The International Accounting Standards Board and the International Federation of Accountants agreed Tuesday to strengthen their cooperation on developing accounting standards for both the private and public sectors.

While the IASB is primarily responsible for developing International Financial Reporting Standards, which it is in the process of converging with U.S. GAAP, IFAC supports the International Public Sector Accounting Standards Board, which is responsible for developing International Public Sector Accounting Standards. IPSAS are used by an increasing number of public authorities, including national and local governments, agencies and regulatory bodies from around the world, and by many international organisations.

The boards acknowledged they have worked together in the past, but the new agreement represents a further commitment to strengthen the cooperation between the two boards to ensure greater consistency in their respective standard-setting activities.  Many of IFAC’s public sector accounting standards are primarily drawn from IFRS, and the new agreement, in the form of a memorandum of understanding, reflects the IASB’s and IFAC’s shared conviction that the transparency provided by high-quality financial reporting standards contributes significantly to the effective functioning of capital markets and sound economic growth. 

The MoU also acknowledges the ongoing working relationship between the IASB and the International Auditing and Assurance Standards Board, which is also supported by IFAC. As part of this relationship, the IAASB seeks to advise the IASB on issues surrounding verifiability and auditability of proposed accounting standards.

“The ongoing financial crisis has shown the importance of transparency in financial reporting by both private and public sector entities,” IASB chairman Hans Hoogervorst in a statement. “This agreement strengthens the already close ties between the IASB and the IFAC and will serve as a platform for further cooperation.”

The agreement is consistent with the conclusions of the IFRS Foundation Trustees’ strategy review, which called for greater interaction between the IASB and other accounting standard-setting authorities.

“The sovereign debt crisis has exposed the risk to financial stability from poor quality financial reporting by governments, and demonstrated that transparency is a prerequisite for confidence,” said IFAC CEO Ian Ball. “International Public Sector Accounting Standards are the benchmark for financial reporting in the public sector and the means for governments to signal their commitment to transparency. This agreement accelerates the existing cooperation between the two boards and enhances the IPSASB’s ability to continue to develop high-quality standards.”

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