By Robin Hamaker-Taylor
A new Consultation Paper has been released by the IFRS Foundation in late September 2020 and is open for public comment until 31 December 2020. The International Financial Reporting Standards (IFRS) Foundation is the organisation behind the set of globally accepted accounting standards, known as the ‘IFRS Standards’, which are the financial reporting standards required for use by more than 140 jurisdictions.
The Trustees of the IFRS Foundation are aiming to assess demand for global sustainability standards, as there is increased focus on environmental, social and governance (ESG) and ongoing developments in sustainability reporting. Alongside these developments, there has also been an increased call for standardisation of sustainability reporting. Investor groups have also been calling for the IFRS Foundation to expand its mission to include sustainability reporting.
Trustees are now seeking stakeholder input on the need for global sustainability standards and gauging support for the Foundation to play a role in the development of such standards. The Consultation Paper will feed into the Foundation’s current assessment of its future strategy, as the Trustees are required to consult on every five years.
Erkki Liikanen, Chair of the IFRS Foundation Trustees, said:
“Calls for standardisation and comparability of reporting on sustainability and climate-change issues continue to grow as these matters become increasingly important to capital markets. We therefore seek to assess whether there is demand for global sustainability standards and whether the IFRS Foundation should play a role in developing such standards.”
What does the Consultation Paper include?
The Consultation Paper sets out possible ways the Foundation might contribute to the development of global sustainability standards by broadening its current remit beyond the development of financial reporting standards and using its experience in international standard-setting, its well-established and supported standard-setting processes and its governance structure.
One possible option outlined in the paper is for the Foundation to establish a new sustainability standards board (SSB). The new SSB could operate alongside the International Accounting Standards Board under the same three-tier governance structure, build on existing developments and collaborate with other bodies and initiatives in sustainability, focusing initially on climate-related matters.
The Consultation Paper also shares critical success factors for the creation of a new board. These include:
- Achieving sufficient support from public authorities and market participants;
- Working with regional initiatives to achieve global consistency and reduce complexity in the reporting landscape; and
- Achieving the appropriate level of funding; and ensuring the current mission of the IFRS Foundation is not compromised.
Where can the Consultation Paper be located?
The Consultation Paper was released on 30 September and is open for comment until 31 December 2020 and it can be accessed here. The IFRS Foundation will hold webinars discussing the Consultation Paper throughout the consultation period. More information can be found here.
This article was adapted from the original, available on the IFRS website, available here.