Banks should have methodologies that enable them to quantify the risk involved in exposures to individual borrowers or counterparties. Banks should use measurement techniques that are appropriate to the complexity and level of the risks involved in their activities, based on robust data, and subject to periodic validation. ^[1.]

Many countries are adopting International Financial Reporting Standards (IFRSs). Since January 1, 2005, European Union public companies or firms with debt on a European exchange have been required to use IFRS.

IFRSs refer to the entire body of IASB pronouncements, including standards and interpretations approved by the IASB International Accounting Standards Board and International Accounting Standards (IASs) and IAS s Standing Interpretations Committee (SIC) interpretations approved by the predecessor International Accounting Standards Committee. Having a single set of accounting standards makes it easier to arrive at credit decisions (far easier than working through differing sets of national accounting standards). Without a single set of accounting standards, bankers spend lots of time and effort working through financials. Also, financial information that is inconsistent causes confusion; remember: bankers are outsiders and are not privy to investment budgets, inventory schedules, and so on.