International Developments in Accounting and Auditing
The Credit and Financial Crisis continues to weighs heavily on our agendas because the impacts are far from over. Impaired assets, the appearance of new sovereign risks, slow or stagnant growth are a few of the indicators that the crisis is far from over.
There are several revelations from the crisis that companies have come to realize. Some of these eye openers that have changed the accounting and finance routines because:
- The crisis has shown to us that only global solutions can work.
- Common accounting standards and their consistent application are crucial for the functioning of global capital markets
- Accepting the same set of global auditing standards, exercising the same level of high quality audit oversight
- Trusting each other is essential however securities and guarantees are much better
In the context of the financial crisis, the G20 has called for the creation of a single set of high quality global accounting standards, as well as for cooperation among regulators, supervisors and accounting standard setters to ensure their consistent application and enforcement...
Again markets are global. This underlines the importance of major jurisdictions to sign up to the international system. In a globalized world all rules must be global as well. However Global Governance is a long way when G20 can agree to put a set of Global Governance rules into practice.
The crisis has highlighted several accounting issues that need further attention.
- Fair value. Clearly some degree of flexibility is necessary on where and how to apply fair value. Fair value is sometimes impossible to determine in impaired or malfunctioning markets. That calls for a revision of IAS 39, and IFRS 9
- How to provision loan-losses – the so-called dynamic provisioning. Several regulators are involved in this work.
The International Accounting Standards Committee Foundation (IASCF) has taken the lead role for world accounting that will be reflected in its governance structure. Whilst acknowledging the IASCF's first steps in reforming its governance structure, including the introduction of the Monitoring Board that the European Commission, there is still much work to conform the standards still remain.
Getting the Global Governance is probably the first step to create a global framework not only for the accounting profession but for many other industries and trades as well.
One thing is to have global standards, it is more important to ensure their effective implementation and apply them in a consistent manner. These are huge challenges that will be
explored on how changes in accounting and auditing standards can alter a corporation's strategic operations as well as its financial reporting processes.
- Disclosure and reporting demands from regulators, oversight authorities, and other stakeholders are extensive. How can you improve your ability to demonstrate effective compliance? Only if the processes are properly crafted to meet stakeholder demands.
- Reporting and visualization tools can provide you with full visibility into and across GRC operations, including your controls, policies, and attestations your company or your employees make to ethical conduct.
- Focus on revenue recognition, leasing, financial instruments, and more
Jens Røder, CPA, Secretary General Nordic Auditors Association