The paper “ The Role of International Accounting Standards in the Global Financial Crisis” is a meaty example of a finance & accounting essay. The 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 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 from 2000 through 2005 in the U. S. there were 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 in 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 sense in any economy various aspects interact to cause a problem even if one factor may seem very pronounced (Scott, 2011).
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