On May 15, 2002, the International Accounting Standards Board (IASB) released an exposure draft on "Improvements to International Accounting Standards." The draft introduces a series of wide-ranging improvements to 12 of the 34 standards IASB inherited from its predecessor, the International Accounting Standards Committee (IASC). The proposed revisions are the IASB's initial response to demands made by the International Organization of Securities Commissions (IOSCO), national standard-setters, and other important commentators.
The proposed improvements include the following:
- The definition of related parties will be extended to cover more parties (eg joint ventures and pension plans) and more information (e.g., amounts of transactions and balances, terms and conditions, details of guarantees).
- It will no longer be permitted to label items of income or expense as extraordinary items either in the income statement or in the notes.
- LIFO (last in, first out—an inventory valuation method sometimes used in the US and elsewhere) will be prohibited.
- Voluntary changes in accounting policies and corrections of errors will now have to be accounted for retrospectively. Companies will no longer have the option of running them through current income.
- Disclosure is required of the critical judgments made by management in applying accounting policies.
- Disclosure is required of the key assumptions about uncertainties made by management that could cause material adjustment of the carrying amounts of assets and liabilities in financial statements.
The exposure draft will be available for free on the IASB's Web site after May 25, 2002. Comments are due by September 16, 2002.
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