IFRS Regulatory Framework and Compliance 2 — Questions and Answers
Question 1: Which body is responsible for setting IFRS Accounting Standards?
- Financial Accounting Standards Board (FASB)
- International Accounting Standards Board (IASB) (Correct answer)
- Securities and Exchange Commission (SEC)
- International Federation of Accountants (IFAC)
Correct answer: International Accounting Standards Board (IASB)
The IASB, operating under the IFRS Foundation, is solely responsible for developing and issuing IFRS Accounting Standards.
Question 2: What is the role of the IFRS Interpretations Committee?
- To issue new IFRS standards independently
- To provide guidance on applying existing IFRS where divergent interpretations have arisen (Correct answer)
- To enforce compliance with IFRS in member jurisdictions
- To approve all IASB exposure drafts before publication
Correct answer: To provide guidance on applying existing IFRS where divergent interpretations have arisen
The IFRS Interpretations Committee issues IFRIC Interpretations to address divergent application of existing IFRS requirements.
Question 3: Under the IFRS Foundation's governance structure, which body provides oversight of the IASB?
- The IFRS Advisory Council
- The Monitoring Board
- The IFRS Foundation Trustees (Correct answer)
- The IASB itself
Correct answer: The IFRS Foundation Trustees
The IFRS Foundation Trustees appoint IASB members, oversee its work, and ensure the independence of the standard-setting process.
Question 4: A US private company voluntarily adopts IFRS. Which regulatory body's rules would primarily govern this decision?
- The IASB
- The SEC (Correct answer)
- The AICPA
- The PCAOB
Correct answer: The SEC
The SEC governs financial reporting requirements for US entities; public companies must use US GAAP, and private companies follow AICPA guidance on permissible frameworks.
Question 5: Which of the following correctly describes 'endorsement' of IFRS by a jurisdiction?
- The jurisdiction requires all entities to use IFRS without modification
- The jurisdiction reviews and formally adopts IFRS into its local legal framework, sometimes with modifications (Correct answer)
- The jurisdiction allows only foreign companies to use IFRS
- The jurisdiction prohibits local companies from using IFRS
Correct answer: The jurisdiction reviews and formally adopts IFRS into its local legal framework, sometimes with modifications
Endorsement means a jurisdiction formally incorporates IFRS into its legal or regulatory system, often after a review that may result in carve-outs or modifications.
Question 6: What is the 'due process' requirement in IFRS standard-setting?
- A legal process for enforcing IFRS compliance globally
- A structured consultation process including public exposure of proposed standards before finalisation (Correct answer)
- An internal IASB voting procedure requiring unanimous agreement
- A requirement for all standards to be reviewed by national governments
Correct answer: A structured consultation process including public exposure of proposed standards before finalisation
IASB due process involves public consultation through discussion papers, exposure drafts, and comment periods before a standard is finalised.
Question 7: Under IAS 8, when a new IFRS standard is issued but not yet effective, what must an entity disclose?
- Nothing until the standard becomes effective
- The standard's name and effective date only
- The known or reasonably estimable information relevant to assessing the possible impact of the new standard (Correct answer)
- A full pro-forma set of financial statements under the new standard
Correct answer: The known or reasonably estimable information relevant to assessing the possible impact of the new standard
IAS 8 requires disclosure of the likely impact of a new standard not yet effective, or a statement that the impact cannot yet be reasonably estimated.
IFRS Regulatory Framework and Compliance 2
Which body is responsible for setting IFRS Accounting Standards?