Introduction to the Regulatory Framework for Accounting

The need for a Regulatory Framework

It is important that general guidelines be available to resolve accounting issues. Without these
basic guidelines, every enterprise would have to develop its own set of accounting practices and
therefore accountants would have to become familiar with every company's peculiar accounting
and reporting rules in order to understand their financial statements. It would also be difficult, if
not impossible to compare the financial statements of different companies.

The accounting profession has established a set of standards and rules that are recognized as
a general guide for financial reporting purposes. This recognized set of standards is called
Generally Accepted Accounting Principles (GAAP). "Generally accepted", means that these
principles must have substantial authoritative support. Such support usually comes from two
standard-setting bodies, namely, International Accounting Standards Committee (IASC); now
the International Accounting Standards Board (IASB) which is responsible for issuing the
International Accounting Standards (IAS) or the International Financial Reporting Standards
(IFRS) and the Financial Accounting Standards Board (FASB) which issues the Financial
Accounting Standards (FAS) in the United States. Hence the two main approaches to
accounting; (i) Principles based approach (conceptual framework) such as that used by the UK
Accounting Standards Board (ASB) and (ii) Rules based approach such as that used in the US.

Since the 1970s these bodies have been responsible for developing accounting standards.
Their job is an ongoing process in which accounting principles change to reflect changes in the
business environment and in the needs of users of accounting information. Prior to the
establishment of the IAS accounting principles were developed on a problem-by-problem b.
That is, rule-making bodies developed and issued accounting rules methods to solve specific
problems. As a result, there were no consistent rules and practices over time.

Background to the IASB (IFRS regulatory system)

The International Accounting Standards Committee (IASC) was founded as a result of an
agreement by accountancy bodies from around the world The IASC had about 140 member
bodies from 104 countries. The IAS was founded in June 1973 in London and replaced by the
International Accounting Standards Board (IASB) on 1 April 2001, with the IAS assuming the
responsibility of developing the International Accounting Standards and promoting the use and
application of these standards. The IASB is an independent, privately-funded accounting
standard setter based in London. The members of the IASB have a variety of backgrounds
comprising a mixture of auditors, preparers of financial statements, academics.

Objectives of the IASB

In 2001, a new constitution and structure came into force. The constitution set out the
objectives of the IASB as follows:
 ● to develop, in the public interest, a single set of high qual understandable, and
enforceable global accounting requires transparent and comparable information in
general purpose financial statements standards.

● to promote the use and rigorous application of those standards; and

● to cooperate with national accounting standards setters to achieve convergence in
accounting standards around the world.

Structure of the IASB

The structure of the IASB as at 1" January 2009

The structure of the IASB has the following main features: The IASB foundation is an
independent corporation having two main
bodies;
(i) the Trustees and
(ii) the Board
There are also two further bodies,
(iii) Standard Advisory Council and the (iv) International Financial Reporting Interpretation
Committee.
• Monitoring Board (MB)
The board provides a formal link between the Trustees and Public Authorities which seeks to
replicate, on the international basis, the link between accounting standard-setter and public
authorities. responsibility of the board shall be: There

(i) To participate in the process for appointing trustees and to approve their appointment,
(ii) To review and approve advice to the Trustees. The Trustees shall make an annual written
report to the Monitoring Board, and
(iii) To meet the Trustees or a sub-group of the Trustees at least once annually and have the
authority to request a meeting with the Trustees.

IFRS Foundation (Trustees)

● > The International Accounting Standards Committee Foundation is an independent, not
for profit foundation based in the USA.
● > The governance and oversight of the activities undertaken by the IFRS Foundation
and its standard-setting body rests with its Trustees, who are also responsible for
safeguarding the independence of the IASB and ensuring the financing of the
organization.
● > The Trustees of the foundation appoint the members of the IFRS Board, IFRS
Advisory Committee and IFRS Interpretation Committee. > The Trustees are publicly
accountable to the Monitoring Board.

● IFRS Board
● >The IFRS Board is the independent standard-setting body of the IFRS Foundation.
● > Its members (currently 15 full-time members) are responsible for the development and
publication of International Financial Reporting Standards (IFRSS), formally known as
International Accounting Standards (IAS), and for approving Interpretations of IFRSS as
developed by the IFRS Interpretations Committee (formerly called the IFRIC).
● The main qualification for membership of the IFRS Board is professional competence
and practical experience. The Trustees are required to select members so that the IASB,
as a group, will comprise the best available combination of technical expertise and
international business and market experience, and to ensure that the IFRS Board is not
dominated by any particular constituency or geographical interest.
● > All meetings of the IFRS Board are held in public and webcast.
● In fulfilling its standard-setting duties the IFRS Board follows a thorough, open and
transparent due process of which the publication of consultative documents, such as
discussion papers and exposure drafts, for public comment is an important component.
● The IFRS Board engages closely with stakeholders around the world. including
investors, analysts, regulators, business leaders, accounting standard-setters and the
accountancy profession.
 ● IFRS Advisory Council
● The primary objective of the IFRS Advisory Council is to give advice to the IFRS Board
on important decisions that the IFRS Board may be considering. At time the council
advises the trustees.
● As a result, the IFRS Advisory Council provides a forum where the IFRS Board consults
individuals, and representatives of organizations affected by its work, that are committed
to the development of high quality International Financial Reporting Standards (IFRSS).
● The IFRS Advisory Council comprises about forty (40) members and normally meets at
least three times a year. Its meetings are open to the public and its chairman is
appointed by the trustees.
As part of the consultative process the IFRS Advisory Council give advice to the IFRS Board on
a range of issues which includes, but not limited to, the following:
● (i) inputs on the IFRS Board's agenda;
● (ii) input on the IFRS Board's project time (work programme including project priorities
and consultation on any changes agenda
● (iii)advice on projects.
A secondary objective of the IFRS Advisory Council is to support the IFRS Board in the
promotion and adaptation of IFRS throughout the world. This may include the publishing of
articles supportive of IFRS and addressing public meetings on the same subject.

> The IFRS Advisory Council is composed of individuals, representatives of organizations,

interested in the development of highs are: quality IFRSS.
de process
Setting t
> The members are drawn from user groups, prepares, financial analysts, IFRS B academics,
auditors, regulators, and professional accounting bodies.

IFRS Interpretations Committee

> The IFRS Interpretations Committee (formerly called the IFRIC) is the interpretative body of
the IFRS Board.
> The Interpretations Committee comprises 14 voting members appointed by the Trustees and
drawn from a variety of countries and professional backgrounds.
>The mandate of the Interpretations Committee is to review on a timely basis widespread
accounting issues that have arisen within the context of current IFRSS and to provide
authoritative guidance on those issues.

IFRIC is responsible for publishing draft interpretations after seeking clearance from the board
for public comment and consider comments
made within a reasonable period before finalizing an interpretation > The committee reports to
the board and obtains board's approval for final interpretation.
> Interpretation Committee meetings are open to the public and webcast. In developing
interpretations, the Interpretations Committee works closely with similar national committees
and follows a transparent, thorough and open due process.
Development of an IFRS (Process Involved) International Financial Reporting Standards
(IFRSS) are set in a similar manner as the setting of the previous IASS in accordance with the
IASB's due process. The IFRS Board has six (6) stages of standards setting.
These are:

(1) Setting the Agenda:

The IFRS Board considers the following factors when adding agenda
items:
The relevance to users of the information involved and the reliability of information that could be
provided;
Existing guidance available;
Quality of the Standards to be developed; The possibility of increasing convergence;
Resource constraints.

(2) Project Planning:

A working group will be established. The duties of Project Managers

● Proposing the due process and a time table for IFRS Board's
● consideration;
● Preparing the due process and a timetable for IFRS Board' consideration;
● Preparing IFRS Board meeting materials, including observer notes:
● Developing staff recommendations;
● Presenting the different views of constituents and facilitating
● debates during IFRS Board's meetings;
● Preparing materials for meetings and assisting with communications with working groups
and constituents;
● Preparing updates for the IFRS Board's Website to enable the public to follow the
progress of the project; and
● Co-ordinating the due process throughout the life of the project.

(3) Development and Publication of a Discussion Paper

This includes;
● A comprehensive overview of the issue;
● Possible approaches in addressing the issue;
● The preliminary views of its authors or the IFRS Board; and
● An invitation to comment.
●
(4) Development and Publication of an Exposure Draft:
● This is the IASB's main vehicle for consulting the public.
● This process begins with the IFRS Board considering issues on the basis of staff
research and recommendations, as well as comments received on any discussion paper,
made by the IFRS Advisory Council, working groups and accounting standard setters
and arising from public education sessions.
 ● After resolving issues at its meetings, the IFRS Board instructs the staff to draft the
exposure draft.
● An exposure draft contains an invitation to comment on a draft standard, or amendment
to a standard that proposes requirements on recognition, guidelines and disclosures,
● The IFRS Board normally allows a period of 120 days for comments on an exposure
draft
●
(5) Development and Publication of an IFRS:
● IFRS Board considers the comments received on the exposure draft. They consider
whether it should expose its revised proposal for public comments, for instance, by
publishing a second exposure draft.
● When it is satisfied that it has reached a conclusion on the issues arising from the
exposure drafts, it instructs the staff to drafts ISA or the IFRS.
● In considering the need for re-exposure, the IFRS Board:
(i) Identifies substantial issues that emerges during the comment period on the exposure draft
that it had not previously considered;
(ii) Assesses the evidence that it has considered;
(iii) Evaluate whether it has sufficiently understood the issues and actively sought the views of
constituents;
(iv) Consider whether the various viewpoints were aired in the exposure draft and adequately
discussed and reviewed in the basis for conclusion on the exposure draft.

After resolving issues at its meetings, the IFRS Board instructs the staff to draft the exposure
draft.
An exposure draft contains an invitation to comment on a draft standard, or amendment to a
standard that proposes requirements on recognition, guidelines and disclosures,
The IFRS Board normally allows a period of 120 days for comments on an exposure draft

(5) Development and Publication of an IFRS:

● IFRS Board considers the comments received on the exposure draft. They consider
whether it should expose its revised proposal for public comments, for instance, by
publishing a second exposure draft.
● When it is satisfied that it has reached a conclusion on the issues arising from the
exposure drafts, it instructs the staff to drafts ISA or the IFRS.
In considering the need for re-exposure, the IFRS Board:
(i) Identifies substantial issues that emerges during the comment period on the exposure draft
that it had not previously considered;
(ii) Assesses the evidence that it has considered;
(iii) Evaluate whether it has sufficiently understood the issues and actively sought the views of
constituents;
(iv) Consider whether the various viewpoints were aired in the exposure draft and adequately
discussed and reviewed in the basis for conclusion on the exposure draft.

(6) Procedure after IFRS is issued:

 ● The staff and the IFRS Board members hold regular meetings with interested parties,
including other standards-setting bodies to help understand unanticipated issues related
to the practical implementation and potential impact of its proposals.
● After a suitable time, the IFRS Board may consider initiate studies in the light of:
> Its review of the IFRS application;
> Changes in the financial reporting environment and regulatory requirements, and
> Comments by the IFRS Advisory Council, the IFF
Interpretations Committee, Standard-Setters and Constituent about the quality of the IFRS.
Those studies may result in items being added to the IFR
Board's agenda.

IASB Liaison Members

● Seven of the full-time members of the IASB have formal liaison responsibilities with
national standard setters in order to promote the convergence of national accounting
standards and International Accounting Standards.
> The IASB envisages a partnership between the IASB and these national standard setters as
they work together to achieve convergence of accounting standards worldwide.
> The countries with these liaison members are Australia and New Zealand, Canada, France,
Germany, Japan, UK and USA.

Learn The Table i.e. IAS Standards and IFRS

Benefits of the Regulatory Framework (Advantages)

● 1) Investors are protected against perceived abuse
● 2) It ensures that accounting information is disclosed in a uniform manner and this
enables the comparison of companies in the same industry.
● 3) Governments of developing countries could attempt to control the activities of foreign
multinational companies in their own country. These companies would not "hide" behind
foreign accounting practices which are difficult to understand.
● 4) It helps create a level of public disclosure deemed necessary and adequate for
decision making.
● 5) Without regulation, some companies may be reluctant to disclose some information
about the entity.
● 6) It avoids extreme and negative behavior.

The Limitations of the Regulatory Framework (Disadvantages)

● 1) It has a high corporate cost for compliance with regulation of accounts.
● 2) Standard setting may become increasingly political as special interest groups may
attempt to lobby the regulating agency for special treatment.
● 3) Standard setting may hinder the conduct of research and experimentation of
accounting policy.
 ● 4) Cultural differences result in objectives for accounting systems differing from country
to country.
● 5) Different purposes of financial reporting: In some countries the purpose is solely for
tax assessment, while in others it is for investor's decision-making.
● 6) Different user groups: Countries have different ideas about who the relevant user
groups are and their respective importance.
● 7) Different legal systems: These prevent the development of certain accounting
practices and restrict the options available.
● 8) The lack of strong accounting bodies: Many countries do not have strong independent
accounting or business bodies which would press for better standards and greater
harmonization.

Institute of Chartered Accountants, Ghana (ICAG)

● The Institute of Chartered Accountants of Ghana is a professional accountancy
organization in Ghana.
● It is the sole such organization in Ghana with the right to award the Chartered
Accountants designation, and with the right to regulate the accountancy profession in
Ghana.
● The Institute of Chartered Accountants (Ghana) was established by an Act of
Parliament, Act 170, in 1963.
● • Members of the organization are the only persons recognized under the Companies
Act (Act 179) 1963, to pursue audits of company accounts in Ghana.
● It is governed by a council of eleven chartered accountants. The Council, headed by a
President, holds office for a period of two (2) years.
The Institute of Chartered Accountants (Ghana) is a member of two international bodies, the
sub-regional ABWA or Association of Accountancy Bodies in West Africa, and the IFAC or
International Federation of Accountants, the worldwide organization for the accountancy
profession.

The Institute currently runs two distinct programmes.

● Institute of Chartered Accountants (ICA), Professional Programme.
● Ghana Accounting Technicians (GAT), Technicians Programme.

A candidate who successfully completes the professional programme and obtain a working
experience in accountancy, approved by the Council of the Institute, qualifies to use the
designatory letter 'CA' after his/her name

The ICAG Syllabus from May 2015

Part 1: Knowledge Level;
1.1 Financial Accounting
1.2 Business Management and Information System
1.3 Business and Corporate Law
1.4 Quantitative tools in Business
Part 2: Application Level;
1.1 Financial Reporting
1.2 Public Sector Accounting and Taxation
1.3 Cost and Management Accounting
1.4 Audit and Assurance
1.5 Financial Management
1.6 Corporate Strategy, Governance and Ethics

Part 3: Advanced Level;

1.1 Advanced Financial Reporting
1.2 Advanced Audit and Assurance
1.3 Advanced Financial Management
1.4 Advanced Taxation and Fiscal Policies

Exemption Policy
● 1) Holders of the following qualifications (awarded by recognised institutions) are
exempted from Part 1 and Audit and Assurance of
● Part 2 of the qualifying examinations;
University Degree in Accountancy
HND Accountancy Option

GAT/ATSWA
● 1) Holders of any Diploma Certificate from recognized tertiary institutions are exempted
from Part 1 of the qualifying examinations. Diploma in Business Studies (DBS) awarded
by Technical Examination Division of Ghana Education Service does not qualify for this
exemption.
● 2) Holders of university degrees (other than those specified in (1) above) and
comparable professional qualifications recognized by the Institute would be granted
exemption on subject basis on the merit of subjects passed as indicated on the
academic transcript.
● 3) Holders of master degree (accounting option) awarded by recognized universities
would be granted exemption from Part 1 and 2. (Except Public Sector Accounting and
Taxation)
● 4) Exemptions would not be extended to any paper in Part 3. Part 3 papers are to be
written and passed by all students.
Association of Chartered Certified Accountants (ACCA)
● ACCA is the global body for professional accountants.
● The aim of the association is to offer business-relevant, first-choice qualifications to
people of application, ability and ambition around the world who seek a rewarding career
in accountancy, finance and management.
● The association supports 140,000 members and 404,000 students throughout their
careers, providing services through a network of 83 offices and active centers.
● ACCA has global infrastructure which is used to support its students in writing
professional examinations in accountancy.
● > The association uses it expertise and experience to work with governments, donor
agencies and professional bodies such as the International Federation of Accountants
(IFA) to develop the global accountancy profession and to advance the public interest.
● The reputation of ACCA is grounded in over 100 years of providing world-class
accounting and finance qualifications. ACCA champions opportunity, innovation,
diversity, integrity and accountability.
● By promoting its global standards, and supporting members wherever they work, the
association's aim is to meet the current and future needs of international business.

Tutorial Questions

1. Briefly describe the structure of the IASB

2. Briefly explain the role of the following bodies in relation to accounting standards:
(i) IFRS Foundation
(ii) International Accounting Standards Board (IASB)
(iii) IFRS Advisory Council
(iv) IFRS Interpretation Committee
(v) Consultative Group
3. List the stages of the Standard Setting Procedure.
4. State five factors to consider when setting agenda under standard setting.
5. State five duties of Project Managers under project planning in standard setting.
6. What is the main vehicle of IFRS Board under the standard setting
Procedure?