The FCAG was established by the International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) to advise the two boards about standard-setting implications of the global financial crisis and potential changes to the global regulatory environment. It consists of 18 senior leaders with broad international experience with financial markets, joined by official observers representing key global banking, insurance, and securities regulators. The chairmen and a few other board members from the IASB and the FASB also participate in the discussions. The FCAG has considered as to how improvements to financial reporting may help to enhance investor confidence in the financial markets and is seeking to identify, and endow with input and advice on, significant accounting issues that require the boards’ immediate attention or longer-term consideration. Topics being discussed include, among others, fair value accounting, loan provisioning, and structured entities and other off-balance sheet vehicles. The FCAG was also interested in exploratory the oversight of the boards, the standard-setting process in exigent situations, and the benefits of convergence of the two boards’ standards. As part of its work, the FCAG is considering various studies connected with the financial crisis, such as the US Securities and Exchange Commission’s study on ‘mark-to-market’ accounting, the UK Financial Services Authority’s Turner Review on the global banking crisis, and the Financial Stability Forum’s work on addressing pro-cyclicality in the financial system. The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) this week announced the membership of the Financial Crisis Advisory Group (FCAG). The FCAG is the high-level advisory group set up by the boards to consider financial reporting issues arising from the global financial crisis. The group includes recognized leaders from the fields of business and government with a broad range of experience in international financial markets.
In view of the above discussion it is evident that the criteria as set forth as per Accounting standard that the focus should now be on ensuring that IFRS continues to be a high quality principle based accounting language. The world trade authorities need to engage with the standard setting process, as more and more countries adopt IFRS. The steps relevant to financial crisis endorse an assurance to a joint approach to the financial crisis and to the overall goal of seeking convergence between International Financial Reporting Standards and US generally accepted accounting principles (GAAP). There is no denying the fact that in relation to global financial crisis, the IASB and FASB have significant role to switch over the difficulties in regard to world economic crisis. They have taken active steps to measure the risks and uncertainty of these areas. The required discussion for those with IFRS experience to share their views and knowledge. In areas such as accounting, being too prescriptive with global measures could backfire. Issuing guidance those results in mechanical rule-following could be a recipe for disaster. The underlying principles based standard setting and professional judgment has a vital role to play and should not stifle recovery. If this can be achieved through the consultative process, it should be possible for public and private sector parties to contribute to the evolution of individual standards, from the initial standard setting phase. In the majority cases, the concerning authorities should subsequently be in a position to give their support to new standards, as they are issued by the International Accounting Standards Board. However, the reforms strategy of change in present financial reporting system concludes that while the crisis has revealed flaws in the World’s own regulatory system, the concerning authoritative Board is still well positioned to play an active role in designing new global structures and ensuring that they are transparent and accountable and that developing countries as well as others are represented, in order to increase the legitimacy of the decision-making process.
FASB and IASB web page