IASB accused of being soft on country-by-country reporting

Proposed accounting rules which may force mining and oil companies to publish how much they pay corrupt regimes don’t go far enough according to a humanitarian group campaigning for greater international corporate transparency.

The Publish What You Pay (PWYP) coalition, which wants mining and oil companies to publish how much they pay individual governments in royalties, taxes, bonuses and license fees, said new accounting proposals on the subject are too cautious.

The International Accounting Standards Board (IASB) yesterday released a discussion paper which may force companines involved in extractive industries to break down their costs and revenue on a country-by-country basis, and publish the figures in their financial statements.

The paper suggests investors and capital providers may want to know about the risks to reputation and income of working in resource-rich and sometimes corrupt nations.

However, PWYP believes the proposals do not go far enough.

“The IASB’s project team shies away from clearly recommending that company payments
be reported in this country-specific manner, stopping short of a change that investors and citizens need to successfully assess risk and press for responsible governance, which companies are resisting,” the body said in a statement.

Vanessa Herringshaw, of the Revenue Watch Institute, dismissed concerns the new measures would be costly.

“Any claim that real country-by-country reporting costs too much is penny wise and pound foolish…There is a price to upgrading any reporting system, but investors face far greater costs when they lack the tools to assess risk in the volatile extractive sector, she said.

“If the financial crisis has taught us anything, it is that corporate transparency and accountability are vital to stability.”

The IASB must justify new accounting rules by how useful they will be for investors, capital providers and other market participants.

At the moment, multi-national mining and oil companies aggregate their costs and revenue data which makes it difficult to distil how much they pay individual governments. Breaking the data down to a “country-by-country” basis could expose corruption and provide useful market information, according to the IASB’s discussion paper.

“Generally speaking, the greater the level of corruption, the greater the investor’s concern about the integrity of the government and its commitment to honour existing terms and conditions relating to an entity’s operations in that country,” the discussion paper states.

“The disclosure of payments made to governments provides information that would be used by at least some capital providers in making their investment decisions, either by using the information to make their own assessments of investment risks and reputational risk or by providing better information to other risk analysts that advise the capital providers on investment and reputational risks.”

Read the IASB's discussion paper

Read the PWYP statement

Further reading:

The time has come to ‘publish what you pay’

Global rules proposed may fight Third World corruption