World Bank lends support for country-by-country reporting

The World Bank has thrown its support behind proposals which could reveal how
much corrupt regimes receive by selling their nation’s natural resources.

The Bank’s vice president and controller, Charles McDonough, has backed new
accounting rules which would require international oil and mining companies to
publish their revenue and cost figures on a country-by-country basis.

The proposals would allow investors and humanitarian groups to see how much
third-world nations receive from international oil and gas companies. It would
also represent a leap towards revealing the so-called corruption gap – the
difference between how much a government receives from mining and oil companies
and how much it spends.

The proposals, under considered by the International Accounting Standards
Board (IASB), face stiff opposition from the extractive industries which argue
the rules would be costly, impractical and offer little meaningful data for
investors.

However McDonough claims any practical issues could be dealt with “through a
generous period of implementation.”

The proposals face an uphill battle. Any change to the growing list of
international accounting rules must be justified on financial, not
humanitarian, grounds.

McDonough believes investors be interested in the political and reputational
risks carreid by oil and mining companies which would be brought to light if the
rules came into effect.

“We believe that requiring country-by-country disclosures, that would be
audited, is essential to providing financial statement users with qualitative
information about a number of useful aspects of risk exposure,” he said.

Royal Dutch Shell said its reporting systems are not designed to capture the
information referred to in the rules and warned of costs “which may be
significant” if the proposals come into effect.

“Whilst we support in principle the disclosure of revenues paid to
governments, we do not believe that the inclusion of requirements in an
[international accounting rule] is the way to achieve this,” Shell executive
vice president Roy Waight, said in a letter to the IASB.

Patrick Mulva vice president and controller with international oil company
Exxon Mobil, said payments made to governments would not provide cost-beneficial
information to investors, but believes production, reserve, cost, and revenue
information should be disclosed.

“Accounting standards and related financial statement disclosures should not
be used to advance social objectives that are unrelated to the primary purposes
of financial reporting,” he said.

Further reading:

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

Country-by-country
tax reporting gains favour – Accountancy Age

IASB:
Extractive Activities Discussion Paper and Comment Letters