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The Basel Committee on Banking Supervision has released a set of high level guiding principles aimed at assisting the International Accounting Standards Board (IASB) address issues related to provisioning, fair value measurement and related disclosures. The Basel principles are also meant to help ensure that accounting reforms address broader concerns about procyclicality and systemic risk.

According to the Basel Committee, the principles are in response to recommendations made by the G20 leaders at the April summit to strengthen financial supervision and regulation. The global treasury and finance website says that the Basel Committee believes these principles should facilitate continued coordination among standard setters, supervisors and regulators in their respective efforts to implement the G20 recommendations.

Based on the guiding principles, the new standards from IASB will hopefully:

a) reflect the need for earlier recognition of loan losses to ensure robust provisions;

b) recognise that fair value is not effective when markets become dislocated or are illiquid;

c) permit reclassifications from the fair value to the amortised cost category — which should be allowed in rare circumstances following the occurrence of events having clearly led to a change in the business model; and

d) promote a level playing field across jurisdictions.
 

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