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The Task Force and Allies Call on IASB to Adopt PWYP Reporting Standards

August 2nd, 2010

The Task Force on Financial Integrity and Economic Development called on the International Accounting Standards Board (IASB) this past week to adopt Publish What You Pay’s (PWYP) proposal to require a country-by-country reporting standard in the extractive industries (oil, gas and mining).

The standards proposed by PWYP (and supported by the Task Force and many other NGOs) would require companies to disclose the payments they make to the governments in which they operate. These standards are vital in assuring that multi-national corporations (MNCs) pay a just amount of taxes and that payments made between their subsidiaries are both reasonable and legal. These standards are key to fighting corruption in host countries as well, as disclosure creates accountability in government.

However, in the IASB’s original position paper on this issue, floated earlier this summer, the Board opposed adopting such standards.

The Task Force responded to the IASB’s main argument, that its only responsibility is to investors, as invalid. Following this reasoning, the IASB claims it has no obligation to the public good, and thus cares not about distributing the benefits of extractive activities to the people of countries that open their doors to MNCs, unless that is what investors also want. As Richard Murphy said in a recent posting on the Guardian’s website,

“…the apparent needs of fund managers, and their largely computer-generated investment decisions – many of them undertaken solely in pursuit of stock exchange index tracking – are paramount for the IASB.”

Citing precursory reports and other relevant documents, the Task Force says that the IASB is responsible not only to investors, but to the public, the government, company shareholders and employees – just to name a few.

The Task Force takes the IASB to task on several other areas as well:

  • The IASB proposal to allow companies to opt out of disclosing information in certain jurisdictions for reasons left up to their own discretion would create a moral hazard and allow corruption to thrive.
  • Under the International Accounting Standards Committee Foundation (IASCF) constitution, the IASB has an obligation to addressing the special needs of “emerging economies.” Where might be a clearer example of an emerging economy then in places where extractive activities flourish?
  • The recent Deepwater Horizon event in the Gulf of Mexico highlights the fact that risks in the extractive industries are “are specific, peculiar and in very many cases geographically located.” The relationship between the host country and the extractive industry company has obvious significance for investors, as highlighted by the demand in America for BP to compensate in full for damage caused in the Gulf.

Just last month, the United States government adopted PWYP’s reporting requirements for any company listed with the Securities and Exchange Committee (SEC).   The new SEC requirements apply to 90% of the world’s internationally operating oil and gas companies.  U.S. President Barack Obama has vowed to campaign for the adoption of these standards at the international level.  For more on the implications of the U.S. legislation, click here to read Ann Hollingshead’s analysis.

Finally, the Task Force is not the only group to take the IASB to task on this issue. Below you can find comments from other organizations who submitted comments:

Individual Task Force coordinating committee members’ submissions:

Other like-minded organizations’ submissions:

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Written by Scott Fahey

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