Initiative launched to overhaul global reporting standardsUnited Kingdom
Rachel Sanderson in London
A coalition of businesses, regulators, accountants, securities exchanges and not-for-profit groups is launching an initiative intended to overhaul international company reporting in the wake of the financial crisis.
The crisis has raised concerns about the value of company reporting, with the annual reports and financial statements of banks especially criticised for having failed to alert investors to the risks companies were running. Investors are focusing more on the effect issues such as climate change may have on company finances.
The International Integrated Reporting Committee seeks to capitalise on this groundswell of discontent to undertake a radical review of reporting. It will not only address companies’ financial statements but will also consider management commentary, governance, remuneration and environmental and social issues.
Participants in the initiative include Nestlé, Aviva, EDF, HSBC, Tata and the Big Four auditors: PwC, Deloitte, Ernst & Young and KPMG. The UK’s 100 top finance directors, business schools, including Harvard Business School, and influential not-for-profit groups such as the Global Reporting Initiative and the Accounting for Sustainability Initiative are also involved.
Crucially, the initiative also has the backing of the International Accounting Standards Board and the US Financial Accounting Standards Board, which set the rules for financial reporting, and the International Organisation of Securities Commissions, which develops and promotes international standards of regulation across financial markets.
The committee intends to publish a framework this year for a global integrated reporting model that would make annual reports comparable across borders. It would be presented to the G20 in 2011.
The G20 already backs the formation of a single set of reporting standards, and G20 support for broader rules is considered crucial to their introduction.
To achieve this, however, will be challenging because international accounting rule-setters still struggle to make financial reporting rules converge. But the high level support being lent to the initiative – by the Prince of Wales for example – could help it to succeed.
Ian Powell, PwC’s chairman and senior partner, said: “This is an important step on the journey to create a new corporate reporting model fit for the 21st century.”
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