G-20 Committed to Global GAAP, Independence of Standard Setters

Meeting in London, the Group of 20 on Thursday reaffirmed its commitment to strengthening the financial system and again weighed in on accounting issues as it did last November in Washington.

The primary communiqué released at the end of Thursday’s summit said the G-20 would “call on the accounting standard setters to work urgently with supervisors and regulators to improve standards on valuation and provisioning and achieve a single set of high-quality global accounting standards.”

The group also issued a Declaration on Strengthening the Financial System that expands the Financial Stability Forum to become the Financial Stability Board, which will have broad authority to review and advise financial regulators and standard-setting bodies.

The declaration also details several recommendations for accounting standard setters including the following actions that it says should be taken by the end of 2009:

• Reduce the complexity of accounting standards for financial instruments;
• Strengthen accounting recognition of loan-loss provisions by incorporating a broader range of credit information;
• Improve accounting standards for provisioning, off-balance-sheet exposures and valuation uncertainty;
• Achieve clarity and consistency in the application of valuation standards internationally, working with supervisors;
• Make significant progress towards a single set of high-quality global accounting standards; and
• Within the framework of the independent accounting standard-setting process, improve involvement of stakeholders, including prudential regulators and emerging markets, through the IASB’s constitutional review.

A March 14 status report on the Washington action plan shows that FASB and the International Accounting Standards Board (IASB) have been very active since the action plan was first unveiled in November. Just prior to Thursday’s summit in London, the IASB further detailed its progress on the G-20 recommendations in a comprehensive overview of measures undertaken by the International Accounting Standards Committee Foundation with the IASB responding to the conclusions reached by the G-20 at its summit in Washington.

The G-20 was established in 1999. Its members are the finance ministers and central bank governors of 19 of the world’s most significant industrial and emerging economies, and the European Union, which is represented by the rotating Council presidency and the European Central Bank.

The G-20 has no official powers or permanent staff. Its decisions depend upon the follow-through of its members. The G-20 chair rotates annually among members. In 2009 the G-20 chair is the United Kingdom, and in 2010 it will be South Korea.