FCAG Declares: It's not acounting's fault
The Financial Crisis Advisory Group has published a report concluding that accounting standards are not to blame for the economic crisis.
The group came together at the request of the International Accounting Standards Board and the U.S. Financial Accounting Standards Board and includes prominent members with broad experience in the international markets. Co-chaired by Hans Hoogervorst, chairman of the Netherlands Authority for the Financial Markets, and Harvey Goldschmid, former commissioner of the U.S. Securities and Exchange Commission, the group met six times this year to discuss ways for the accounting profession to deal with the financial crisis. "Accounting was not a root cause of the financial crisis, but it has an important role to play in its resolution," said Hoogervorst.
The report covers four main areas: effective financial reporting, the limitations of financial reporting, convergence of accounting standards, and standard-setter independence and accountability. It also includes a series of recommendations, many of them calling for the adoption of, or convergence with, International Financial Reporting Standards.
In explaining the financial crisis, the report described the importance of recognizing the inherent imperfections of the financial reporting process, and how investors need to look beyond the numbers, which only capture information about the performance of a business over a finite period of time.
The report also criticized attempts by politicians to interfere in the standards-setting process, as happened to both the IASB and FASB with fair value and mark-to-market accounting standards.
To protect the IASB's independence from undue influence, the report also recommended that the board have a permanent funding structure under which sufficient funds are provided on an equitable, mandatory basis.
To view the report, visit www.fasb.org/cs/contentserver?c=document_c&pagename=fasb%2fdocument_c%2fdocumentpage&cid=1176156365880.
(c) 2009 Accounting Today and SourceMedia, Inc. All Rights Reserved.
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