ACCOUNTING IMPLICATION OF GLOBAL FINANCIAL CRISIS

There is no denying the fact that the term ‘Global Financial Crisis’ means economic scarcity where there exists a continuous drawback against strategic, stable economic growth around the globe. The underlying background regarding the crisis had been reported in business journals for many months before September 2008, with an emphasis on the financial stringency of U.S. and world investment banks, insurance firms, and mortgage Securities Companies, consequent to the subprime business crisis. Introducing some critical evaluations of business failures, which are often attributed to the misapplication of risk controls for bad debts, collateralization of debt insurance, and fraud, large financial institutions in the United States and other countries worldwide have faced a credit crisis and a slowdown in economic activity.

The impacts rapidly promoted and spread widely, causing a global shock, causing many European bank failures and declines in various stock indexes, correlated with numerous reductions in the market value of equities and commodities take place. The subprime mortgage crisis reached a critical stage during the first week of September 2008, featuring 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 concerning 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 Implications of the Global Financial Crisis. As a result of the global financial crisis, there was a great impact on accounting implications and in reference to the world trade economy, there was a scarcity of resources to measure the strength of the existing posture of the financial institutions.