Call for inter-connected standards for corporate reporting
In December 2019, Accountancy Europe issued a Cogito paper, Interconnected standard setting for corporate reporting, that emphasised the need for greater connectivity between the various non-financial reporting initiatives currently in existence.
There is a sense that the ever-increasing number of these initiatives is creating confusion amongst users and preparers and a greater risk of green-washing. The latest paper also builds on an earlier paper produced by Accountancy Europe: Core & More: An opportunity for smarter Corporate Reporting that proposed a new, smarter model for corporate reporting.
One of the key messages within the Accountancy Europe paper is that there should be greater connectivity between reporting on non-financial information and financial reporting in order to address concerns from certain stakeholders that non-financial information is not reporting with the same discipline or rigour as financial information.
The paper lists nine criteria to evaluate the possible standard-setting approaches that might tackle this lack of connectivity. These criteria are:
- Global or local solution
- Due process of standard setting
- Responding to stakeholder interests
- Framework and metrics
- Materiality lens
- Legal embedding
- Role of technology
The paper discusses each of these nine criteria and some of the challenges and areas for consideration as part of this evaluation process.
Four possible approaches are proposed for interconnected standard setting for corporate reporting along with the principle benefits and challenges of each. These four approaches are:
- The creation of an International Non-financial reporting Standards Board (INSB) within the current IFRS structure and overseen by the IFRS Foundation.
- A regional solution to introduce greater connectivity at a European level by establishing a European non-financial information standard setter with a global solution as the ultimate eventual objective.
- The creation of a separate governance structure for financial and non-financial reporting which would leverage on some of the existing initiatives and bodies in the area of non-financial reporting.
- A global corporate reporting structure under which a new oversight body, the Corporate reporting Foundation, would oversee and govern global corporate reporting standard-setting.
Accountancy Europe are keen to receive thoughts and opinion on their proposals by 31 March 2020. Details of how to respond are included within the paper.