This new report, based on the 2007 annual reports of 22 global banks, provides a targeted review of bank disclosure requirements and proposes best practice recommendations for the three areas most affected by market events: fair value, structured finance and risk management.
The report finds that in challenging times, on the whole there has been improvement since the previous survey. Banks demonstrated an increase in fair value disclosures and also in the range and depth of structured finance disclosures.
However, although banks have expanded their disclosures in areas most affected by the recent credit crunch, this increase has perhaps not achieved the level of transparency that users of financial statements are demanding.
Despite compliance with accounting standards, the disclosures gave a less cohesive picture of the banks’ position on, for example, risk, than the market is looking for.
The implementation of IFRS 7 – Financial Instruments: Disclosures and SFAS 157 – Fair Value Measurements, along with the fallout from the market turmoil, has reinvigorated the fair value debate and, to varying degrees, has had a positive impact on the nature and extent of fair value disclosures.
The survey notes an overall increase and improvement in disclosures on the use of fair value, which is particularly evident in those areas worst hit by the turmoil and where the banks discussed valuation techniques using significant unobservable inputs.