The principles and procedures underlying the work of the FRC where advised by the Accounting Council are set out in several places.
The rubric at the front of FRSs states that they should be read in the context of the Foreword to Accounting Standards and the Statement of Principles for Financial Reporting currently in issue.
The Accounting Council follows these procedures and practices when developing an accounting standard or other definitive statement.
Once the FRC has decided the Accounting Council should include a topic in its work programme, the task of managing the project is given to one of the FRC’s project directors. The project directors are professionally qualified accountants, some directly employed and some on secondment from large accounting firms.
The project director works under the supervision of the chairman and director of accounting, and is responsible for undertaking the necessary research and identifying sources of expertise. As the project develops, the project director identifies issues and suggests solutions, and debates them with the Board.
Normally, an ad hoc panel of consultants will be created. Typically these will include technical partners from some of the larger firms, preparers and users of accounts and academics. The consultants are chosen for their special knowledge or expertise in the topic, and act as a sounding board for the project director.
For most major projects, the first formal stage of the development of a standard will be the publication of a Discussion Paper. Such documents normally set out the need for a new or revised accounting standard, describe the problems perceived and suggest various ways in which a solution might be developed. At this stage the Committee and the FRC Board will not necessarily have a preferred solution, and the objective is to canvass the views of the interested public on the possible approaches. A period of time (normally three months) is given for comments to be sent to the project director.
When the comments have been received they are analysed, and the Committee considers the issues raised by respondents. Unless the respondent has requested confidentiality, sets of responses received are placed on the public record and copies may be purchased from the FRC.
In the course of deciding which of the available options to adopt, the Committee may pursue further enquiries with interested parties, or field-test possible procedures. The FRCwill then publish for further public comment an exposure draft designated a FRED (Financial Reporting Exposure Draft). Sometimes the document will also invite comments on an alternative approach.
Again, when the responses are received they are analysed and considered before the Board reaches its conclusion and issues its final pronouncement in the form of a Financial Reporting Standard or other publication, which specifies the date on which it becomes effective.