The co-chair of a joint IASB-FASB expert group, who is firmly committed to a single set of global accounting standards, will replace David Tweedie as Chair of the International Accounting Standards Board. Hans Hoogervorst, co-chair of the Financial Crisis Advisory Group, and Chair of the Netherlands Authority for the Financial Markets, will replace Chairman Tweedie in mid-2011 and relinquish all his other positions at that time.
The Financial Crisis Advisory Group is co-chaired by former SEC Commissioner Harvey Goldschmid and also includes Jerry Corrigan, former President of the NY Fed, Gene Ludwig, former Comptroller of the Currency, and former SEC Chief Accountant Don Nicolaisen. Acting SEC Chief Accountant James Kroeker is an observer at the group’s meetings. In recent remarks at a UK seminar on restoring confidence in the financial markets, Chairman Hoogervorst said that a global response to the financial crisis is critical in order to prevent regulatory arbitrage and a regulatory race to the bottom. He also believes that the moral hazard created by a public safety net of central bank lending and government bailouts, which he concedes was needed, must be counterbalanced by strong regulation.
In a recent letter to the G-20 signed by Chairman Hoogervorst, the FASB-IASB expert group said that it remains critically important to produce a single set of high quality, globally converged financial reporting standards that provide consistent, unbiased, transparent and relevant information across geographical boundaries. The Financial Crisis Advisory Group expects the standard setting process to continue in a spirit of independence and accountability. In order to develop high-quality standards that provide unbiased, transparent and relevant information, noted the group, it is critical that FASB and the IASB enjoy a high degree of independence from undue commercial and political pressures. At the same time, they must have a high degree of accountability through appropriate due process, including wide engagement with constituents. The G-20 has consistently called for convergence towards a single set of high-quality, global, independent accounting standards.
With regard to mark-to-market accounting, there was concern that recognizing assets and liabilities at fair value on only the balance-sheet date may be a misleading snapshot when financial statements are used for a period after the balance-sheet date. The group debated the merits of other methods of valuation such as average values, providing sensitivity information, or providing a range of information; however, there was no consensus on an alternative to the current fair value method. Since there is no better alternative, the group emphasized the importance of users of financial statements being made aware that a balance-sheet date is a snapshot and not representative of any financial position other than that day.
There was complete agreement that, regardless of the amount required by regulators or the method chosen by accountants, the amount and presentation of a loan loss provision must be transparent to be useful to investors. To properly achieve this on an international basis, said FCAG, provision requirements must have great discipline to ensure they are consistently interpreted by investors.