Financial Crisis Advisory Group publishes wide-ranging review of standard-setting activities following the global financial crisis

The Financial Crisis Advisory Group (FCAG) published its recommendations related to accounting standard-setting activities and the international regulatory environment in light of the current global financial crisis. Among the key recommendation is “to use every effort to achieve converged solutions.”

The report recommends FASB and the IASB make convergence the “focus and chief priority” for the remainder of the year. The FCAG encourages legislators and governments to voice their concerns and provide input to their respective standard setters. However, the report further instructs policymakers to “refrain from seeking to prescribe specific standard-setting outcomes.” The independence of both FASB and the IASB has come under fire during the past year for allegedly not following due process in updating standards.

Harvey Goldschmid, FCAG co-chairman and former SEC commissioner, acknowledged in his comments that accounting is not to blame for the current crisis, but that accounting “has an important role to play in its resolution.”

The FCAG is a joint body of FASB and the IASB tasked with considering financial reporting issues arising from the crisis. The report focuses on four key areas:

1. Effective financial reporting
2. Limitations of financial reporting
3. Convergence of accounting standards
4. Standard setter independence and accountability

Notable recommendations include:

• Urging national governments, financial market participants, and the global business community to actively support the development of a single set of high-quality accounting standards
  
  
• Encouraging all national governments that have not already done so to set a timetable that is both practicable and firm for adopting or converging with IFRS
  
  
• Defining in advance the circumstances under which it is appropriate to act on the basis of expedited due process
  
  
• Developing permanent funding structure for the IASB under which sufficient funds are provided to it on an equitable and mandatory basis
  The FCAG will reconvene in December to review the progress made on its recommendations.

Related items

• Read the recommendations from the report
• Read the full Financial Crisis Advisory Group report

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