International investors wade in to segments row

The embattled standard on the reporting of company segments has hit a new
roadblock, after an international body of investors controlling more than $10
trillion (£5 trillion) weighed in to the row.

The International Corporate Governance
– whose members come from 38 different countries – has written to
the European Commission over the plans, significantly broadening the coalition
attacking the standard.

The plans have so far been opposed mainly by European and particularly UK

The group, led by executive director Ann Simpson, argues that the standard
‘confuses the corporate governance paradigm and muddies responsibility by
referring to management rather than boards’.

‘If the chain of accountability – of the boards to shareholders, and
management to the boards – is to be effective, the management must be
accountable to the boards,’ she said.

In their letter, the group stated their opposition to the way in which IFRS 8
allowed management the defining role in financial reporting.

‘By specifically referring to management, rather than boards, IFRS 8 is
perhaps as much a corporate governance standard as an accounting standard. If
there is any risk that with IFRS 8, financial reporting can amount to a “paper
passing” exercise decided by management under the sanctity of IFRS 8, then the
matters should be addressed by the EU,’ the letter stated.

The IASB has been
rattled by opposition from UK investors who have, alongside NGOs, charities and
pressure groups, led criticism of the standard. Tax campaigners want country-
by-country reporting of tax problems.

The ASB, which held a meeting to establish a consensus, has also been drawn
into the row. It has been accused of presenting opponents as agreeing with the
standard and urging the EC to adopt it when they did not agree with it.

The ASB has also been accused of excluding pressure groups who were present
at the meeting, and of giving each person present a vote – even when more than
one person from an organisation was present.

Richard Murphy, representative of NGO collective,
What You Pay
, said: ‘This is about more than IFRS 8. What is happening here
is a question of whose interests accounts are prepared for and what exactly
accounting standards are meant to do,’ said Murphy.

The EC has provisionally deferred the adoption of the standard.

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Fiona Westwood of Smith and Williamson.