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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 suffered major declines in value and vanishing market liquidity. Participants were 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 took exceptional steps with a view to facilitating adjustment and dampening the impact on the real economy. These 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 also took steps to rebuild capital and liquidity cushions. And both national and international organisations 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 is dedicated to tracking developments arising from the global financial crisis, the policy responses and recommendations and related resources.

 

Related news

  • 'Convergence can never be a substitute for adoption of IFRS'

  • Mar 08, 2014

  • At the 8th IFRS Regional Policy Forum currently hosted by the Institute of Chartered Accountants of India (ICAI) in New Delhi, IASB Chairman Hans Hoogervorst gave a speech entitled 'Closing the accounting chapter of the financial crisis' in which he detailed the IASB's reaction to the financial crisis and concluded that convergence was an unstable means to achieve a single set of global accounting standards.

  • EFRAG believes fair value should not be banned

  • Oct 26, 2013

  • The European Financial Reporting Advisory Group (EFRAG) has submitted a letter of comment to the European Commission (EC) concerning its Green Paper, ‘Long-term financing of the European economy’. EFRAG believes that the use of fair value may be necessary to achieve transparent and relevant financial reporting and should be required in these cases.

  • G20 continues calls for convergence

  • Sep 09, 2013

  • The Group of 20 (G20) has released its G20 Leaders' Declaration and accompanying documents from the G20 Leaders' summit held in St. Petersburg on 5-6 September 2013. Focused on the theme of "cooperation, coordination and confidence", which aims for a stronger and sustainable growth to end the global financial crisis, the Declaration also discusses again the need for convergence of accounting standards.

  • FSB takes stock after five years: Convergence of accounting standards still 'amber'

  • Sep 02, 2013

  • In preparation for the upcoming G20 Leaders' Summit, the Financial Stability Board (FSB) has released several reports about progress in connection with the fundamental reform of the global financial system initiated by the G20 in 2008. One of the developments that is facing 'difficulties in meeting its objective and/or timeline' is achieving a single set of high quality global accounting standards.

  • EDTF progress report on the implementation of disclosure recommendations

  • Aug 22, 2013

  • In October 2012 the Enhanced Disclosure Task Force (EDTF) presented a report to the Financial Stability Board (FSB) recommending key enhancements to the risk disclosures made by banks. The report identified seven fundamental principles for enhancing risk disclosure and included 32 specific recommendations. The EDTF has now published a progress report in line with its October 2012 report.

  • IAASB exposure draft proposes significant changes to audit reports

  • Jul 26, 2013

  • The International Auditing and Assurance Standards Board (IAASB) has released an exposure draft which proposes changes to audit reports, including the provision of more information on how audits are performed. Among other changes, a key development would be the introduction of a 'key audit matters' section in the audit report on audits of listed entity financial statements.

  • IPSASB issues guidance on long-term fiscal sustainability

  • Jul 25, 2013

  • The International Public Sector Accounting Standards Board (IPSASB) has issued its first 'Recommended Practice Guideline' (RPG), providing non-mandatory guidance on reporting on the long-term sustainability of a public sector entity’s finances, including the nature and extent of financial risks that the entity faces. The guidance recognises that long-term fiscal sustainability information is broader in scope than information in financial statements, and focuses on the three dimensions of service, revenue and debt.

  • ESMA publishes report on 2012 enforcement activities

  • Jul 23, 2013

  • The European Securities and Markets Authority (ESMA) has published a report providing an overview of the financial information supervision and enforcement activities carried out during the year ended 31 December 2012 in the European Union. Impairment of goodwill was a clear focus of attention in 2012.

  • IASB responds to the European Commission’s Green Paper on long-term financing

  • Jul 05, 2013

  • The IASB has submitted a response to the European Commission (EC) concerning the Green Paper, ‘Long-term financing of the European economy’. Focus of the letter is the EC's question regarding a possible relationship between the use of fair value accounting principles and short-termism in investor behavior.

  • 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.