Risk in financial reporting: status, challenges and suggested directions

Claudio Borio and Kostas Tsatsaronis ()

No 213, BIS Working Papers from Bank for International Settlements

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.

Keywords: risk measurement and management; accounting; regulation; financial reporting (search for similar items in EconPapers)
JEL-codes: D52 G00 G12 G28 M41 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2006-08
New Economics Papers: this item is included in nep-acc, nep-cfn, nep-his, nep-reg and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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