Even in the most advanced developed countries, accounting can be problematic. The United States has the Financial Accounting Standards Board, which over the years has substantially improved the quality of U.S. companies' accounts. Fraud still occurs, but less frequently and with less damaging results than previously. And even with the best information, lenders can make mistakes. Nevertheless, the market now generally knows when a company is in trouble.
Global competition brings a requirement for financial accounts that meet international standards.
The combination of better accounts and reduced company debt leverage will make lenders more confident of their risk judgments, lowering borrowing costs. The improved data made available by the IMF will not be read solely by individual lenders, who sometimes exhibit irrational exuberance. The IMF, ministries of finance, bank regulators, and ratings agencies such as Moody's will all be paying attention so that dangerous conditions are not likely to be ignored. We cannot expect to eliminate all the risk, but a substantial reduction will greatly help to avoid such sharp swings as occurred in the Asian crisis. The quest for transparency, at least on a global basis, is recent.