The Group of Governors and Heads of
Supervision of the Basel Committee on Banking Supervision has
agreed on the design of a capital and liquidity reform package.

The proposals change the treatment of various
accounting balances, including an override of local GAAP in favour
of IFRSs in relation to some intangible assets.

Reform proposals expected to affect the
accounting profession include:

  • An option to use IFRS in determining the
    level of intangible assets if national GAAP resulting in a wider
    range of assets, such as certain software assets, being classified
    as intangible;
  • Definition of the leverage ratio, which would
    strengthen the treatment of derivatives relative to the purely
    accounting based measure and provide a simple way of addressing
    differences between IFRS and GAAP; and,
  •  Forward looking provisioning. The
    Committee proposes to implement the expected loss approach to
    provisioning proposed by the International Accounting Standards

The Basel Committee’s proposed reforms were
originally published in December 2009 and the Governors and Heads
of Supervision, which oversees the committee, considered public
feedback before reaching a consensus.

The committee will finalise the
regulatory buffers before the end of the year while the Governors
and Heads of Supervision will finalise the calibration and phase-in
arrangements at their meeting in September.

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Central banking chiefs make accounting demands