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Financial reporting lessons from the financial crisis

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23 Nov 2009

US SEC Commissioner Kathleen L Casey spoke about Lessons from the Financial Crisis for Financial Reporting, Standard Setting and Rule Making at Financial Executives International's 28th Annual Current Financial Reporting Issues Conference in New York on 17 November 2009. Commissioner Casey identified three key lessons from the crisis:

  1. First, financial stability depends upon market confidence; and investor confidence, in turn, depends upon the transparency of financial statements.
  2. Second, financial reporting and accounting standard setting must remain focused on the needs of investors. While there are many other important stakeholders that rely on financial statement reporting, investors' interests must remain paramount.
  3. Third, financial reporting must remain relevant and informative to investors, and should not impose unnecessary or costly burdens that do not add to investor understanding.
    Here is an excerpt relating to IFRSs in the United States:

    As the number of US investors with holdings of securities of non-US companies continues to increase, the Commission and the FASB would be remiss and would fail the needs of investors if we did not continue to support the development of a single set of high quality global accounting standards. The desirability of convergence on certain key accounting standards – particularly those related to financial instruments and other areas relevant to the credit crisis – has been highlighted in a number of forums, including the March 2009 communique of the G-20 finance ministers, the Department of Treasury's June 2009 Regulatory Reform report and the July 2009 Report of the Financial Crisis Advisory Group. The Commission strongly supports the continued convergence efforts of FASB and IASB. The existing convergence targets of these two standard setters pursuant to their 2006 MoU, as updated in September 2008, set the goal of completing several major joint projects by 2011. And less than two weeks ago, the FASB and IASB issued a joint statement reaffirming their commitment to achieving convergence of IFRS and US GAAP, and announcing plans to intensify their efforts to complete the major joint projects described in the MoU.

    Going forward, it is crucial that the United States continue to play a leadership role in the support and development of a single set of high quality global accounting standards. It is also my hope and expectation that the Commission will soon articulate the next steps to be taken with respect to the use of IFRS by US issuers – further signaling our commitment to this important goal.

    Click to view Lessons from the Financial Crisis for Financial Reporting, Standard Setting and Rule Making (PDF 45k).

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