- New Guidance Issued for Evaluating and Improving Costing
- Articles of Merit Submission Deadline Extended to September 3, 2009
- Projects Launched on Governance, Risk, and Internal Control Guidance
- IFAC G20 Accountancy Summit Results in Mandate for Global Standards
- Pragmatic Approach to Guide Through the Debate on the Efficient Markets Hypothesis
- IFAC Supports IASB Guidance on Business Reporting, Management Commentary
- Sustainability Framework Provides New Climate Change Resources
- ACCA Urges UK to Do More on Renewable Energy
- Australian Board Advances Water Accounting Standards
- CICA Report Raises Board Awareness of Climate Change
- CIMA Conducting Climate Change Survey
- Principles of the Prince of Wales Sustainability Project Endorsed by 16 Accounting Bodies
- SAICA Publishes Green, Expands Sustainability Initiatives
- UK Carbon Reporting Model Developed by PricewaterhouseCoopers
- It is important to have balanced views in the standard-setting process, ensuring that there is no undue influence from any one stakeholder group.
- The International Accounting Standards Board needs to have a robust governance structure that will ensure its effectiveness and independence.
- Governments should follow the same high standards of financial reporting as their private sector counterparts and adopt International Public Sector Accounting Standards.
- The needs of small and medium enterprises need to be considered in the development of standards and re-regulation.
- The G20 should continue to make strengthening corporate governance a priority.
- A more robust financial reporting model is required that includes, among other things, reporting on sustainability and environmental issues.
- Influence and inform
- Lead by example
- Drive thought leadership
- Collaborate through the Forum
- Incorporate accounting for sustainability within training and professional education
Newsletters & eNews
Jul 31, 2009
PAIB eNews: July 2009
In This Issue:
Other Sustainability News from Around the World:
1. New Guidance Issued for Evaluating and Improving Costing
To help professional accountants support better management decision-making, the PAIB Committee has published a new International Good Practice Guidance (IGPG), Evaluating and Improving Costing in Organizations, which establishes six fundamental principles for evaluating and improving their approach to costing.
This guidance is targeted to professionals working in commerce, industry, as well as the public sector. It recognizes the importance of distinguishing between the purposes and information needs of cost accounting to meet the demands of external reporting, cost measurement, and reporting for internal decision support.
A companion document for the guidance, Evaluating the Costing Journey: A Costing Levels Maturity Model, has also been published to help professional accountants decide what level of costing sophistication to use given organizational requirements and the needs of managers and employees. The model can help professional accountants exercise professional judgment to assess their organization's existing costing capabilities. IFAC welcomes comments on this model, which is a beta version.
Both documents can be downloaded free of charge from the PAIB section of the IFAC online bookstore at www.ifac.org/store.
2. Articles of Merit Submission Deadline Extended to September 3, 2009
The Professional Accountants in Business (PAIB) Committee has extended the deadline for nominations of articles for the 2009 Articles of Merit Award to September 3, 2009. The competition recognizes articles that provide distinct, valuable, and useful contributions to inspire and support professional accountants in business.
Member bodies are encouraged to nominate articles that have previously been published in their journals or other publications and on their websites. Each member body may nominate up to three articles. The articles may cover any relevant aspect or current issue related to the roles and domain of professional accountants worldwide, whether employed in commerce, industry, the public sector, education, or the not-for-profit sector. The PAIB Committee's judging panel will nominate 20-25 articles from the submissions to be published on the IFAC website. Professional accountants, as well as other readers, will be invited to vote on these articles to supplement the voting of the PAIB judging panel.
For more information, contact Gabriella Teofilo, Operations Assistant, Professional Accountants in Business Committee, at email@example.com.
3. Projects Launched on Governance, Risk, and Internal Control Guidance
The Professional Accountants in Business Committee has launched two projects aimed at improving guidance related to governance, risk, and internal control.
After the recent publication of the International Good Practice Guidance (IGPG) Evaluating and Improving Governance in Organizations and IFAC's submittion to the G-20 (see item 4), the PAIB Committee intends to publish a reconciliation of its IGPG principles with the OECD Principles of Corporate Governance. IFAC's IGPG on governance complements the OECD Principles as its main purpose is to support PAIBs and to help their organizations evaluate and further improve their governance structures and systems. This will help restore the balance between compliance and performance in organizations.
The PAIB Committee is also developing an IGPG on Evaluating and Improving Internal Control in Organizations. The goal will be to provide practical guidance that will focus on common pitfalls in the way current internal control systems are being deployed, and what should be done to avoid them. Widespread poor corporate performance and outright failures, particularly resulting from the financial crisis, suggest that many organizations are not protected well enough by their governance, risk management, and internal control systems. This is despite the use of widely accepted guidance, such as the framework of the Committee of Sponsoring Organizations of the Treadway Commission. An IGPG on this subject will serve as an opportunity to illustrate how PAIBs can support their organizations in evaluating and improving their internal controls.
4. IFAC G20 Accountancy Summit Results in Mandate for Global Standards
Over 60 leaders of the accountancy profession attended IFAC's G20 Accountancy Summit on July 23-24 in London to achieve consensus on a series of recommendations that will be made to the leaders of the Group of Twenty (G20) Finance Ministers and Central Bank Governors prior to the Group's September meeting on the financial crisis.
Participants unanimously agreed that the public interest would be best served by a single set of high-quality, principles-based financial reporting and auditing standards for listed and public interest entities.
Attendees also agreed on the following recommendations:
These and other recommendations from the summit participants, who represented accountancy organizations in 17 of the G20 countries, are included in a communiqué that was sent to the G20.
5. Pragmatic Approach to Guide Through the Debate on the Efficient Markets Hypothesis
To complement recent guidance Project Appraisal Using Discounted Cash Flow, the PAIB Committee has started development on principles for an International Good Practice Guidance (IGPG) on Estimating and Using the Cost of Capital for Project [Investment] Appraisal. This is timely given the widespread debate on the validity of Efficient Markets Hypothesis (EMH) and the importance of the cost of capital to good financial management. Due to the time value of money, the cost of capital plays a fundamental role in deriving a point valuation of a set of cash flows taking place over time. Its calculation has been historically based on the assumption of efficient markets that underpins financial calculations of valuing everything from stocks to pension fund liabilities to executive compensation.
While there does not appear to be an immediate solution arising out of the disagreements between EMH supporters and behavioralists, professional accountants in business can take a pragmatic approach to estimating and using the cost of capital. A key principle in the IGPG will likely recognize that the estimation of the cost of equity is not a precise science. It will explain that there are different methodologies by which to estimate the cost of equity-often involving several variables which themselves have to be estimated. More than one methodology can be used along with sensitivity analysis to produce a range in which the "true" cost of capital might reasonably fall.
6. IFAC Supports IASB Guidance on Business Reporting, Management Commentary
The International Accounting Standards Board (IASB) has issued for public comment the Exposure Draft (ED) title Management Commentary. Based on the 2005 discussion paper of the same name, the draft outlines a proposed framework to help entities prepare the narrative reports often referred to as management commentary. Comments for the ED are requested by March 1, 2010.
IFAC supports this IASB project and views management commentary as a key element of business performance reporting, which could benefit greatly from principles-based international standards or guidance. Recent IFAC studies on developments in the financial reporting supply chain have also demonstrated the importance of management commentary for investors and other stakeholders.
In addition, in 2010, the PAIB Committee will consider additional guidance for professional accountants who work as chief financial officers, controllers, or preparers on evaluating and improving business reporting.
7. Sustainability Framework Provides New Climate Change Resources
The IFAC Sustainability Framework, a web-based tool that targets professional accountants who can influence the way organizations integrate sustainability into their objectives, strategies, management, and definitions of success, now has a resources section related to climate change policy developments. Carbon disclosures, cap-and-trade, and green legislative initiatives are among the issues addressed by these new links.
The recently launched framework focuses on sustainability from four business perspectives: strategy, internal management, financial investors, and that of other stakeholders. It provides guidance on key considerations for accountants and resources to promote sustainability leadership throughout the full management cycle-from making and executing strategic decisions to providing useful performance reporting to stakeholders. As of July 29, more than 12,000 visitors have accessed the framework.
Further sustainability news from the around the globe can be found in item 8 of this eNews below.
Other Sustainability News from Around the World:
8. ACCA Urges UK to Do More on Renewable Energy
The United Kingdom must do more in the renewable energy market if it is to achieve climate change targets, the Association of Chartered Certified Accountants (ACCA) declared in a new report titled The Future of Renewable Energy. The UK, along with other countries of the European Union, has committed to the "202020" agreement, which involves reducing overall emissions to at least 20 percent below 1990 levels and increasing the share of renewables in energy use to 20%, both by 2020. To meet these goals, ACCA says in the paper, the UK needs to take advantage of the investment potential in renewable energy technology and recognize that the key elements of a global policy framework for a "green new deal" must include effectiveness, efficiency, and equity.
More information about the paper and ACCA's other sustainability and environmental initiatives can be found at www.accaglobal.com/sustainability.
9. Australian Board Advances Water Accounting Standards
The Water Accounting Standards Board, responsible for the oversight and coordination of all Australian Water Accounting Standards (AWAS), has prepared a Water Accounting Conceptual Framework, which aims to assist in the preparation and presentation of General Purpose Water Accounting Reports by providing guidelines for the development of AWAS. The WASB has also delivered a Preliminary Australian Water Accounting Standard that proposes to standardize the practice of water accounting in Australia. These proposals do not impact financial reporting requirements. They predominantly deal with standardizing reporting in relation to quantities of water assets and liabilities, which is one of the objects under the National Water Initiative.
10. CICA Report Raises Board Awareness of Climate Change
A new publication from the Canadian Institute of Chartered Accountants provides a series of questions corporate directors can ask relating to the business implications of climate change. The Risk Management and Governance Board of the Canadian Institute of Chartered Accountants commissioned the publication titled Climate Change Briefing - Questions for Directors to Ask to increase awareness among corporate board members about the business impacts and governance issues associated with climate change. The publication is available online in the climate change section of the CICA's website (www.cica.ca/climate).
11. CIMA Conducting Climate Change Survey
The Chartered Institute of Management Accountants (CIMA) is conducting a survey, in conjunction with The Prince of Wale's Accounting for Sustainability Project, in order to get a better understanding about the current and potential involvement of finance professionals in climate change initiatives. According to a recent poll on CIMA's new online community board, CIMAsphere, 88 percent of respondents think that climate change is relevant to the finance team. The survey results will be published by CIMA and The Prince's Accounting for Sustainability Project later this year and will be provided to all respondents on request.
12. Principles of the Prince of Wales Sustainability Project Endorsed by 16 Accounting Bodies
In July, 16 accounting bodies endorsed to a set of sustainability principles developed by The Prince of Wales Accounting for Sustainability Project, in which IFAC is also taking a leadership role. The 16 accounting bodies include 14 IFAC member bodies and comprise the Project's Forum.
The Project's Sustainability Principles are:
13. SAICA Publishes Green, Expands Sustainability Initiatives
The South African Institute of Chartered Accountants (SAICA) will soon publish the book Green, by Graham Terry of SAICA, which outlines why corporate leaders need to embrace sustainability to ensure future profitability. The book will be launched to members and the public at large at local bookstores throughout South Africa in August. In addition, SAICA has been hosting a series of Sustainability breakfasts, published a corporate guideline titled The Reporting and Assurance of Greenhouse Gas Emissions in South Africa and has offered a training masterclass certified by the Global Reporting Initiative. In addition, SAICA has published a number of sustainability articles in Accountancy SA magazine and established a carbon tax sub-committee. More information on SAICA's sustainability initiatives can be found at www.sustainabilitysa.org/ and at www.saica.co.za/TechnicalInformation/Sustainability/IntroductionandBackground/tabid/1591/language/en-US/Default.aspx.
14. UK Carbon Reporting Model Developed by PricewaterhouseCoopers
PricewaterhouseCoopers has developed a groundbreaking carbon emissions reporting model for business climate change and greenhouse emissions reporting. It was designed to help business respond to the UK government's launch of the world's first legally binding carbon budget, aimed at achieving 80 percent reduction of carbon emissions by 2050.
For more information about any of the items mentioned above or other information about the PAIB Committee, please contact firstname.lastname@example.org.
Register and Login to subscribe to the PAIB Committee eNews.