RegulationAccounting StandardsAccounting rules not suited to fight corruption

Accounting rules not suited to fight corruption

New IASB rules would only add red tape to company disclosures

A Big Four partner has poured cold water on proposals which could see
accounting standards used to expose third world corruption.

The International Accounting Standards Board (IASB) is currently drafting a
consultation paper, to be released next year, which will seek feedback on
proposals to make listed companies in the extractive industries report on a
country by country basis.

The issue,
reported
in Accountancy Age yesterday
, could show how much companies pay to
developing nations.

So far the proposals have won support from humanitarian groups which see the
potential to show up the so called corruption gap – the difference between how
much a company receives and how much it spends.

However Bevan Whitehead, partner in Deloitte’s oil and gas group, said
accounting rules were the wrong tool to expose corruption in the developing
world.

Whitehead, who is working the IASB on the proposals, said the rules would be
impractical and ineffectual.

“I don’t think the rules would add very much apart from some fuel for
sensationalist reporting against big oil, which I don’t think is terribly
helpful,” he said.

“It would be nice if you could [expose corruption], but I don’t think when
one gets down to practicality, I don’t think the rules that are available here
are very good for the purpose.”

He said the rules would only add to the reams of disclosures already included
in financial statements.

“The world is a great place for adding more rules and requirements, but not
for taking that away…There is a sense that financial statements have become too
voluminous that you can’t find enough detail.”

The proposals are being backed by Revenue Watch, a group which believe the
measures would help to provide more information to investors and analysts about
potential risks.

Last week, Vanessa Herringshaw, London director of the New York based group
said the measures would make third world nations transperant and accountable to
their citizens.

“Here are industries producing vast amounts of revenue, but that revenue
disappears into black boxes and citizens have no way of working out how much
money comes out and where it goes,” she said.

“It is important for citizens to know how much money they are receiving and
how much is spent on health and social services and to stop the money
disappearing.”

Further reading:

Global
rules proposed may fight Third World corruption

IASB’s
draft discussion paper on Extractive Industries

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