I would like to acknowledge the Wurundjeri (wa-run-jeri) People of the Kulin Nation, the Traditional Owners of the land on which we are gathered and pay my respects to their Elders both past and present.Mention I speak for IFAC here, not the IIRC. I can speak about the IIRC, but not for it.
The ongoing global financial crisis has highlighted the lack of transparency and responsible financial reporting frameworks.Corporate governance failuresBanking collapse
Crises like Enron and the controversial accounting procedures which helped the multinational company look more profitable than it actually was brought to the fore financial reporting failure in the private sector. It led to the passage of theSarbanes-Oxley Act, and the creation of regulatory bodies for private sector audits in many major countries.
The core of reporting remains financial reporting. With global companies and capital markets comes the need for convergence to support international comparability of elements of reportingEmerging issues need to be discussed and ultimately reflected in IFRS, such as accounting for carbon emissions controls and creditsTechnology is helping to transform how reporting is delivered, e.g., XBRL
Various initiatives over the years include: PwC Value Reporting,Enhanced Business Reporting ConsortiumHowever, reports are typically long and are getting longer. Because reporting has evolved in separate, disconnected strands, critical interdependencies between strategy, governance, operations and financial and non-financial performance are not made clear. To provide for the growing demand for a broad information set from markets, regulators and civil society, a framework is needed that can support the future development of reporting reflecting this growing complexity. Such a framework needs to bring together the diverse but currently disconnected strands of reporting into a coherent, integrated whole, and demonstrate an organization’s ability to create value now and in the future. Key challenges include complexity, incompleteness, static and backward looking, in case of governments in particular, deficient accounting practices.An important aspect of IR is that reporting reflects and communicates the interdependencies between the success of the organization and the value it creates for investors, employees, customers and, more broadly, society. A good example is that success depends on stakeholder trust in the organization, and this depends on effective stakeholder engagement and an understanding of which factors underpin an organization’s success. For many companies, this can include its relationship with local communities and indigenous peoples.
All variables considered we now have liftoff!There is an urgent need for understandable financial and non-financial information that will show how a company and its management run their businessThere needs to be a shift from reporting on historical (stagnant) financial information to qualitative reporting that reflects strategy, plans, opportunities, and risksIntegrated reporting will provide a clearer and more strategic picture of the ability of an organization to create and sustain value today and in the long term. The implementation of integrated reporting will improve the quality of the information reported, support the development of integrated analysis, and hopefully evolve to be the standard in mainstream business reporting.
Integrated reporting builds on the many positive developments to date. The IIRC pulls together a cross section of leaders from the corporate, investment, accounting, securities, regulatory, academic and standard-setting sectors as well as civil society. It has political buy-in from a multi-disciplinary perspective and is trying to achieve sustainability from two perspectives:Sustainability of the organization from a financial and economic perspective, which has social significance, and sustainability from an environmental perspective.The information provided by an integrated report is needed by decision makers at all levels, including the capital markets and by internal management. Reporting is an important part of the feedback cycle, and should provide decision makers with reliable and relevant information on whether objectives are being met, and how they might need to be refined in light of new learning.What is reported mirrors what we believe are important aspects of performance. Reporting in an more integrated way also can drive more integrated governance and management practices within an organization, as is being evidenced in South Africa where integrated reporting is implemented.These two perspectives are not distinct and have to be considered together.
PAIB Committee an update on the progress of the IIRC and the development of the IR framework. The reaction was supportive but included caution in 3 areas: A concern at the low response rate to the DP from BRIC countries and particularly India and China. AN Raman suggested that it might take time for these countries to assimilate the IR concept given their general stage of business development and maturity, and a focus on other priorities such as IFRS convergence. This could mean that the IIRC should slow down the development of the IR framework to a more manageable timescale, and in synch with the IR pilot program (this might have already been decided by the IIRC WG).To ensure that there is adequate PAIB/preparer engagement so to ensure that the practical implications for implementing IR are properly understood and reflected in the framework. Although I assume the pilot program should allow for this, I think that there was some concern that representatives of the audit profession, particularly through the big 4, might be seen to over dominate. I think there was a concern that PAIBs could feel disenfranchised particularly where (as seems to be the case in some places), discussions and subsequent promotion to companies is being driven by assurance providers.IR will likely fail to meets it objectives if implementers view it as a compliance process, which will result in anodyne disclosures and box ticking. Actions to prevent this could be as important as the framework itself.
IFAC’s active role in the IIRC and development of the IR framework.The ED forecast in the Discussion Paper for 2012 will not appear until 2013, but in the meantime there will be a number of topic-specific drafts and papers. The process allows for the transparent evolution of the IIRC’s thinking as the draft framework is being developed, and the opportunity to test ideas with the pilot programme participants and other stakeholders along the way. A “personal view” is that the draft framework might be expected to be exposed late in the second half of next year and, given the time needed for a robust due process, it is unlikely the “final” Framework would appear until at least mid-2014.
Sustainability is a key strategic theme of the professionThere are many hurdles to be overcome, so we should not expect to see the dismantling of the current financial reporting regimes any time soon, but new tools and measurement are now the focus of a new era in financial reporting.The causes of social responsibility, environmental preservation, and the overall sustainability of global civilization are critical not only for today, but for the benefit of generations to come. The accounting profession is making its mark today in the move toward sustainability by setting the stage for a new standard in financial reporting (integrated reporting.)IFAC, in its G-20 recommendations, recommended the G-20 support the development of these new tools and metrics to achieve global sustainability. This is an area in which we, as a profession, will have a significant role, both as preparers and as providers of assurance. The accountancy profession must be proactive and vocal in their support of innovation and change, engage in candid dialogue with their stakeholders and policy setters to ensure a viable, and a smooth evolutionISAE 3410:Accountants well suited, but not a “captive” domain:Need both assurance AND emissions quantification and reportingAccountants may need to use experts, but not alwaysISAE 3000 – open to broader application?Both limited assurance and reasonable assuranceLA ≠ primarily inquiries and analytical procedures Need to assess risks and design appropriate responses
@GRIAusConf_Plenary: The Role of Reporting In The Transition To A Sustainable Economy - Ian Ball
Plenary Panel: The Role of Reporting in theTransition to a Sustainable EconomyProf. Ian Ball CEO, International Federation of AccountantsJane Diplock Director, Singapore Exchange; Former Chair of the New Zealand Securities Commission; Former Chair of the Executive Committee, International Organisation of Securities CommissionsDamien Walsh Managing Director, bankmecuSimon Longstaff Executive Director, St James Ethic Centre
Integrated Reporting and aSustainable EconomyIan BallCEO International Federation of AccountantsGlobal Reporting Initiative27 March 2012Melbourne, Australia
Integrated Reporting and a Sustainable Economy Why Greece wont go away By Laurence Knight Business reporter, BBC News 6 February 2012 Financial Crisis Enters New Phase By VIKAS BAJAJ Published: September 17, 2008
Integrated Reporting and a Sustainable EconomyCalled to AccountBy Cathy Booth Thomas/Dallas Tuesday, June 18, 2002 State of the Enron By FRANK RICH Published: February 02, 2002 Report: Enron execs hid losses, made millions February 2, 2002
Integrated Reporting and a Sustainable Economy Financial Reporting remains critical• Global convergence to IFRS is a critical step, not yet achieved• In the public sector we are barely crawling, let alone walking• Adoption and enforcement of standards locally is a challenge
Integrated Reporting and a Sustainable EconomyEnhancing Transparency Through Reporting• Financial statements remain critical but do not tell the whole performance story• Concern with the reporting model is not new and various initiatives have attempted to deal with the challenges
Integrated Reporting and a Sustainable EconomyThe Opportunity of Integrated Reporting• Integrates sustainability of an organization from a financial, economic, social and environmental perspective• The International Integrated Reporting Council has wide multi- disciplinary political support to develop an integrated reporting framework• This is not intended to replace existing forms of reporting but to provide, in an integrated way, a clear and understandable picture of material financial and ESG issues
Integrated Reporting and a Sustainable EconomyWhat Is The Profession’s Role? • Ensuring that professional accountancy organizations require relevant knowledge acquisition • Helping accountants in practice and in business to acquire the skills and mindset needed • Helping develop the new model
Integrated Reporting and a Sustainable EconomyThe Role of IFAC • Member of the International Integrated Reporting Council and o Chair of Working Group o Providing technical staff support to the development of IR framework 2012: • Technical consultation papers on specific topics • Continuous involvement of Pilot Programme participants and others 2013: • Proposed integrated reporting framework.
Integrated Reporting and a Sustainable EconomyThe Role of IFAC • Professional accountants in business o Promoting and providing guidance on integrated and ESG reporting and on incorporating sustainability into management processes o Encouraging effective governance and business reporting processes • Small and medium practices o Enhancing advisory services of SMPs • IAASB o Assurance of GHG Emission statements (ISAE 3410) and other assurance (ISAE 3000)