Accounting Is The Language Of Business Comment On This Statement Accounting Implication of a Global Financial Crisis

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Accounting Implication of a Global Financial Crisis

The term “Global Financial Crisis” means an economic shortage in the world where there is a persistent shortage of strategic stable economic growth. Background information about the crisis had been reported in business journals for many months prior to September 2008, highlighting the financial austerity of US and global investment banks, insurance firms, and mortgage-backed securities companies as a result of the sub-prime business crisis. . The misapplication of bad debt risk controls, the prevailing business failures of debt insurance and fraudulent foreclosures, to meet some of the worst critics, have led the dominant large financial institutions in the United States and other regions of the world to develop credit crunch and laziness. in economic activity. The effects were quickly renewed and became a global shock, which resulted in the failure of several European banks and the decline of various stock indices, which led to numerous declines in the market value of stocks and commodities. The sub-prime mortgage crisis, characterized by a sharp decrease in liquidity in global credit markets and the threat of bankruptcy for investment banks and other institutions, reached a critical stage in the first week of September 2008. A critical analysis shows that the Federal Reserve’s bank reserve position began to rise above the required $10 billion level in early September 2008, just after and just before the Democratic and Republican national conventions. the stock market crash and the presidential debates.

As a result of such a global financial crisis, reference to accounting strategy and the world trade economy had a huge impact; financial institutions lacked resources to measure the strength of their current position. In response to this negative impact of accounting, the International Accounting Standards Board and the Financial Accounting Standards Board announced further steps in response to the global financial crisis following a joint board meeting held in London on March 23 and 24, 2009. These postulates helped to create the original form of financial statements. The previous format of the balance sheet strategy had no way to reflect some economic events such as inflation, interest rate and mortgage loan declines, but the current reform strategy has made enough changes in accounting with so many revolutionary arguments. In response to the global financial crisis, the IASB was adopted in 2001 and is the standard setting body of the International Accounting Standards Committee Foundation and a self-regulatory private sector, not-for-profit organization. The IASB is committed to building, in the public interest, a single set of high-quality, global accounting standards that ensure high-quality crystal clarity and consistency in general purpose financial reporting. To that end, the IASB conducts extensive public consultation and seeks the cooperation of intercontinental and national institutions worldwide. Its 14 members are selected from nine countries and have diverse professional backgrounds. They are appointed by and accountable to the Trustees of the IASC Foundation, who are required to select the best available combination of technical expertise and diversity of international business and market experience. Since 1973, the US Financial Accounting Standards Board has been the designated private sector organization for setting financial accounting and reporting standards. These standards govern the preparation of financial statements and are recognized as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants. Because investors, creditors, auditors, and others rely on reliable, transparent, and comparable economic data, such standards are necessary for the cost-cutting measure to work efficiently. Currently structuring the work, the two boards have agreed to work together and expeditiously towards common standards dealing with off-balance sheet activity and financial instrument accounting. They will also work on the analysis of loan loss accounting as part of the financial instruments project. In addition, the boards agreed to submit proposals to replace their financial instruments standards with a common standard within months rather than years. As part of this project, boards will explore accounting for loan losses, including incurred and expected loss models. Boards will continue to draw on the expertise provided by the Financial Crisis Advisory Group (FCAG), a high-level advisory body established to guide boards as they jointly respond to the financial crisis. FCAG includes current and former investors, regulators, central bankers, finance ministers and others from industry and the public sector.

FCAG was established by the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) to advise the two boards on the standardization implications of the global financial crisis and potential changes in the global regulatory environment. It consists of 18 senior leaders with extensive international experience of financial markets and official observers representing major global banking, insurance and securities regulators. The chairmen of the IASB and FASB and several other board members also participate in the discussions. The FCAG has considered how improving financial reporting can help improve investor confidence in the financial markets and seeks to identify and provide information and advice on significant accounting issues that require boards’ immediate attention or longer-term review. . Topics discussed include, among others, fair value accounting, credit provision, structured entities and other off-balance sheet vehicles. FCAG was also interested in examining the oversight of councils, the emergency standard setting process and the benefits of convergence of the two councils’ standards. As part of its work, FCAG reviews various investigations into the financial crisis, such as the US Securities and Exchange Commission’s investigation into market-to-market accounting, the UK Financial Services Authority’s Turner Review into the global banking crisis, and The work of the Financial Stability Forum on eliminating procyclicality in the financial system. The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) this week announced the membership of the Financial Crisis Advisory Group (FCAG). FCAG is a high-level advisory group established by boards to review financial reporting issues arising from the global financial crisis. The group includes well-known business and government leaders with extensive experience in international financial markets.

In light of the above discussion, it is clear that the criteria mentioned in accordance with the Accounting standard should now focus on ensuring that IFRS remains a high-quality principles-based accounting language. As more countries adopt IFRS, world trade bodies must engage in the standard-setting process. Steps related to the financial crisis confirm the commitment to a joint approach to the financial crisis and the common goal of seeking convergence between International Financial Reporting Standards and US generally accepted accounting principles (GAAP). In relation to the global financial crisis, it is undeniable that the IASB and FASB have an important role in overcoming the difficulties related to the world economic crisis. They have taken active steps to measure the risks and uncertainties of these areas. Discussion required for those with IFRS experience to share their views and knowledge. Being overly prescriptive with global measures in areas such as accounting can backfire. Delivering these results by following mechanical rules can be a recipe for disaster. Standard setting and basic principles based on professional judgment play an important role and should not overwhelm recovery. If this can be achieved through a consultative process, it should be possible for public and private sector parties to contribute to the evolution of individual standards starting at the initial standard setting stage.

Considering the above, it is clear that in most cases the relevant authorities should be able to give their support to the new standards as they are issued by the International Accounting Standards Board. However, the reform strategy for changing the current financial reporting system concludes that while the crisis has exposed flaws in the world’s own regulatory system, the relevant Board is still well positioned to play an active role in designing new global structures and ensuring their credibility. transparency and accountability and representation of other countries as well as developing countries to increase the legitimacy of the decision-making process.

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