There are numerous views for the financial crisis of 2008. The International Accounting Standards Board (IAS) responded to the financial crisis by amending IAS 39. A study found by provides light to the issue of whether or not the amendment to IAS 39 benefit U.S. banks. The financial crisis of 2008 consists of unfair accounting practices, poor regulation, too much emphasis on credit scores and various other reasons. One popular reason includes subprime mortgages which leave mortgage-backed assets frozen on the books of U.S. banks. This leads to write-downs for the financial assets. The IASB initiates change to alleviate the financial crisis by amending the IAS 39. The IAS 39 allows for reclassification and measurements of financial instruments. Firms are allowed to abandon fair value measurement in order to alleviate the mortgage-backed assets effects. Some firms abuse IAS 39 and contribute it to the financial crisis. Several well-known executives argue that using fair value accounting is the key to helping the financial crisis. One study found that the amendment to the IAS 39 is not helping U.S. firms, but assisting international banks. The benefits of IAS 39 gets weigh against the disadvantages.
Table of Contents
1. Introduction
1.1 Study Found that Fair value Accounting Causes Benefits and Costs
1.2 The IASB Changes Financial Standards during the Financial Crisis of 2008
1.3 Harmonization in Global Standards
1.4 Reasons for the financial Crisis
1.5 Additional Reasons that Contribute to the Financial Crisis
2. Conclusion
Objectives and Topics
The paper examines the impact of amendments to the International Accounting Standard 39 (IAS 39) in response to the 2008 financial crisis, evaluating whether these changes benefited U.S. banks or primarily served international interests while investigating the role of fair value accounting.
- Impact of IAS 39 amendments on financial institutions
- Debates regarding fair value accounting during economic instability
- Need for harmonization in global financial standards
- The influence of subprime mortgages and accounting regulation
- Comparative analysis of accounting models and market confidence
Excerpt from the Book
Harmonization in Global Standards
There is a need for harmonization in financial standards in order to promote consistency in financial statements. A world-wide meeting occurs in Silicon Valley- among top financial standards board rule-makers- to address the need for togetherness in financial standards. According to Cutler (2008), worldwide financial leaders agree- that the financial crisis stimulates the need for harmonization-in global financial accounting standards. David Tweetie is the chairman of the International Accounting Standards Board (IASB). Robert Herz is the Financial Accounting Standards Board (FASB) chairman. As cited in Cutler (2008), David Tweetie mentions that the financial crisis spans from subprime mortgages in the United States to financial processes globally. “Robert Herz joined Tweedie in observing that the global financial crisis has ‘‘impacted everything’’ and ‘‘clearly . . . reinforces that idea that we have a globally interconnected set of financial markets and economies’’ requiring global solutions” (Cutler, 2008, p.948).
Summary of Chapters
Introduction: This section outlines the context of the 2008 financial crisis and the subsequent amendment of IAS 39 by the IASB to allow for the reclassification of financial instruments.
Study Found that Fair value Accounting Causes Benefits and Costs: This chapter analyzes research findings indicating that IAS 39 amendments failed to meet their intended goals and inadvertently assisted foreign banks over U.S. institutions.
The IASB Changes Financial Standards during the Financial Crisis of 2008: This chapter details the regulatory changes implemented in 2008, providing specific guidelines for the reclassification of assets held for trading and available-for-sale assets.
Harmonization in Global Standards: This chapter emphasizes the necessity of unified international accounting standards to foster consistency and transparency across interconnected global financial markets.
Reasons for the financial Crisis: This chapter discusses different perspectives from board members on how accounting weaknesses and the application of fair value accounting contributed to the economic turmoil.
Additional Reasons that Contribute to the Financial Crisis: This chapter reviews executive viewpoints on the root causes of the crisis, including erroneous accounting, credit measurement dependencies, and regulatory failures.
Conclusion: This final section summarizes the study's findings and suggests that the U.S. should adopt international standards to improve financial reporting proficiency.
Keywords
Financial Crisis 2008, IAS 39, Fair Value Accounting, IASB, FASB, Subprime Mortgages, Financial Instruments, Harmonization, Accounting Standards, Reclassification, Regulatory Capital, Global Financial Markets, Market Confidence, Asset Valuation, Economic Benefits
Frequently Asked Questions
What is the primary focus of this paper?
The paper examines how the International Accounting Standards Board (IASB) addressed the 2008 financial crisis through amendments to IAS 39 and whether these changes were effective for U.S. financial institutions.
What are the central themes discussed in the document?
Central themes include the role of fair value accounting, the impact of reclassification of financial assets, the need for global harmonization of standards, and the debate over regulatory efficacy.
What is the main research question or goal?
The study aims to determine if the amendments to IAS 39 provided the intended relief to U.S. banks during the 2008 crisis or if they produced unintended consequences by benefiting international banks.
Which scientific method is utilized?
The author employs a literature review and synthesis of existing studies, including analysis of empirical research conducted by Bischof, Brüggemann, and Daske (2010).
What topics are covered in the main body?
The main body covers the regulatory changes to IAS 39, the debate over fair value accounting versus alternative models, the necessity of global accounting harmonization, and expert arguments regarding the causes of the financial crisis.
Which keywords define this work?
Key terms include Financial Crisis 2008, IAS 39, Fair Value Accounting, Global Harmonization, and Reclassification.
How does the amendment of IAS 39 affect the balance sheet?
The amendment allows firms to reclassify assets and abandon fair value measurements, which effectively changes how financial instruments are recorded, aiming to alleviate the impact of mortgage-backed assets.
What is the author's argument regarding U.S. adoption of international standards?
The author concludes that to improve the accuracy and consistency of financial reporting, the United States should expedite the adoption of International Accounting Standards.
- Arbeit zitieren
- Gaberella Green (Autor:in), 2011, The Financial Crisis of 2008 Gets Reviewed, München, GRIN Verlag, https://www.hausarbeiten.de/document/272863
