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Basel chair: IASB/FASB must cooperate

Tuesday 5 April 2011 - by Dave Goodman

The Basel Committee on Banking Supervision has called on the world's two biggest accounting standards boards to continue to cooperate in order to ensure a single set of global accounting standards.

In a letter to the chairs of the International Accounting Standards Board and the Financial Accounting Standards Board, Nout Wellink, chairman of the Basel committee praised the work the two boards had done together in the IASB's Impairment supplement to the November 2009's Exposure Draft Financial Instruments: Amortised Cost and Impairment.

Wellink particularly highlighted the move toward a converged expected credit loss approach as a good development, but stressed the need for continued cooperation to ensure universal standards of accounting.

"We believe the objectives set out by the IASB and FASB are complementary in nature and need to be jointly and equally emphasised," said Wellink in his letter to Sir David Tweedie and Leslie Seidman.

"We welcome the initiative of the IASB and FASB to work together to achieve a high-quality converged accounting standard for financial instruments and we encourage them to continue developing a single set of high quality accounting requirements that would be beneficial to supervisors, investors and other users across the globe."

He added: "The Committee supports the common solution proposed by the IASB and FASB in the ED - it will improve the decision usefulness and relevance of financial reporting for users, including prudential regulators.

"We strongly encourage both the IASB and FASB to make similar progress with other aspects of accounting for financial instruments as this would ensure a level playing field across the globe."

However, Wellink also noted that the Committee's reaction to the Impairment supplement was not entirely positive, as they felt it was too focused on open portfolios and did not allow for the build up of adequate levels of provisions on the balance sheet to absorb all credit losses.

He wrote: "The original IASB ED on impairment emphasised the Income Statement as it looked to reflect the economic reality of lending by recognising interest revenue as a credit cost adjusted return (or yield), which eliminated the front-loading of interest revenue in closed portfolios.

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