New global company reporting standards: can it work?

A new initiative to overhaul international company reporting standards in the wake of the financial crisis is getting all the right support, but will it work?

The International Integrated Reporting Committee is a coalition of businesses, regulators, accountants, securities exchanges and not-for-profit groups campaigning for a radical overhaul of global reporting standards in the wake of the global financial crisis, which called into question the value of company reporting.

The Financial Times reports:

“The crisis has raised concerns about the value of company reporting, with the annual reports and financial statements of banks especially criticised for having failed to alert investors to the risks companies were running.”

The committee seeks to develop reporting standards that “would not only address companies’ financial statements but will also consider management commentary, governance, remuneration and environmental and social issues,” says the Financial Times.

So far, the initiative has the support of Nestle, Aviva, EDF, HSBC, Tata, (crucially) the Big Four auditors: PwC, Deloitte, Ernst & Young and KPMG, the UK’s top 100 finance directors, business schools (including Harvard), the Global Reporting Initiative, the Accounting for Sustainability Initiative, the International Accounting Standards Board, the US Financial Accounting Standards Board and the International Organisation of Securities Commissions.

That’s an impressive roll call of support, as I’m sure you’ll agree, and I see it as an example where globalisation can do good for all. The cynic in me, however, wonders if, even with this groundswell of support, something this big can be pulled off. I mean, hasn’t this been tried before? Numerous times?

We’ll watch this story with interest and report back. The first step is the publication of a framework for a global integrated reporting model that would make annual reports comparable across borders. This will be presented to the G20 next year. G20 support is considered crucial for the initiative’s success.

What do you think: Another international committee with no teeth? Or an initiative with real promise?

Read more:

Financial Times, Initiative to overhaul global reporting standards, 1 August 2010

International Integrated Reporting Committee website

Watch:

Committee member, Paul Druckman, interviewed on CNBC, 2 August 2010

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