Main Criticisms of Accounting for Financial Instruments

Main criticisms of accounting for financial instruments that emerged during the financial crisis

Main Criticisms of Accounting for Financial Instruments are:

1. The complexity of the standards
2. Difficulties in determining fair values in illiquid or inactive markets
3. Delayed recognition of impairment losses
4. Off-balance sheet entities

By the end of 2011 the IASB had addressed

(2) by the issuance of IFRS 13 Fair Value Measurement,which specifically addresses how to determine fair value in inactive or illiquid markets. It had also addressed

(4) by the issuance of the revised standards on consolidation (IAS 27 and IFRS 12). It had partially addressed (1) and (3) by the issuance of IFRS 9; however IFRS 9 was still not complete and the final rules on hedging and impairment had not been issued. The complexity surrounding liability versus equity distinction had also not been addressed.Read in detail about Criticisms of accounting for financial instruments that emerged during the financial crisis.