Accounting Implication of Global Financial Crisis

The term ‘Global Financial Crisis’ means economic scarcity where there exists a continuous drawback against strategic stable economic growth in the world. The underlying backgrounds with regard to the crisis had been reported in business journals for many months before September 2008, with the emphasis about the financial stringency of U.SA and world investment banks, insurance firms and mortgage Securities Companies consequent to the sub prime business crisis. Introducing with some evil critics against the business failures predominated by misapplication of risk controls for bad debts, collateralization of debt insurance and fraud, large financial institutions in the United States and other countries in the world had faced a credit crisis and a slowdown in economic activity. The impacts rapidly promoted and spread wide ranging into a global shock resulting in a number of European bank failures and declines in various stock indexes, correlated with numerous reductions in the market value of equities and commodities take place. The sub prime mortgage crisis arrived a critical stage during the first week of September 2008, featured by severely contracted liquidity in the global credit markets and insolvency threats to investment banks and other institutions. It is observed by a critical analysis that the position in respect of the reserve from banks in the Federal Reserve System began increasing over required levels of about $10 billion at the beginning of September 2008, just after the Democratic and Republican national conventions, and just before the stock market crash and presidential debates. Accounting Implication of Global Financial Crisis As a result of global financial crisis, there was great impact in accounting implication and in reference to world trade economy; there was scarcity of resource to measure the strength of the existing pose of the financial institutions. For such adverse connotation of Accounting, the International Accounting Standards Board and the Financial Accounting Standards Board (FASB) in the present day publicized supplementary steps in response to the global financial crisis following their joint board meeting held in London on 23 and 24 March 2009. These postulates have helped to establish the original form of financial statements. In former format of balanced sheet strategy, there was no scope to reflect some economic events like inflation/deflation, stock growth, currency fluctuation, interest rate and mortgage declining affairs but in the present reform strategy, sufficient changes based on accounting implication have been made with so many revolutionary altercations. In reference to global financial crisis, the IASB was accepted in 2001 and is the standard-setting establishment of the International Accounting Standards Committee (IASC) Foundation, and self-regulating private sector, not-for profit organization. The IASB is steadfast to mounting, in the public interest, a single set of high quality, global accounting standards that provide high quality crystal clear and equivalent in order in general purpose financial statements. With regard to the objective, the IASB demeanor wide-ranging public consultations and seeks the co-operation of intercontinental and national bodies around the world. Its 14 members are drawn from nine countries and have a variety of professional backgrounds. They are appointed by and accountable to the Trustees of the IASC Foundation, who are required to select the best available combination of technical expertise and diversity of international business and market experience. Since 1973, the US Financial Accounting Standards Board was elected organization in the private sector for establishing standards of financial accounting and reporting. Those standards administer the preparation of financial reports and are authoritatively recognized as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants. Such standards are indispensable to the resourceful functioning of the cost-cutting measure for the reason that investors, creditors, auditors and others rely on credible, transparent and comparable economic information. Structuring on work underway, the two boards have agreed to work jointly and expeditiously towards common standards that deal with off balance sheet activity and the accounting for financial instrument. They will also work towards analyzing loan loss accounting within the financial instruments project. Furthermore, the boards have agreed to issue proposals to replace their respective financial instruments standards with a common standard in a matter of months, not years. As part of this project the boards will examine loan loss accounting, including the incurred and expected loss models. The boards will continue to draw on expertise provided by the Financial Crisis Advisory Group (FCAG), a high level advisory body formed to guide the boards in their joint response to the financial crisis. Composition of the FCAG includes current and former investors, regulators, central bankers, finance ministers and others from industry and the public sector. Source: http://www.shvoong.com/business-management/management/1883273-accounting-implication-global-financial-crisis/#ixzz3FZPogVig