Campaign for a country by country reporting standard
June 11th, 2010
June 11th, 2010
Investors, governments, tax authorities, the IASB
Call to action: We have a unique chance to make new global rules for company reporting
A new global standard for extractive company reporting is under development right now. It has the potential to make oil, gas and mining companies:
This new standard is called an International Financial Reporting Standard (IFRS). It is being developed by the International Accounting Standards Board (IASB). A formal Discussion Paper has been published. This contains discussion of some of the proposed requirements for country-by-country reporting that Publish What You Pay and the Tax Justice Network have been pushing for a number of years.
But there are big gaps and weaknesses in the proposals and opposition from industry actors risks turning this crucial moment into a missed opportunity. A lot is at stake. Powerful interests are opposed to reforms and will likely pressure the IASB to maintain the status quo.
We are in the middle of the consultation period on these proposals. This is a big opportunity. But it cannot be missed. The deadline for comments to the IASB is July 30th.
Our top target, the IASB, formally prioritises the views of investors and companies, but we also think it will listen to government agencies and the media. We think it should also listen to civil society. So you will make a huge contribution to the campaign if you can:
There are other possible targets, like extractive companies and national associations of accountants. But these are best investigated case-by-case so we haven’t included them in this general Campaign Action Pack.
1. Companies should be required to report for each and every country in which they operate
We do not accept the current proposal to allow companies in the extractive industries to establish a cut-off point for country-specific reporting. We are particularly concerned by the proposal to allow the threshold to be set in terms of what is material for the company based on the size of national reserves relative to their international operations. This ignores the fact that reputational and legal risks are unrelated to the scale of operations. We also believe that the proposal to leave the decision on where to set the cut-off to the discretion of the company will reduce comparability of data, a key principle of international standards. Combined, we are convinced that this will leave the data on many countries still aggregated and inaccessible.
2. Information on specific payments to individual governments is essential
The current proposal recognizes that capital providers/investors have stated that they would find country-specific information on payments to governments useful to their decision-making. Other users of financial reports – like civil society and tax authorities – also anticipate significant benefits in assessing the appropriateness of payments and holding governments to account for their use. Companies should already have this country-specific information to comply with host government taxation reporting. Many will also need it to address anti-bribery and corruption legislation in their home countries. Therefore, additional costs should not be significant, making the proposal for further cost-benefit analysis unnecessary.
3. A minimum set of information is needed to ensure the coherence and credibility of what is reported by a company for operations per country
PWYP has identified six reporting types which would provide the minimum integrated set of data that should be disclosed to ensure accounting credibility. The IASB Discussion Paper treats this minimum package of data as a set of options by rejecting country-specific reporting requirements related to production revenues, subsidiaries and properties, and by failing to give a clear recommendation relating to payments to governments. But all elements must be required to allow meaningful judgments and comparisons.
Therefore the minimum package must include:
4. There should be no reporting exemptions, as these are unnecessary, would undermine comparability and would increase pressure on ethical companies seeking to be transparent
The current proposal to give companies the option to exempt themselves from reporting payments to particular governments undermines the whole added value of an IFRS. It would remove the protection of a standard reporting requirement, leaving companies to explain to untransparent host governments why they were not using the exemption. Resulting non-reporting would reduce the comparability of company reports. Such exemptions are not needed since regulations like IFRSs would override restrictions of confidentiality clauses if applied in a uniform manner.
5. There are many legitimate users of company financial reports other than investors and other capital providers and their needs must be considered by the IASB in the design of standards
The constitution governing the IASB states that it must act in the public interest and address the needs of the various users of company financial reports. In spite of this, the Discussion Paper explicitly rejects specific consideration of the needs of any users except capital providers/investors.
We’ve created some other materials to help you get into action vital for the campaign:
GUIDANCE FOR ENGAGEMENT: As described above, this section will help you identify specific targets and how to contact them, frames our issues in ways that will appeal to their agendas and provides 2 page summary/letters to help your communications with these priority groups. This has four sub-sections, to help you:
1. Getting investors to support what we’re asking for
2. Getting governments and tax authorities to support what we’re asking for
3. Getting the IASB to listen to your voice
4. National contact points – people acting as country focal points in particular countries
BACKGROUND BRIEFING: This is a source of detailed information and sources, relating to issues like:
a. The potential benefits of a new accounting standard – why it will have such reach
b. Global context for country-by-country reporting: mechanisms, precedents, progress
c. The IASB (International Accounting Standards Board): how it’s structured, how it operates, and debates on its accountability
d. Process and timeline for the creation of a new reporting standard
e. Key issues and gaps in Discussion Paper proposals – detailed analysis and references
A number of people have agreed to be focal points for the campaign in their particular countries. Their names and contact information are listed in section 4 of the Guidance for Engagement. If there is no one listed for your country, you can contact the international contacts. They are:
Joseph Williams, PWYP international office
Information & Advocacy Officer
+44 (0) 20 7031 1616
+44 (0) 77 7575 1170
Vanessa Herringshaw, Revenue Watch, London office
Director, Training and Capacity Building
Tel: +44 (0)7900 492631
Søren Kirk Jensen, Independent Policy Analysis
Tel: +45 5015 5783
Richard Murphy (Tax Research LLP) has been providing a lot of technical support. But please note he is a freelance consultant, so there are limits on what support he can provide without remuneration!
Work: +44 (0) 13 66 383 500
Mobile: +44 (0) 77 7552 1797
Your support is critical in our effort to mobilize stakeholders to endorse country-by-country reporting. Please keep us updated on developments – We’re looking forward to hearing from you!
Please click here to download the pdf version.