Financial reporting standards are at the heart of international finance, whether you're an investor or a regulator. If we can't see it, we can't know it's there, and if we can't compare the figures, we know less about what it is going on in financial markets. We lose investment opportunities, make bad ones, or worse yet, we collectively make bad ones because, amongst other things, the information was faulty. Companies typically want to make themselves look as profitable as possible, whilst hiding the risks and liabilities they face in making their money the way they do.
A single global accounting standard is therefore an important goal to pursue and possibly reach. The world is divided into the United States, which uses US-GAAP (Generally-Accepted Accounting Practices) and the rest of the world, which uses IFRS (International Financial Reporting Standards), issued by the International Accounting Standards Board in London. That Board is a private body of 15 accountants, supplemented by public oversight and user advice bodies whose job it is to set principles-based reporting standards that are then applied mostly by accounting companies like Deloitte, KPMG and PriceWaterhouseCoopers.
Since the crisis began, attention has focused on the quality of information available to investors and to regulators, which is one reason why the accounting profession came under official, if attenuated, public oversight. Today, the head of the Basel Committee on Banking Supervision called on the IASB and FASB, its American counterpart, to achieve convergence on accounting standards. Outstanding issues include the use of Fair Value Accounting and the accounting of financial instruments. The American SEC needs to make a decision this year on taking a decision on convergence.
Apparently the Basel Committee feels that the SEC and FASB need a little push.
A single global accounting standard is therefore an important goal to pursue and possibly reach. The world is divided into the United States, which uses US-GAAP (Generally-Accepted Accounting Practices) and the rest of the world, which uses IFRS (International Financial Reporting Standards), issued by the International Accounting Standards Board in London. That Board is a private body of 15 accountants, supplemented by public oversight and user advice bodies whose job it is to set principles-based reporting standards that are then applied mostly by accounting companies like Deloitte, KPMG and PriceWaterhouseCoopers.
Since the crisis began, attention has focused on the quality of information available to investors and to regulators, which is one reason why the accounting profession came under official, if attenuated, public oversight. Today, the head of the Basel Committee on Banking Supervision called on the IASB and FASB, its American counterpart, to achieve convergence on accounting standards. Outstanding issues include the use of Fair Value Accounting and the accounting of financial instruments. The American SEC needs to make a decision this year on taking a decision on convergence.
Apparently the Basel Committee feels that the SEC and FASB need a little push.
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