Saturday 20 March 2010

Financial crisis

IASB response to the financial crisis

The International Accounting Standards Board (IASB) is reviewing accounting issues emerging from the global financial crisis, including those identified by the G20 and other international bodies such as the Financial Stability Board. Committed to a global approach, the IASB is working closely with the US Financial Accounting Standards Board.

Read an update on the IASB / IASC Foundation response to the G20 report (March 2010)
View a summary of how the IASB has responded to concerns expressed by EU stakeholders on the project to replace IAS 39 Financial Instruments/STRONG>/SPAN>(added 12 November 2009)
View the timeline for an overview of the latest measures taken by the IASB in response to the financial crisis (last update 5 November 2009)
View a letter from the IASC Foundation Trustees to participants of the G20 meeting on 24-25 September 2009 in Pittsburgh, USA (added 16 September 2009)
View a letter from the IASC Foundation Chairman to the Monitoring Board detailing the IASB’s response to the G20 and the organisation’s initial assessement of the recent US FASB changes (added 21 April 2009)
View an overview of how the IASC Foundation and the IASB responded to the G20 conclusions (last update 27 August 2009)
View a speech by Board Member John Smith at the European Commission Conference on the IASB’s response to the financial crisis (May 2009)
View an overview of the IASB activities related to the crisis below (last update 22 May 2009)

IASB activities relating to the crisis

Financial Crisis Advisory Group

Objective : The high level advisory group set up by the IASB and FASB will consider financial reporting issues arising from the global financial crisis. Results will feed into the work of related projects and additional measures may be undertaken.

Click here to view the Financial Crisis Advisory Group pages

Public round tables

Objective: Identify financial reporting issues highlighted by the global financial crisis.

The IASB and US FASB jointly held three public round tables in London, Norwalk and Tokyo to identify any accounting issues that might require the urgent and immediate attention of the boards.

The round tables took place in November and December 2008 – click here for the IASB’s discussion of a summary of the round tables [Zip].

For measures undertaken in response to the round tables, click here. (Includes link to Q&As on accounting for some collateralised debt obligations CDOs)

Accounting for off balance sheet vehicles

Relevant project 1: Consolidation

Issue: Some entities may not have accounted for all other entities they control, especially some special purpose entities (SPEs) used for securitisation transactions.

What are we doing: The IASB has accelerated this project, which it started before the global financial crisis. It is looking to: tighten up the definition of control so that entities account for all other entities that they control, review how the control notion applies to structured entities (such as SPEs) and improve disclosure requirements for entities that rightly remain off balance sheet.

Click here to view the project page

Relevant project 2: Derecognition

Issue: Some entities may have stopped accounting for assets they still control. This gives readers an incomplete picture. Users also require more information on an entity’s risk exposure related to assets that are rightly off balance sheet.

What we are doing: The IASB has accelerated this project, which it started before the financial crisis. It is looking to review and clarify when entities should stop accounting for assets transferred to other entities and is reviewing the disclosure requirements.

Click here to view the project page

Disclosures

Relevant project: IFRS 7

Issue: Users of financial statements may need further information on how entities estimated the fair value of their financial instruments when there are only limited market data to support those estimates. In addition, existing disclosure requirements for liquidity risk do not focus on essentials (issue identified by the round tables).

What we are doing:

Improving disclosures about fair value measurements of financial instruments and about liquidity risk.

Improving disclosures about investments in debt instruments.

Fair value

Relevant measure: Expert Advisory Panel

Issue: The financial crisis has raised concerns that it may be difficult to estimate fair value in illiquid markets.

What we are doing: The IASB created an external Expert Advisory Panel in May 2008 to consider issues relating to measuring fair value in illiquid markets. The panel met seven times.

Relevant project 1: Fair Value Measurement

Issue: Guidance on how to measure fair value is dispersed across standards and in some cases inconsistent. This project was on the Board’s agenda before the financial crisis.

What are we doing: Creating a single standard clarifying how to measure fair value where existing standards require or permit fair value.

Click here to view the project page

Relevant project 2: Financial Instruments / IAS 39

Issue: The standard deals with the recognition and measurement of financial instruments. The existing standard is complex and does not always produce the most useful information.

What are we doing: This is a project to replace IAS 39 with the objective of improving the decision usefulness of financial statements for users. It should also result in the simplification of the requirements for the accounting for financial instruments. In response to the crisis, the project will take into consideration possible results of the Financial Crisis Advisory Group (FCAG).

Click here to view the project page