Across the financial services industry, there are substantial efforts to improve the level of transparency and disclosure. This is recognized not only as a key part of the response to the financial crisis, but also a core fundamental of efficient markets.
Concurrent to this are enhancements in accounting standards, given the importance of globally consistent, high-quality accounting standards to the efficient and consistent regulation of international financial markets.
High-quality accounting standards are an essential ingredient for financial statements that can be trusted by investors and others. The primary goal of financial statements is to provide high-quality information to debt and equity investors and other users. Financial statements that investors can understand and rely upon are essential to the return of market confidence.
Increased disclosure can potentially enhance public and investor confidence, and is central to restoring trust in markets. Simultaneously, it is noted that some disclosures can be misinterpreted, and greater transparency needs to be pursued with an acknowledgement of that risk.
The IIF believes that accounting standards need to be principles-based, with sufficient clarity of application to facilitate reasonably consistent enforcement in different jurisdictions. Standard-setters should continue to consider the directional goal of international convergence, and where full consistency is not possible on specific standards, the reasons should be explained and differences clearly articulated and justified.
The IIF actively engages with the industry and regulators on disclosure expectations and requirements, and enhancements to Pillar 3 of the Basel framework. The IIF recognizes enhanced disclosure as a key part of demystifying the variance in Risk Weighted Assets (RWA) calculations between banks.
The IIF Senior Accounting Group (SAG) addresses accounting matters of international significance to financial institutions, including such questions as IFRS-US GAAP convergence and interactions between regulatory and accounting issues.
Three-Way Dialogue (TWD) events are staged three times annually, among the IIF SAG, the Accounting Task Force of the Basel Committee, and the IASB. The IIF also presents views to the Basel Committee, Financial Stability Board (FSB), International Accounting Standards Board (IASB), U.S. Financial Accounting Standards Board (FASB) and U.S. Securities Exchange Commission (SEC) regarding provisioning and pro-cyclicality, classification of financial instruments, fair value measurement and hedge accounting.