Accounting body calls for greater transparencyJune 2010
Proposed new requirements for the global extractive industry have suggested that companies should disclose key financial information country by country for transparency purposes – but stop short of recommending a breakdown of payments to governments.
In a discussion paper for a new extractives standard, the global body that oversees corporate financial reporting, the International Accounting Standards Board (IASB), has said country-specific information should be disclosed for reserves, production costs and subsidiaries.
However, on payments to governments, potentially the most controversial financial information for companies in the oil, gas and mining sectors, the IASB is wary of the costs.
The paper says: ‘There would be a significant cost associated with disclosing information about payments made to governments. Preparers also raised concerns about the materiality of this information, both in terms of providing the disclosure on a country-by-country basis and the separate disclosure by payment type.’
Instead, the researchers say further study is required to reach a definite conclusion, but they believe such data ‘would be used by at least some capital providers in making their investment decisions’.
Under the Extractive Industries Transparency Initiative (EITI), a number of companies and countries have already agreed to become more transparent about oil, gas and mining revenues in the hope that more openness will deter such revenues being used to promote conflict or simply being syphoned off into the private bank accounts of corrupt government officials.
But the EITI is only a voluntary project, and new IASB rules on the topic would be binding.
As such they would be expected to have more force and greater reach.
The Publish What You Pay pressure group, however, said the proposals ‘have been weakened by pressure from companies and have yet to clearly recommend reporting of the full information that investors and citizens need’.
The present extractives standard, a version of the International Financial Reporting Standards, also produced by the IASB, was issued in 2004 as an interim measure pending completion of the research.
The IASB says it neither specifically tackles the development and production of extractives properties nor includes disclosure requirements that would help users to assess the nature and extent of the risks in extractive activities.
The new discussion paper, Extractive Activities, is out for comment until 30 July.
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