For a change accountants and accounting at least when it came to external financial reporting were not blamed for the credit crisis. Much of the blame was given to poor control of risks and to inadequate regulation, in a number of aspects. (Of course, there are many accountants in those areas as well). I am not as familiar as I perhaps should be with the Sarbanes Oxley - SOX- rules and their Canadian equivalents. It is curious to me that controls seemed to be inadequate to catch some of this activity. There will be a lot of second guessing going on with the benefit of 20/20 hindsight. The important thing now is what to do to fix problems and develop solutions to prevent further issues.
The Declaration does however set out some tasks for accountants over the next number of months. A key recommendation is to improve transparency:
This is elaborated on in more detail as follows:
Strengthening Transparency and Accountability
Immediate Actions by March 31, 2009
- The key global accounting standards bodies should work to enhance guidance for valuation of securities, also taking into account the valuation of complex, illiquid products, especially during times of stress.
- Accounting standard setters should significantly advance their work to address weaknesses in accounting and disclosure standards for off-balance sheet vehicles.
- Regulators and accounting standard setters should enhance the required disclosure of complex financial instruments by firms to market participants.
- With a view toward promoting financial stability, the governance of the international accounting standard setting body should be further enhanced, including by undertaking a review of its membership, in particular in order to ensure transparency, accountability, and an appropriate relationship between this independent body and the relevant authorities.
- Private sector bodies that have already developed best practices for private pools of capital and/or hedge funds should bring forward proposals for a set of unified best practices. Finance Ministers should assess the adequacy of these proposals, drawing upon the analysis of regulators, the expanded FSF, and other relevant bodies.
- The key global accounting standards bodies should work intensively toward the objective of creating a single high-quality global standard.
- Regulators, supervisors, and accounting standard setters, as appropriate, should work with each other and the private sector on an ongoing basis to ensure consistent application and enforcement of high-quality accounting standards.
- Financial institutions should provide enhanced risk disclosures in their reporting and disclose all losses on an ongoing basis, consistent with international best practice, as appropriate. Regulators should work to ensure that a financial institution' financial statements include a complete, accurate, and timely picture of the firm's activities (including off-balance sheet activities) and are reported on a consistent and regular basis.
As I reported on Friday night, the SEC has released its proposed IFRS Roadmap for comment
It was interesting that this document was posted without any fanfare or news release and also after hours. It is not a slam dunk that the US will convert to IFRS. There are many detractors who do not believe that IFRSs are as rigorous as US GAAP, among a number of other objections. In any event, there will continue to be convergence between the FASB and the IASB following the Norwalk agreement on convergence. Undoubtedly those who favour complete conversion will be make their case over the next few months. "We live in interesting times".
For an alternative view on this G20 Declaration you can read the recent article in the blog Accounting Onion. Tom Selling does not agree with adopting the IFRS in the USA.
As I say the game is afoot.
For a more positive view point you can refer to the recent article in the FEI US Financial reporting blog.
The Declaration is worth a read I believe. Let's hope that Regulators, especially in the USA put some real meat on this. Help please we need it.
IFRS Exorcist to speak at IFRS Summit in January 2009
You may be interested that I will be presenting at an IFRS seminar in January. Readers of this blog are entitled to a 25% discount. Please come to the site for more information.