A comprehensive review of existing financial reporting requirements needs to be carried out to determine whether any of those requirements have intensified some or all of the problems that have arisen, EFRAG notes.
A comprehensive review of existing financial reporting requirements needs to be carried out to determine whether any of those requirements have intensified some or all of the problems that have arisen, EFRAG notes. It is also essential that any weaknesses identified in the financial reporting requirements are addressed and improvements made as matter of priority.
EFRAG, the ASB in the UK, the CNC in France and the GASB in Germany have discussed the considerable difficulties many capital and other financial markets have experienced over the last months and do not believe that financial reporting has caused the crisis as some have claimed.
Areas of possible weaknesses which are worth exploring further have widely been identified by several bodies:
- The consolidation model, particularly in the context of SPEs.
- De-recognition and the disclosures provided about off-balance sheet items particularly those items that were near to being recognised.
- The requirement to measure many financial instruments at fair value, how that requirement should be applied particularly in illiquid markets.
- The disclosures that should be provided to support the measure used.
The Chairs of the ASB, CNC, EFRAG and GASB think that the IASB should be the body that first responds to the accounting issues arising as a result of the current market turmoil.
Joint Statement
© EFRAG - European Financial Reporting Advisory Group
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