Mike Rosenberg/CCSA

A new strategy review by the Trustees of the International Accounting Standards Board has clarified that its financial reporting standards will focus on the needs of ‘investors and other market participants’.

This is a slap in the face for civil society, which has repeatedly made the case for the IASB to properly address the needs of legitimate users of financial information apart from investors. The IASB’s constitution itself requires reporting standards to be in the ‘public interest’ and serve ‘other users of financial information’, but these objectives are ignored in a new guiding principle proposed by Trustees.

Civil society organisations in Zambia, including Christian Aid partner the Centre for Trade Policy and Development, recently demonstrated their interest in the accounts of multinational companies when they filed a complaint to the OECD calling for an investigation into allegations of tax evasion from Zambia by a multinational group based in Switzerland.

Zambian citizens only found out about the case through the leak of an audit report, and routinely have no way of assessing the activities of companies profiting from their country’s resources. In most developing countries it’s impossible to see how much tax a company pays to the government, so tax dodging and corruption can invisibly divert resources from development. An IASB country by country reporting standard would provide invaluable information to citizens with which to hold companies and governments to account.

When the IASB eventually considered the idea of such a reporting standard for the extractive industries, it did so only from the perspective of investors. Although investors are supportive of the idea since it would give them much more information on country risk, the real winners would be ordinary citizens.

With this track record of ignoring the public interest, perhaps no-one should really be surprised by the Trustees’ new proposals. It is after all funded by private sources and registered in the secrecy jurisdiction of Delaware in the US.

But ultimately the IASB’s obstinance on this issue undermines its own ambition to develop a single global set of financial reporting standards. In the face of IASB inaction, the US has independently passed legislation requiring extractive industry companies to report their payments to foreign governments on a country by country basis, and the EU is set to follow suit. This will impose multiple reporting requirements on companies, the very inefficiency the IASB was established to avoid.

The European Union’s decision to delegate its standard setting to the IASB catalysed the adoption of its standards elsewhere, though the US is still considering whether to sign up. The EU has shown a willingness to put pressure on the IASB recently, but both the EU and the US should threaten to abandon its standards altogether if it does not actively look after the interests of citizens around the world.

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