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Risk in financial reporting: status, challenges and suggested directions

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Author Info

  • Claudio E. V. Borio
  • Kostas Tsatsaronis

Abstract

Advances in risk measurement technology have reshaped financial markets and the functioning of the financial system. More recently, they have been reshaping the prudential framework. Looking forward, they have the potential to reshape financial reporting too. Recent initiatives to improve financial reporting standards have brought to the fore significant differences in perspective between accounting standard setters and prudential authorities. Building on previous work, we argue that risk measurement and management technology can be instrumental in bridging this gap and, by the same token, in improving financial reporting. Risk measurement plays a crucial role in the measurement, verification and validation of valuations. It is the basis for giving more prominence to risk and measurement error information in public disclosures. And it could act as more of a focal point in the design of accounting standards, as greater consistency between sound risk management practices and accounting standards can help to narrow the wedge between accounting and underlying economic valuations.

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Bibliographic Info

Paper provided by Bank for International Settlements in its series BIS Working Papers with number 213.

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Length: 28 pages
Date of creation: Aug 2006
Date of revision:
Handle: RePEc:bis:biswps:213

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Related research

Keywords: risk measurement and management; accounting; regulation; financial reporting;

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  1. Danielsson, Jon & Shin, Hyun Song & Zigrand, Jean-Pierre, 2004. "The impact of risk regulation on price dynamics," Journal of Banking & Finance, Elsevier, vol. 28(5), pages 1069-1087, May.
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Cited by:
  1. David Murphy, 2012. "Maintaining Confidence," FMG Special Papers sp216, Financial Markets Group.
  2. Panayiotis P. Athanasoglou & Ioannis Daniilidis, 2011. "Procyclicality in the banking industry: causes, consequences and response," Working Papers 139, Bank of Greece.
  3. Athanasoglou, Panayiotis & Ioannis, Daniilidis & Manthos, Delis, 2013. "Bank procyclicality and output: Issues and policies," MPRA Paper 50830, University Library of Munich, Germany.

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