RegulationAccounting StandardsIASB accused of being soft on country-by-country reporting

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

New proposals may expose corruption in resource rich nations

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

Related Articles

Demystifying GDPR for accountants

Accounting Standards Demystifying GDPR for accountants

1w Ellen Temperton, Lewis Silkin
EY fined £1.8m over Tech Data audit

Accounting Standards EY fined £1.8m over Tech Data audit

2m Emma Smith, Managing Editor
The great professional services shake-up

Accounting Standards The great professional services shake-up

3m Fergus Payne, Lewis Silkin
What do clients actually want from an accountant?

Accounting Standards What do clients actually want from an accountant?

4m Emma Smith, Managing Editor
Accountants shouldn’t neglect hybrid mismatch anti-avoidance rules

Accounting Standards Accountants shouldn’t neglect hybrid mismatch anti-avoidance rules

4m Alison Conley
Membership of the accountancy profession on the rise

Accounting Standards Membership of the accountancy profession on the rise

5m Alia Shoaib, Reporter
The real price of mates' rates in the provision of professional services

Accounting Standards The real price of mates' rates in the provision of professional services

5m DAC Beachcroft
IASB overhauls insurance accounting with issuance of IFRS 17

Accounting Standards IASB overhauls insurance accounting with issuance of IFRS 17

7m Alia Shoaib, Reporter