on
discussion papers and exposure drafts and the development of technical and
conceptual papers on emerging topics;
 Initiating changes to the EU Accounting Directives;
 Technical assessment of final IASB documents;
 Provision of implementation guidance when necessary to ensure consistent
application of a given standard within the EUI.

The European Commission has also established a European Securities Committee and
a Committee of European Securities Regulators. The two advisory committees will assist
the Commission in implementing the Financial Services Action Plan and speeding up the
legislative process.