The term ‘Global Financial Crisis’ means economic scarcity where there is a continuing challenge against stable strategic economic growth in the world. The underlying background to the crisis was reported in business magazines for many months prior to September 2008, with an emphasis on the financial tightness of US investment banks, insurance companies and mortgage securities companies. and the world as a result of the crisis of high-risk companies. . Coming up with some vicious criticism of the prevailing business failures from the misapplication of risk controls for bad debts, debt insurance collateralization, and fraud, the large financial institutions that prevail in the United States and other regions of the world are they have faced a credit crunch and sluggish progression. in economic activity. The shocks were quickly updated and emerged in a global shock that resulted in a series of bankruptcies of European banks and falls in various stock indices, relevant with numerous reductions in the market value of shares and commodities. The subprime mortgage crisis reached a critical stage during the first week of September 2008, characterized by severely squeezed liquidity in global credit markets and threats of insolvency for investment banks and other institutions. It is noted by critical analysis that the reserve position of banks in the Federal Reserve System began to rise above the required levels of around $10 billion in early September 2008, just after the the Democratic and Republican national conventions, and just before the stock market crash and the presidential debates.
Consequently, in the face of such a global financial crisis, there was a great impact on the accounting strategy and in reference to the economy of world trade; there was a shortage of resources to measure the strength of the current position of financial institutions. To such an adverse connotation of Accounting, the International Accounting Standards Board and the Financial Accounting Standards Board today publicized complementary measures in response to the global financial crisis following their joint meeting held in London on 23-24 March 2009. These postulates have helped establish the original form of financial statements. In the previous format of the balance sheet strategy, there was no scope to reflect some economic events such as declining inflation, interest rate, and mortgage matters, but in the current reform strategy, enough changes have been made based on in accounting participation with so many revolutionary altercations. In reference to the global financial crisis, the IASB was accepted in 2001 and is the standard-setting body of the International Accounting Standards Board Foundation, and a self-regulatory private sector not-for-profit organization. The IASB is committed to assembling, in the public interest, a single set of high-quality global accounting standards that provide clear and equivalent high-quality general purpose financial statements. With respect to the objective, the IASB conducts wide-ranging public consultations and seeks the cooperation of cross-continental and national bodies from around the world. Its 14 members come from nine countries and have a variety of professional backgrounds. They are appointed by and accountable to the IASC Foundation Trustees, who must 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 chosen as the private sector organization to set accounting and financial reporting standards. Those standards govern financial reporting and are authorized by the Securities and Exchange Commission and the American Institute of Certified Public Accountants. Such standards are indispensable for the cost-cutting measure to work efficiently because investors, creditors, auditors, and others rely on credible, transparent, and comparable economic information. In structuring the work in progress, the two boards agreed to work jointly and expeditiously toward common standards dealing with off-balance sheet activity and accounting for financial instruments. They will also work to analyze bad loan accounting within the financial instruments project. Additionally, the boards agreed to issue proposals to replace their respective financial instrument standards with a common standard in a matter of months, not years. As part of this project, the boards will examine credit loss accounting, including incurred and expected loss models. The boards will continue to draw on the expertise provided by the Financial Crisis Advisory Group (FCAG), a high-level advisory body formed to guide the boards in their joint response to the financial crisis. The FCAG’s membership includes current and former investors, regulators, central bankers, finance ministers and others from industry and the public sector.
The 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 implications of the global financial crisis for standard setting. and potential changes in the global regulatory environment. It is made up of 18 senior leaders with extensive international experience in financial markets, along with official observers representing the world’s leading banking, insurance and securities regulators. The chairmen and some other board members of the IASB and FASB also participate in the discussions. The FCAG has considered how improvements in financial reporting can help increase investor confidence in financial markets and is seeking to identify, and provide information and advice on significant accounting issues that require immediate board attention or consideration. longer term. . Topics discussed include, among others, fair value accounting, loan provisioning, and structured entities and other off-balance sheet vehicles. The FCAG was also interested in exploring board oversight, the standard-setting process in challenging situations, and the benefits of converging the two board’s standards. As part of its work, the FCAG is considering various studies related to the financial crisis, such as the US Securities and Exchange Commission study and the Financial Stability Forum’s work to address procyclicality in the financial system. The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) announced this week the membership of the Financial Crisis Advisory Group (FCAG). The FCAG is the high-level advisory group established by the boards to consider financial reporting issues arising from the global financial crisis. The group includes recognized leaders from the business and government fields with extensive experience in international financial markets.
In view of the above discussion, it is clear that the criteria set out by the Accounting standard must now focus on ensuring that IFRS continues to be a high-quality principle-based accounting language. Global trade authorities need to be involved in the standard-setting process as more and more countries adopt IFRS. Steps relevant to the financial crisis support an assurance of a joint approach to the financial crisis and the overall objective of seeking convergence between International Financial Reporting Standards and US GAAP. No The fact that, in connection with the global financial crisis, the IASB and FASB have an important role in overcoming the difficulties related to the global economic crisis can be denied. They have taken active steps to measure the risks and uncertainty of these areas. The discussion required those with IFRS experience to share their views and insights. In areas like accounting, being too prescriptive with global measures could backfire. Issuing guidance from those results in mechanical rule following could be a recipe for disaster. Standard setting based on underlying principles and professional judgment have a vital role to play and must not stifle recovery. If this can be achieved through the consultative process, it should be possible for public and private sector parties to contribute to the evolution of individual standards, right from the initial standard setting phase.
In view of the above, it is clear that in most cases, competent authorities should subsequently be in a position to give their support to the new standards, since they are issued by the International Accounting Standards Board. However, the strategy for change reforms in the current financial reporting system concludes that while the crisis has revealed flaws in the global regulatory system itself, the worrisome authoritarian Board is still well positioned to play an active role in designing new global structures and ensure that they are transparent and accountable and that developing countries and others are represented, in order to increase the legitimacy of the decision-making process.