“Discuss the questions raised by the financial crisis over the objective of general purpose financial reporting, and how the IFRS Foundations Trustees wish to resolve them”.

The financial crisis which started during the summer 2007 is, by its magnitude and its scale, the strongest crisis that happened since 1929. Begun as a bank crisis which have destroyed and “all the major US bulge-bracket firms” (Molyneux & Valdez, 2010, page 263), the crisis spread like wildfire and has rapidly engulfed the entire financial world.
Even if everybody agree to recognise that accounting was not the root cause of financial crisis, its role to prevent future financial crisis could be significant. Many questions have been raised by financial crisis over the objective of general purpose financial reporting.
The first question is related to the purpose of the financial reporting. In fact, the actual crisis has showed that, more than ever, the financial sector needs prudential regulators (Goodhart, et al.,2003, page 10) (Molyneux & Valdez, 2010, page 470) (Spencer, 2000, page 211); because the information given by the financial reporting is an important tool for regulators, standard setters and regulators need then to collaborate. However, their interest could overlap or be in conflict. In these cases, it is important to formulate clearly the main aim of financial reporting. The lacks of global standard as well as the inconsistency of some standards are two other weaknesses of the financial crisis that, by reducing the “comparability”, “understandability” and “verifiability” (Conceptual Framework, 2010) of financial reporting that have played roles in the financial crisis.

One question that the financial crisis raised over the objective of financial reporting raised concerns the purpose of financial reporting and the intersection of prudential regulation with financial