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GLOBAL FINANCIAL CRICIS AND INTERNATIONAL ACCOUNTINGThe global financial crisis that peaked in 2008 has many lessons that have been learned by governments, financial institutions, regulatory and monitoring bodies, multinational corporations, companies as well as individuals. Conversely, many debates have and are going on concerning the main what causes of the crisis. The inconsistencies and disparities in the accounting standards and their enforcements were contributing factors. Perhaps the crisis could be curbed through a better and unified/ standardized accounting system that considers compliance strictly. This paper will look at the global financial crisis, its causation, accounting connection, best practice and conclusion on the best direction of accounting practice.

PART A The Global Financial Crisis (GFC) has led to a major debate about fair-value accounting. Many critics argued that fair-value accounting is a root cause of the GFC. However, in trying to identify what might have triggered the GFC; one will always land on the US housing market particularly the difficulty with sub-prime mortgages (Davies, and Whittred, 1980). The initial event was when the news came about owners of homes defaulting on their starting home payments at the start of spring in 2007, which had not occurred before.

Most of the literature that had been written about the real estate sector since 2000 through 2005 in the U. S. there was all indications that something was actually wrong. In particular the connection between the ownership society promoted by president Bush and the housing bubble, where it was argued that it would result into a huge transfer of wealth to the rich when the bubble eventually bursts (Wray 2005). However, this might not be the true picture of what caused the GFC.

Anything could have triggered the same since in any economy various aspects interact to cause a problem even if one factor may seem very pronounced (Scott, 2011). This means that the GFC as pointed out with more analytic writers it was as a result of several aspects including, debt, and deindustrialization, unfunded liabilities, unemployment, crash of the stock market, inflation as well as Federal Reserve System. Actually anyone who was keen and had knowledge about the operation of the economy especially on accountability and reporting will note that GFC got most of the people off-guard including the policy makers.

Some of the economist could predict and sense on what could result out of the events that were occurring in the economy (Leuz, and Schrand, 2009: Diamond, Douglas, and Robert Verrecchia, 1991). A portion of the analysts points an accusing finger on the Fed because it kept the interest rats too low resulting into speculation. This is also not very true because the fed moved to increase the interest rates in 2004 and most of the occurrence was after 2004.

Before 2004 the rates had been extremely low but most of the intrigues in the housing market occurred before then. Some other people view GFC to as a result of the stagnant actual wages of the U. S as well as augmenting inequality. Actually this also has got a big part to play because it describes the reason behind the American households going beyond debt trying to keep the living standards. There had not been increase of wages from the start of 1970’s, thus households were going for loans to purchase cars, college and even pay bills (Stocken, 2000).

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