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Big four firms support recommendations on bank disclosures

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The Financial Stability Forum, recommended improving disclosures about structured credit products and other instruments that caused bank losses during the financial crisis. PricewaterhouseCoopers LLP …

The Financial Stability Forum, recommended improving disclosures about structured credit products and other instruments that caused bank losses during the financial crisis. PricewaterhouseCoopers LLP in its comment letter on the proposal said the task force recommendations were useful and that it would look into any practical challenges of preparing the recommended disclosures.

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  • 1. BIG FOUR FIRMS SUPPORT RECOMMENDATIONS ON BANKDISCLOSURESBig Four accounting firms welcomed an international task force’s October 2012 set ofrecommendations on improving bank risk disclosures.The recommendations, issued by the Financial Stability Forums Enhanced Disclosure Task Force,are designed to clarify what risks banks are taking and make disclosures more timely. Therecommendations aim to make it easier for investors and analysts to compare information amongbanks.The task force was formed in May at the urging of the Financial Stability Board. Its predecessor, theFinancial Stability Forum, recommended improving disclosures about structured credit products andother instruments that caused bank losses during the financial crisis. (See International Task ForceMakes Recommendations on Bank Disclosures in the November 5, 2012, edition of Accounting &Compliance Alert.)The FSB is an international panel of central bankers, senior finance ministry officials, and marketregulators. The U.S. members are the Federal Reserve, the Treasury Department, and the SEC.PricewaterhouseCoopers LLP in its comment letter on the proposal said the task forcerecommendations were useful and that it would look into any practical challenges of preparing therecommended disclosures."One of the key challenges that we have faced since the financial crisis, is how to rebuild trust in ourfinancial institutions. The recommendations of the EDTF are a significant step towards restoringconfidence in the banking industry and we look forward to working with other stakeholders to turnthese recommendations into pragmatic solutions,“ said Dennis Nally, chairman of PwC International.Other Big four firms, Ernst & Young LLP, KPMG LLP, and Deloitte Touche Tohmatsu Limited saidthey supported the recommendations.The task forces work took place as many regulated banks have been considering the FASBs draftof required disclosures about financial risks.In June, the FASB issued Proposed Accounting Standards Update (ASU) No. 2012-200FinancialInstruments (Topic 825) Disclosures about Liquidity Risk and Interest Rate Risk.The proposal aims to give a clearer picture about a businesss ability to raise short-term cash andborrow funds by requiring companies to disclose the information in their financial statementfootnotes. Financial institutions would have the added requirement of explaining how changes ininterest rates will affect the financial instruments on their balance sheets. They would also have toshow how interest rate changes would affect earnings and capital.“We are pleased that other organizations are looking to improve the information regarding risk that isavailable to investors and other financial statement users,” said FASB Chairman Leslie Seidman.
  • 2. “The FASB will consider the EDTF report, along with other stakeholder feedback, as part of our dueprocess in determining how to move forward with our effort in enhancing risk disclosures.”The IASB said it complemented its own efforts to enhance comparability and usefulness of financialstatements. The board said it will consider the EDTF recommendations as it develops new financialreporting disclosure principles.Thomson Reuters Checkpoint Alert December 12, 2012

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