Bulletin
2008 / 05 - 3 December 2008
Preparation of report for IASB/FASB
roundtable meeting in Tokyo
The Chairman of the Australian Financial Reporting Council (FRC), Mr Jeffrey Lucy AM, today announced the completion of a report on accounting issues emerging from the global financial crisis. The report is being presented to the joint International Accounting Standards Board (IASB)/Financial Accounting Standards Board (FASB) roundtable meeting in Tokyo on 3 December 2008.
Ms Judith Downes, who has extensive experience in the banking industry, was engaged to prepare the report.
The report is based on a survey of eight ADIs, including Australia’s four largest banks. The joint IASB/FASB roundtable meeting in Tokyo on 3 December 2008 is one of three similar meetings being held by the two Boards and represents part of the Boards’ processes to identify accounting issues emerging from the global credit crisis. The G‑20 Leaders envisage that this work will feed into their action plan.
The key findings of the report are:
- The most pressing need for change that was identified relates to the difference between the prudential and accounting models for provisioning of loans held at amortised cost. The accounting model is based on incurred loss, while the prudential model focuses on expected loss. Respondents acknowledge that prudential and financial reporting serve different purposes; however, they would prefer the IASB to move closer to the expected loss model.
- The accounting rules for hedging are an area of high priority for change. Respondents welcomed the review of the hedging requirements that the IASB has commenced.
- Respondents felt that changes are needed in the measurement and reversal of impairment of available for sale securities.
Respondents also raised issues specific to the insurance industry.
The FRC thanks respondents for their willingness to participate in this survey. The FRC is committed to working with Australian entities to ensure that Australian issues are identified and brought to the attention of the IASB, in order to achieve the highest standard possible for financial reporting.
The recent G-20 communique re-emphasised the importance of key global standard setters working towards single high quality global accounting standards, and the FRC is pleased to support the IASB and FASB in this endeavour.
For further information, contact: Tony Murray (02) 6263 3736.
About the FRC
The FRC is the peak body responsible for the broad oversight of the accounting and auditing standard setting process for the private and public sectors, as well as monitoring the effectiveness of auditor independence requirements in Australia. It comprises key stakeholders from the business and investing communities, the professional accounting bodies, governments and regulatory agencies. A list of the current FRC membership is on the FRC's website.
The FRC advises the Government on the accounting and auditing standard setting process and on the development of international accounting and auditing standards. It determines the broad strategic direction of the standard setters, the Australian Accounting Standards Board and the Auditing and Assurance Standards Board.