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Global financial crisis

Background

Starting in the summer of 2007, accumulating losses on US subprime mortgages triggered widespread disruption to the global financial system. Large losses were sustained on complex structured securities. Institutions reduced leverage and increased demand for liquid assets. Many credit markets became illiquid, hindering credit extension.

In less than a year, the balance sheets of financial institutions became burdened by assets that have suffered major declines in value and vanishing market liquidity. Participants are reluctant to transact in these instruments, adding to increased financial and macroeconomic uncertainty.

To re-establish confidence in the soundness of markets and financial institutions, national authorities have taken exceptional steps with a view to facilitating adjustment and dampening the impact on the real economy. These have included monetary and fiscal stimulus, central bank liquidity operations, policies to promote asset market liquidity and actions to resolve problems at specific institutions. Financial institutions have taken steps to rebuild capital and liquidity cushions. And both national and international organisations have developed recommendations and resources aimed at reducing the likelihood that this situation would recur.

During 2010-2011 the crisis morphed into concerns about the sovereign debt of some countries. This resulted in the restructuring of the debt of some nations, and triggered another round of concerns about the solvency and financial reporting practices in relation to institutions holding sovereign debt instruments.  It also raised concerns about the accounting practices adopted by governments.

This page on IAS Plus is dedicated to tracking developments arising from the global financial crisis, the policy responses and recommendations and related resources.

 

Related news

  • ICAA report calls for public sector accounting standard reform

  • May 31, 2013

  • The Institute of Chartered Accountants in Australia (ICAA) has released a report calling for reform of global public sector reporting, including the 'transformation' of the International Public Sector Accounting Standards Board (IPSASB) and the integration of the private and public sector financial reporting models under the auspices of the IFRS Foundation, possibly eventually leading in the longer term to a potential merger of the IPSASB and International Accounting Standards Board (IASB).

  • Free access to research papers in renowned accounting journals

  • May 02, 2013

  • In an effort to promote accounting research, the publisher Taylor & Francis Online has pulled together four freely available collections of research papers on currently much debated issues. The topic groups are: 'International Financial Reporting Standards', 'Sustainability in Accounting', 'The Financial Crises', and 'Accounting Education'.

  • IASB chairman speaks about short-term volatility and long term investment

  • Apr 10, 2013

  • Hans Hoogervorst, Chairman of the IASB, recently gave a speech entitled "Accounting and long term investment – 'Buy and hold' should not mean 'buy and hope'". In his speech, Mr Hoogervorst looked at the relationship between accounting and investing and pointed out that even long-term investors need information on where they stand today. Short-term information helps to reach a long term goal.

  • EMIR technical standards enter into force

  • Mar 17, 2013

  • The European Market Infrastructure Regulation (EMIR) was passed in 2012, but most provisions only apply after technical standards enter into force. Technical standards on OTC derivatives, reporting to trade repositories and requirements for trade repositories and central counterparties entered into force on 15 March 2013. EMIR gave rise to the IASB's project on the novation of derivatives as EMIR brings about hedge accounting questions.

  • IASB proposes urgent amendments to hedge accounting to respond to G20 OTC initiatives

  • Feb 28, 2013

  • The International Accounting Standards Board (IASB) has issued ED/2013/2 'Novation of Derivatives and Continuation of Hedge Accounting'. The exposure draft proposes changes to IAS 39 and the forthcoming hedge accounting chapter of IFRS 9 to permit the continuation of hedge accounting where hedging instruments are novated to a central counterparty in accordance with laws or regulations introduced by jurisdictions to implement the G20's agreed reforms around over the counter (OTC) derivatives. As a number of jurisdictions are currently considering implementing these laws, the IASB is proposing an urgent amendment and has set a 30 day comment period.

  • ACCA outlines policy positions on public sector reporting

  • Feb 14, 2013

  • The Association of Chartered Certified Accountants (ACCA) has released an updated paper outlining its policy positions on a range of themes for public services. In addition to a number of other themes, the paper supports the use of accrual accounting and sustainability reporting in the public sector, and puts forward policies and recommendations in these areas.

  • UK FRC consults on the implementation of the Sharman Panel recommendations

  • Jan 31, 2013

  • In June 2012, the United Kingdom Sharman Panel of Inquiry, established at the invitation of the UK Financial Reporting Council (FRC) to consider going concern and liquidity risks, published its final report and recommendations. The FRC has now issued for consultation guidance for directors, and related standards for auditors, to implement the recommendations.

  • ESMA report shows room for improvement regarding disclosures related to goodwill impairment

  • Jan 21, 2013

  • The European Securities and Markets Authority (ESMA) has published a review of 2011 IFRS financial statements related to impairment testing of goodwill. The report shows that significant impairment losses of goodwill were limited to a handful of issuers. According to ESMA, this raises the question as to whether the level of impairment disclosed in 2011 financial reports appropriately reflects the difficult economic operating environment for companies. ESMA also finds that although the major disclosures related to goodwill impairment testing were generally provided, in many cases these were boilerplate and not entity-specific. ESMA expects issuers and their auditors to consider the findings of the review when preparing and auditing the 2012 IFRS financial statements.

  • IASB submission to the UK PCBS

  • Jan 17, 2013

  • On 16 January 2013, IASB Chairman Hans Hoogervorst addressed the UK Parliamentary Commission on Banking Standards' Panel on tax, audit and accounting.

  • EDTF will present findings regarding the risk disclosure of banks to the IASB

  • Nov 20, 2012

  • On 30 October 2012, the Enhanced Disclosure Task Force (EDTF) published a report a report to the Financial Stability Board (FSB) recommending key enhancements to the risk disclosures made by banks. During the current IASB meeting, the EDTF will present the findings and recommendations from the report to the IASB. A slide deck for the presentation has now been made available on the IASB website.

  • IOSCO report calls for further work on securitisation vehicles

  • Nov 19, 2012

  • The International Organization of Securities Commissions (IOSCO) has released a report 'Global Developments in Securitisation Regulation', which includes in its recommendations that the Financial Stability Board, International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) should work toward further harmonisation of approaches to consolidation of securitisation special purpose vehicles (SPVs).

  • ESMA Chair discusses enforcement of IFRS, United States adoption

  • Nov 13, 2012

  • In a speech recently posted to the European Securities and Markets Authority's (ESMA's) website, Mr Steven Maijoor (ESMA Chair) has outlined his views on a number of topics, including consistent application of IFRS and the possible adoption of IFRS in the United States. On the latter point, Mr Maijoor lamented he is "personally disappointed with the lack of ambition regarding IFRS on the other side of the Atlantic".

  • Enhancing the risk disclosure of banks

  • Oct 30, 2012

  • The Enhanced Disclosure Task Force (EDTF) has presented a report to the Financial Stability Board (FSB) recommending key enhancements to the risk disclosures made by banks. The report identifies seven fundamental principles for enhancing risk disclosure which underpin the recommendations made and are considered to provide a framework for future work on risk disclosures and a benchmark by which banks can judge the quality of their current and future disclosures.

  • ASX consults on updated rules and guidance on continuous disclosure

  • Oct 29, 2012

  • The Australian Securities Exchange (ASX) has begun public consultation on proposed changes on the continuous disclosure rules and guidance for entities listed on the ASX. The proposed revisions result from industry feedback, recent legal and market developments, and an earlier agreement with the Australian Securities and Investments Commission (ASIC) to ensure the ASX guidance "remains current in light of recent market conditions and disclosure practices".

  • IOSCO chairman-elect outlines priorities going forward

  • Oct 22, 2012

  • The Australian Securities and Investments Commission (ASIC) has publicly released a transcript of a speech given by Greg Medcraft, current ASIC Chair and chairman-elect of the International Organization of Securities Organisations (IOSCO), to the International Centre for Financial Regulation in September 2012. In the speech, Mr Medcraft outlines his views on the key challenges facing IOSCO and his suggested strategies to address those challenges, including a greater role for industry.

  • SEC Commissioner thinks the U.S. 'will get there eventually' on IFRS

  • Oct 12, 2012

  • In a recent speech to the American Bar Association International Section, U.S. Securities and Exchange Commission (SEC) Commissioner Elisse B. Walter noted that she believed the United States "will get there eventually" with IFRS adoption, but that the time frame was uncertain.

  • IOSCO to consider 'larger role' in IFRS

  • Oct 08, 2012

  • The Board of the International Organization of Securities Commissions (IOSCO) has agreed to consider an IFRS Foundation request to play a larger role in global efforts to further the international adoption and implementation of International Financial Reporting Standards (IFRS).

  • ESMA publishes review of accounting for Greek sovereign debt

  • Jul 26, 2012

  • The European Securities and Markets Authority (ESMA) has published a review of the accounting for Greek Government Bonds (GGB) in Europe. The review focuses on IFRS Financial Statements for the year ended 31 December 2011 and considered a sample of 42 European financial institutions with significant exposures to GGB.

  • New report calls for integrated reporting in light of global financial crisis

  • Jul 24, 2012

  • A joint report by the United Nations Environment Programme Finance Initiative (UNEP-FI), the International Institute for Sustainable Development (IISD), and the Blended Capital Group explores lessons learned from the global financial crises, and outlines a number of recommendations, including a global integrated reporting standard.

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