IASB offices in London. | Photo: Antxon

Twenty besuited men and women shuffle and blink around a large conference table at 9 am in the heart of the City of London, with almost panoramic views from their fourth floor room. To the unknowing eye this might seem like the start of yet another corporate board meeting. Yet these people hold power not only over the future of a company, but the lives of literally hundreds of millions of people living in poverty around the world.

This is the International Accounting Standards Board’s (IASB) October meeting, and the first item on the agenda is its ‘extractive activities’ project. The IASB discussed the comments received on a discussion paper it commissioned, which explored the possibility of a new international financial reporting standard for the extractives industry.

Many mining, oil and gas companies operate in poverty stricken and unstable developing countries. It has long been suggested that the lack of transparency around these industries facilitates massive corruption – companies are not required to declare the payments they make to governments, so these governments cannot be held accountable for the revenue they receive.

Christian Aid and the Publish What You Pay coalition are calling for a country by country financial reporting standard, which encouragingly was included in the IASB’s discussion paper. This would require companies to declare, for every country in which they operate, the profits they make and the payments made to governments. Although a seemingly innocuous and technical adjustment, a country by country reporting standard would empower governments, civil society and ultimately poor people across the developing world.

If civil society organisations in the South had access to this kind of information, they could ensure payments to governments were spent effectively on public service provisions that would transform the lives of the poor. Yet unfortunately the IASB does not recognise civil society as a valid user of financial reports. In fact, it does not even have a clear definition of what a financial report is, a point raised by several board members that day. This is somewhat worrisome for an organisation mandated to come up with new financial reporting standards.

The IASB’s Conceptual Framework for Financial Reporting is the closest thing to a definition, and it counts only ‘investors, lenders and other creditors’ as users of financial information. This is despite the fact that the IASB’s constitution explicitly states that its purpose is to develop financial reporting standards in the public interest.

The IASB wields a disproportionate level of power over a huge number of people around the world, yet is mostly funded by voluntary contributions from companies and accounting firms. It is no surprise that it considers these organisations to be its principle stakeholders, and looks after their interests first.

Around the table at the meeting, the board considered the costs and benefits of a country by country reporting standard entirely from the perspective of investors and companies. Many investors have made clear that this information would be useful to them, since much risk occurs at the level of the country in the form of political stability. And many companies have admitted that they collect the necessary information anyway, and it would not be too costly to compile it for a financial report.

Yet still it seems that unless the needs of government and civil society are considered by the IASB, a country by country reporting standard is unlikely. Political pressure is necessary to force the IASB to realise the values enshrined in its constitution and recognize governments and civil society as legitimate users of financial reports.

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