The way that accounting standards are written suggests that they represent the views of a single voice and are the product of a rationale linear process where consensus has been reached by all parties with an interest. An alternative representation of the development of accounting standards is that of a power struggle between those parties with a vested interest, where choices and compromises may have been made.
Standard setting bodies (in this case the International Accounting Standards Board, (IASB)) have the challenge of developing accounting standards that will result in financial statements that,
“ provide present and potential investors, lenders and other creditors with information that will enable them to make decisions about buying, selling , or holding equity or debt instruments and providing or setting loans or other forms of credit” (IASB, 2010. p4).
As part of your professional training you are expected not only to be able to prepare accounts that comply with the relevant accounting standards, but also to have a critical understanding of the extent to which the regulatory framework meets the objective of providing useful information to users. In my experience students find this aspect of the syllabus difficult, in particular students seem to find it difficult to know where to start.
One way of structuring an evaluation of a particular standard is to evaluate the standard against what the IASB describes as the fundamental and enhancing characteristics of useful information. The IASB in the conceptual framework defines the fundamental characteristics as both faithfully represented and relevant and the enhancing characteristics as comparability, timeliness, verifiability and understandably (IASB, 2010).
Your evaluation of the standard should consider the extent to which the standard meets each of these criteria. For example to what extent is the information is relevant? Is the information complete or has this been compromised to ensure faithful representation or vice versa? Under exam conditions when the pressure is on, if you’re unsure where to start then structuring your analysis in this way will give you a start and hopefully help if you’re mind has gone blank.
IASB (2010) The conceptual framework for financial reporting [Online]. Available at: https://www.iasplus.com/en/standards/other/framework [accessed 29th June 2017].