Financial Crisis Advisory Group Reports to G-20 on Convergence of Accounting Standards

In a letter to the G-20, a joint 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.

The Financial Crisis Advisory Group is co-chaired by former SEC Commissioner Harvey Goldschmid and Hans Hoogervorst, Chairman of the Netherlands Authority for the Financial Markets. Other members of the group include: Jerry Corrigan, former President of the New York Federal Reserve Bank, Gene Ludwig, former Comptroller of the Currency, Don Nicolaisen, former SEC Chief Accountant, and Lucas Papademos, Vice President of the European Central Bank.

The group noted that there will be a number of important developments in the next several months. The SEC will respond to the comments it has received regarding its proposed roadmap for the potential use of International Financial Reporting Standards (IFRS) by domestic U.S. reporting companies. Also expected is the European Union’s endorsement decision regarding the completed first part of the IASB’s financial instruments project, IFRS 9, Financial Instruments:
Classification and Measurement. Similarly, feedback is expected on the IASB’s proposed standard from the second part of its financial instruments project, Financial Instruments: Amortized Cost and Impairment, and the issuance of its proposal on hedge accounting, the third and final part of its financial instruments project. Also, FASB is expected to issue its comprehensive financial instruments proposals on classification and measurement, impairment, and hedge accounting.

FCAG said that it fully supports the shared goals, values, and principles expressed by the Boards’ in a joint statement they issued late last year and the pathway set forth in that document for completion of the Boards’ major convergence projects. In the joint statement, the Boards reaffirmed their commitment to the goal of developing high-quality, common accounting standards, which the Boards defined as those fostering the provision of relevant, transparent, neutral, and comparable financial information. High quality standards are based on an improved and consistently applied conceptual framework, including objectives and principles expressed in clear and unambiguous language, and provide the detail and structure needed to ensure consistent application.

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