Crisis Group says accounting ‘was not core problem’

Four themes have emerged from the first meeting of the Financial Crisis Advisory Group, set up by the IASB and FASB:

• accounting was not the core problem that caused the financial crisis but fair value played some part especially regarding pro-cyclicalit.

• rules regarding consolidation / de-recognition need to be enhanced.

• fair value rules are too complex and need simplification.

• some participants called for the ability to make transparent and open ‘dynamic’ provisions with IFRS. This would allow entities to establish provisions in good times that could be used in bad times. Others argued that this is a regulatory issue and could be resolved by appropriate reserve allocation to restrict distributable profits.

The group will continue its discussions in February and March. For further information see the IASB website.

US to overhaul mark-to-market accounting

The SEC has recommended against the suspension of fair value accounting standards but identified eight improvements to their application. These include reconsidering the accounting for impairments and the development of additional guidance for determining fair value of investments in inactive markets, including situations where market prices are not readily available.

Read the SEC press release.

Obama nominee challenges independence of IASB

New US president Obama’s nominee for the role of SEC chairman, Mary Schapiro, expressed concerns about the adoption of IFRS in the US during her nomination hearing.

While recognising the benefits of a single set of accounting standards used around the world, Schapiro believes that IFRS are not as detailed as the US standards and leave a lot to interpretation. In addition, she has significant concerns about the independence of the IASB and the amount of rigor that exists in the IASB’s standard-setting process. Schapiro indicated that the SEC would proceed with caution and would not necessarily feel bound by the existing roadmap.

View the webcast of Schapiro’s nomination hearing.

The SEC is currently consulting on its proposed roadmap for convergence with IFRS.