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  • Maintaining Trust & Confidence During a Crisis

    Lessons Learned from the Global COVID-19 Pandemic

    Every crisis is different.  In recent history, we have seen crises of systemic scale driven by asset bubbles, acts of terrorism, and the coronavirus.  While the causes and impacts are largely unpredictable, one thing is certain—the next crisis will come. 

    In any crisis, companies, professional firms, public sector entities, and private organizations have, first and foremost, a responsibility for the well-being of their employees, customers, and communities.  While not typically on the front lines directly confronting a threat, professional accountants across the world provide strategic and operational expertise, integrity, reliability, and transparency of information needed for economies to function, even during a crisis. Fortunately, remote locations and today’s virtual technology allow employers of professional accountants to better align the needs of their employees and clients with a commitment to keeping businesses, governments, markets and economies functioning.  

    Crises can disrupt our places of work, our homelife, and our mindset, with repercussions for internal controls and processes, personal and professional behavior, and decisions made in the face of uncertainty and incomplete information.  Such challenges impact the important services professional accountants provide and can shake the foundation upon which relevant, reliable and high-quality information—relied on by boards and the leadership of reporting entities, government/regulatory policymakers, investors and other stakeholders—is based.  When these challenges emerge and the importance of high-quality information is heightened, the expertise, trust and judgment of the accountancy profession is tested and must truly shine. 

    Every crisis teaches us something new about how best to prepare for, mitigate, or even try to prevent the next event.  Society needs professional accountants, as an essential component of a sustainable and resilient global economy—guided by their fundamental ethical responsibility to act in the public interest.  Maintaining trust and confidence during a crisis is the fastest path to recovery after a crisis.  

    Regulators Acknowledge the Challenges Faced by Reporting Entities During the COVID-19 Pandemic

    "Active oversight of financial reporting and audit processes by the issuer’s audit committee or those charged with governance (TCWG)…further supports the provision of reliable, high-quality information to investors.” 

    Read More from IOSCO

    “…we would not expect to second guess good faith attempts to provide investors and other market participants appropriately framed forward-looking information.”

    Read More from the U.S. SEC

    Commentary from Center for Audit Quality and CFA Institute

    “As knowledgeable investors recognize, this is a challenging time for even the best-managed companies….Investors should be thoughtful about the mix of information they are relying on to make decisions, including the assumptions and judgements going into that information and the level of auditor involvement."

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    1. Role of Senior Management & Those Charged with Governance

    Senior management, board directors, audit committee members (i.e., all those charged with governance - "TCWG") are responsible for maintaining the quality and integrity of decisions made, information reported, and messages communicated to stakeholders during periods of economic or operational stress.1 The ability of the board and senior management to identify the challenges, develop innovative solutions, lead corporate culture, and navigate through uncertainties, will determine the survival and future of an entity facing a crisis.

    • To be crisis-ready, IFAC believes that TCWG must employ “integrated thinking” in managing their organizations—focusing on drivers of value, resiliency of the business model, clear assessments of risks and opportunities, and strong alignment of KPIs and incentives.  Crises put companies to the test—spotlighting strategic and structural weaknesses or dependencies that may be easy to overlook during times of prosperity.  IFAC’s partnership with the International Integrated Reporting Council shows our support for companies to focus on long-term value creation and preservation.2
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    • Audit Committees must be vigilant, agile, independent, disciplined, and engaged.  We recommend the below actions to optimize their crucial role in governance, oversight, and long-term value creation during times of crisis:
        • Stay informed,
        • Communicate and collaborate,
        • Leverage available expertise,
        • Promote continuous improvement,
        • Think holistically, and
        • Embrace technology. 

               Adoption of these recommendations may require strengthening and
               refining of governance arrangements and enhancement to risk
               management and internal control activities.

    • Incentives for fraudulent activity and the risk of error can be heightened when organizations and individuals are faced with unusual economic challenges and disrupted working environments.3  TCWG have the ultimate responsibility for business integrity and transparency.  IFAC believes that boards and management must take steps to ensure:
        • Internal controls are adapted or enhanced to reflect new operating conditions.
        • “Tone at the top” makes clear there is zero tolerance for inappropriate activities and encourages employees to speak up if they see mistakes or wrongdoing.
        • Heightened state of alertness exists to detect fraud or manipulation of accounting information.
        • Collaboration with external auditors results in appropriately updated risk assessments, enhanced engagement with finance functions and internal audit, and sufficient, appropriate audit evidence is made available and obtained.
    • IFAC believes that going the extra mile in providing reliable and high-quality information and disclosures will improve stakeholder understanding, support the credibility of reporting entities and reduce second guessing in the aftermath of a crisis.4  Disclosing the assumptions, judgments and estimates that underpin scenario analysis, future performance guidance, fair value measurements, impairments, or expected credit losses is critical.  It’s a matter of investor protection.  By doing so, management provides transparency—based on information available at the time and provided in good faith—into the soundness of company analysis, planning, and ability to survive as future facts and circumstances evolve.  However, investors and other users of financial information cannot assume that all companies will make uniform assumptions, judgments and estimates in uncertain times—so the potential for inconsistencies or inaccuracies in reported information may increase.5 This is why transparency is always important.

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    • IFAC believes that effective corporate governance includes the development of business continuity plans grounded in robust communication between the board/management and key external stakeholders including auditors, regulators, consultants, academic/industry experts, rating agencies, and large shareholders. When normal communication channels are disrupted, a company must take steps necessary to sustain transparency and accountability—to avoid misunderstanding, and ill-informed decisions.
    • Communication between an entity’s leadership and stakeholders is important for companies of all sizes. One of the most important forums for publicly held companies is the annual general meeting. Today’s technology enables companies to conduct “virtual” meetings. In agreement with representatives of the global investor community, IFAC believes that, during a crisis, public safety concerns may defer or change the format of annual meetings, but such emergency solutions must be employed with every effort to be as participatory as possible and should not be extrapolated by companies or regulators to post-crisis practice that could, in the long-run, diminish accountability to shareholders and stakeholders.6
    • While financial statement audits are typically performed annually, we believe that TCWG (especially at companies in industries severely disrupted) should consider additional assurance or related service engagements that address issues such as:7
        • Going concern, including scenario testing of liquidity and solvency;
        • Capital preservation measures, including the suspension of dividends;
        • Internal control assessments; and
        • Valuations and estimates of goodwill, intangibles, inventory, financial instruments, trade receivables, or loan losses.
    • IFAC believes that whistleblower policies at companies and effective legal regimes for handling protected disclosures are a matter of good governance provide effective deterrence to fraud, and are especially important when normal controls and operating procedures are disrupted.8   

    3 Center for Audit Quality - Managing Fraud Risk, Culture, and Skepticism During COVID-19, April 20, 2020

    4 IOSCO highlights the importance of disclosures during the COVID-19 pandemic, noting - “Investors and other stakeholders need timely and high-quality financial information complete with transparent and entity-specific disclosures, including information about the impact of COVID-19…” Further, with respect to audits of annual reporting, “high quality audits conducted by an independent auditor is a critical part of the ecosystem that provides reliable, high-quality financial information to investors. This should be complemented by active oversight of the financial reporting and audit processes by the issuer’s audit committee or those charged with governance (TCWG) which further supports the provision of reliable, high-quality information to investors.” 

    The U.S. Securities and Exchange Commission has urged companies "to provide as much information as is practicable regarding their current operating status, and their future operating plans under various COVID-19-related mitigation conditions." The Commission acknowledges “… actual financial and operational results may differ substantially from what would now appear to be reasonable estimates” and that in light of “the uncertainty in our current business environment, we would not expect to second guess good faith attempts to provide investors and other market participants appropriately framed forward-looking information.”  See:  https://www.sec.gov/news/public-statement/statement-clayton-hinman and https://www.sec.gov/news/public-statement/teotia-financial-reporting-covid-19-2020-06-23

    The SEC has also stated that “…many companies have been required to make significant judgements and estimates to address a variety of accounting and financial reporting matters. As those who engage with us well know, OCA [Office of the Chief Accountant] has consistently not objected to well-reasoned judgments that entities have made, and we will continue to apply this perspective.  Companies should ensure that significant judgments and estimates are disclosed a manner that is understandable and useful to investors, and that the resulting financial reporting reflects and is consistent with the company’s specific facts and circumstances.” 

    The U.K. Financial Reporting Council’s guidance to companies and auditors acknowledges that “making forward-looking assessments and estimates when preparing financial statements and providing other corporate reports is particularly difficult currently.”   FRC guidance addresses “narrative reporting to provide forward-looking information that is specific to the entity and which provides insights into the board’s assessment of business viability and the methods and assumptions underlying that assessment; …the basis of any significant judgments…confirming the preparation of financial statements on a going concern basis; and the increased importance of providing information on significant judgments applied in the preparation of the financial statements, sources of estimation uncertainty and other assumptions made...”  See:  https://www.frc.org.uk/covid-19-guidance-and-advice

    5 In the context of the COVID-19 pandemic, the FRC states that “...users cannot expect all companies to apply consistent assumptions when there is such uncertainty.  This lack of consistency makes the need for full disclosure of judgments, assumptions and sensitive estimates significantly more important than usual.” 

    Pensions & Investments, 17 June 2020, Commentary by Julie Bell (Center for Audit Quality) and Sandra Peters (CFA Institute): “As knowledgeable investors recognize, this is a challenging time for even the best-managed companies.  The difficulties experienced to date in financial reporting [related to the 2020 pandemic] will likely continue….Investors should be thoughtful about the mix of information they are relying on to make decisions, including the assumptions and judgments going into that information and the level of auditor involvement.  Notwithstanding these challenges, investors should have confidence that the financial reporting ecosystem of public companies, auditors, and regulators is designed to equip them with the information needed to make sound investment decisions.  Those decisions will play an essential role in our economic recovery.”

    Following the 2008 Financial Crisis, IFAC's Former Fayez Chaudhury, observed:

    “Strengthening the global financial system’s capacity to anticipate, respond and collaborate is paramount—especially before the next inevitable shock to challenge the global economy.”  

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    The Global Public Policy Committee has compiled a report on publicly available information about shifting regulatory obligations in light of the COVID-19 pandemic.

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    “Effective audits unquestionably require auditors to exercise substantial judgment. So long as those judgments are made in good faith and are guided by the sound application of our auditing standards, auditors should feel empowered to make them. We do not and will not second guess judgments that, when made, were reasonable under our standards and applicable law.” 

    -William D. Duhnke, Chairman of the PCAOB

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    2. Role of Regulators and Standard-Setters

    Regulatory bodies that oversee corporate reporting serve to protect the interests of investors and other stakeholders who rely on the public information companies provide. In uncertain times, regulators must embrace their prudential role to engender confidence in markets.9 Collaboration with companies, auditors, and other critical service providers is needed, in addition to providing effective oversight.  An outcomes-focused approach, proportionate to specific circumstances, will support the important work that must be performed by the profession during a time of crisis. After a crisis, there are often calls for new regulations to “fix” past problems.10 But, the importance of strengthening governance and enhancing focus on ethical behavior—in combination with effective prudential oversight and refinements in regulatory requirements—cannot be overstated.11

    • What is needed most during times of great uncertainty is direct, multi-stakeholder dialogue among regulators, corporates, investors, and various constituents of the accountancy profession that proactively identifies and improves understanding of crisis-related issues and impacts. IFAC supports early action on the part of regulators to directly engage with companies and provide appropriate guidance—in efforts to support the reporting of high-quality information for shareholders and stakeholders. Dialogue across jurisdictions, not just nationally focused, can and should take place to avoid regulatory fragmentation. We urge regulators to take proactive steps—during and after any crisis—to establish these stakeholder networks in order to be “crisis-ready” for the next event.
    • IFAC believes that principles-based financial reporting standards provide the most effective framework for reporting relevant and comparable information, regardless of company, industry, country or market-specific circumstances, including in times of crisis. The alternative—a rules-based approach—can be more rigid and prone to modification or suspension when special situations arise. Legislators and regulators must carefully consider the implications of any crisis-time interventions and ensure coordination with, and support from, appropriate standard-setting bodies. We urge standard-setters to be steadfast in defending their due process. The impact of any such relief needs to be appropriately disclosed by reporting entities.12  
    • Compliance with standards should always take precedence, even if delays in filings are required to ensure reported information is high quality. IFAC supports reasonable and temporary extensions and regulatory relief provided by regulators during a crisis so as to appropriately balance the need for timelines in corporate reporting with ensuring reliable reporting.13 
    • IFAC encourages companies to be proactive in considering what interim reporting is appropriate to keep stakeholders informed and whether additional steps (e.g., the issuance of a Form 8-K in the U.S. or other forms of disclosure) are warranted.14 Times of material disruption in market conditions and operating environments should prompt regulators to evaluate whether their jurisdiction-specific requirements should be enhanced—including frequency of reporting (i.e., quarterly, semiannually, or annually)—balancing the operational impact of reporting enhancements with ensuring sufficient transparency and information is provided to maintain confidence in companies and markets at all times. 
    • During a systemic crisis, despite the best of intentions and hard work, the risk that the future will not unfold in a way portrayed by a company will significantly increase.15 Management will struggle with assumptions, estimates, and judgments in the face of uncertainty and volatility. Uncertainties may raise questions about going concern.16 In anticipation of these challenges, regulators must openly communicate with and help inform the expectations of markets, investors, and other stakeholders—appropriate for the unusual facts and circumstances. In this context, we reiterate our support for the communication of Key Audit Matters (under ISA 701) and Critical Audit Matters (under PCAOB AS 3101) to bring needed transparency to new, crisis-driven matters that require significant auditor attention.17   
    • In some jurisdictions, audit partner or firm rotation policies are practiced to enhance auditor independence. We recommend regulators, boards and management be pragmatic and re-evaluate pre-existing plans to change audit engagements or personnel under crisis circumstances in the interest of relevant, reliable and comparable corporate reporting so that continuity and detailed knowledge of an audit client’s operations, processes, and personnel can be maintained.18   
    • Similar to post-crisis regulations that emerged regarding living wills for large financial institutions or opinions on public company internal controls (e.g., based on COSO criteria developed in the U.S.), IFAC encourages regulators to evaluate whether certain reporting entities should provide investors and other stakeholders with an annual “resiliency analysis”—a report that specifies critical factors for success of a business, identifies inherent vulnerabilities and dependencies in the business model, and explains any reasonable crisis/back-up contingency policies developed by management, consistent with an Integrated Reporting Framework approach.19 

    9 Statement by Jay Clayton, Chairman of the U.S. Securities and Exchange Commission (March 26, 2020):  “The Securities and Exchange Commission and other financial regulators are focused on two overriding and interrelated issues.  First, we are facing an unprecedented national challenge—a health and safety crisis that requires all Americans…to significantly change their daily behavior....  Second, the recognition that the continuing, orderly operation of our markets is an essential component of our national response to, and recovery from, COVID-19.”

    10 In the aftermath of the 2008 financial crisis, results from the IFAC Global Regulation Survey 2015 found as many as 84% of respondents expected the impact of regulation to be “more” or “much more” significant to their organizations over the next five years.  Retrospectively, as many as 83% reported the impact of regulation being “more” or “much more” significant than during the prior five years.  

    12 For example, see Congress should leave accounting standards to FASB by Shana Clor-Pruell and Brian White in Accounting Today (“Arbitrary and ad hoc promulgation of accounting standards, calls for exemptions or options to delay compliance, such as those in the CARES Act, must not be permitted to undermine the FASB’s established, authoritative process.”)

    13 For example, with respect to the COVID-19 pandemic: i) the Global Public Policy Committee has compiled a report on publicly available information about shifting regulatory obligations covering over seventy jurisdictions, ii) the FRC has encouraged UK “companies, as appropriate, to make use of the extension announced by the FCA to the deadline for publication of audited annual financial reports from four to six months from the end of the financial year.” 

    15 The Chairman of the PCAOB, William Duhnke, is also reported to have commented in the context of COVID-19: “Auditor judgment becomes even more critical to high quality audit under these unique circumstances. While we will not second guess reasonable judgments, we will confirm that those judgments are consistent with our standards.”

    17 IFAC Pont of View – Achieving High Quality Audits, The Right Process

    18 Note, the International Code of Ethics for Professional Accountants (including Independence Standards), “the Code” includes provisions for audit partner rotation that must be considered. 

    19 Recommendation 18 of the Report of the Independent Review into the Quality and Effectiveness of Audit (December 2019) proposes a different approach—a three-part statement by a company’s board that “…incorporates, enhances and builds on already-existing Going Concern and Viability Statements” required for certain reporting entities in the UK

    COVID-19 Resources from IFAC’s Network

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    Audit Quality in a Multidisciplinary Firm, what the Evidence Shows (September 2019)

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    Public Interest Responsibilities Must Remain Paramount in an Age of COVID-19

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    3. The Role of the Accountancy Profession

    Professional accountants in business, public practice, and the public sector are key players, along with TCWG and regulatory bodies, in upholding the quality of reporting and providing markets and the broader public with reliable information.  When extreme, uncontrollable events disrupt normal business operations, information provided in the management commentary, risk factors, and notes to the financial statements provide the needed insights into the performance and viability of a company.  Crisis environments can also invite fraud and heighten the scope for error as new opportunities and pressures arise for management, employees and external parties.  These circumstances can prove challenging for making sound judgments and estimates in the face of uncertainty, for meeting deadlines, and for quickly adapting internal procedures.  The ethical responsibilities, training, and expertise that define what it means to be a professional accountant are needed more than ever.

    • We believe that Professional Accounting Organizations (PAOs) are best positioned to understand jurisdiction-specific facts and circumstances that arise in a crisis and should be active participants, on behalf of the profession, with regulators and other concerned parties. IFAC stands ready to convene and facilitate such dialogue on behalf of the global profession with regulators and other stakeholders.
    • When normal operations are not possible or practical, the profession must adapt and innovate in order to fulfill its obligation to adhere to reporting requirements and mitigate the impact of crises on the flow of information. Technology is key to turning operational disruptions into business as usual. IFAC believes that advocating for greater technological readiness and better access to data on the part of employers and clients is a key responsibility of professional accountants—including those operating in small or medium-sized environments—and essential is to being better prepared for the next crisis.20  
    • When adaptations and innovation fail to provide sufficient appropriate audit evidence or when significant issues or material uncertainties are uncovered during the audit process, firms should continue to be steadfast in considering potential implications for the auditor’s report—be it the inclusion of appropriate key/critical audit matters, emphasis of matter paragraph or material uncertainty related to going concern paragraph, or a modified opinion, as necessary.  
    • During the best of times, and especially during times of crisis, all enterprises, regardless of their size, rely on professional accountants—not only for transactional services—but for help in solving critical business problems. While maintaining independence and objectivity, we believe that the multidisciplinary expertise of firms, and the professional accountants they employ, are well positioned to provide assistance to companies with respect to scenario planning, risk assessments, critical judgments, interpretations, estimates, and valuations, in addition to providing resources and expertise needed for emergency steps that can help secure the short-term viability of an entity. In particular, during a crisis, small and medium size entities (SMEs) face unique challenges and need the expertise of their professional accountant as trusted advisor and problem solver. Small- and medium-sized accountancy firms must answer this call.21
    • A crisis environment requires increased focus on judgments, risk taking, decisions, or conflicts of interest that can arise as professional accountants fulfill their role as trusted intermediaries of high-quality information, strategic and commercial advice, and fact-based decision making. IFAC supports the fundamental principles of the IESBA Code—integrity, objectivity, professional competence and due care, confidentiality, and professional behavior—cornerstones of the profession’s public interest mandate. PAOs, the eCode, and other guidance materials provide support to professional accountants in navigating uncharted situations in uncertain times.22 
    • Making the right call—how accountants apply professional judgment and act in an ethical manner—is not straightforward. Even more during a crisis, IFAC sees value in professional accountants seeking trusted advice from internal colleagues, an objective and expert third party, or their PAO. IFAC encourages PAOs, companies, as well as professional practice firms to develop crisis support plans to best enable professional accountants to uphold their responsibility to their employers and their profession. 

    20 In its analysis of impacts from the COVID-19 pandemic, ACCA comments that “…the Covid-19 crisis is a call to arms for smaller accountancy firms to transform further.  Digital transformation of SMPs is key to accelerating the pace of change, ensuring durability, and driving better understanding of client needs.”

    21 ACCA’s analysis also indicates that SMEs face challenges with respect to reduced customer purchases, cash flows, breaches of contracts, ability to defer or renegotiate debt, ability to shift focus beyond short-term issues, or ability to respond to work-at-home arrangements, compared to larger entities.
    Accountancy Europe (AE) conducted interviews with 18 people from practice, including regulators and audit committee chairs. Based on this insight, AE concludes: i) multidisciplinary audit teams contribute to high-quality audits; ii) auditors benefit from experts’ input, especially from internal ones; iii) firms should further develop their capability to work with internal experts; iv) firms should stay multidisciplinary to meet evolving expectations from the audit; and v) auditors’ priorities remain audit quality, the public interest, independence and ethics.
    With respect to the impact on amounts recognized, measured and presented in financial statements, IOSCO has suggested that “it is important that issuers utilize appropriate skills and competencies in areas such as fair value measurement, impairment assessments.  Issuers may wish to consider whether additional expertise is needed to assist management in fulfilling their responsibilities to prepare financial reports.” 

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  • Global Coalition Issues Guidance on How Businesses Can Adopt a Long-Term Value Creation Agenda

    English

    In the wake of unprecedented economic disruption due to the COVID-19 pandemic, many companies are rethinking their fundamentals and assessing how their corporate purpose, strategy and business model will drive long-term success. To support businesses in this uncertain environment, the International Federation of Accountants (IFAC), International Integrated Reporting Council (IIRC), and the Association of International Certified Professional Accountants (the unified voice of the American Institute of CPAs (AICPA) and the Chartered Institute of Management Accountants (CIMA)) today released new guidance for Chief Financial Officers (CFOs) and finance teams to navigate their organizations toward long-term value creation.

    “COVID-19 is the greatest threat to value creation we’ve seen in generations. As a result, many companies are juggling a handful of pressing priorities, including protecting cash flows, ensuring long-term value creation, and delivering positive societal impacts,” said IFAC CEO Kevin Dancey. “The CFO and finance function can partner with management to overcome the challenges associated with understanding and driving long-term value creation.”

    The report contains actionable insights for CFOs, finance teams, and other business leaders to sharpen their perspective on value creation beyond the financials, including how to:

    • Understand the value creation process
    • Identify principal opportunities and risks related to the organization’s strategy and business model
    • Develop an integrated view of performance and value, incorporating balance sheet, business, and societal perspectives; and
    • Drive priorities for value creation into decision making and reporting.

    The approach outlined in this report helps CFOs and finance teams to think about how to ensure that all relevant information around performance, opportunities, risks, and trade-offs are available to internal decision-makers, investors, and other capital providers. It also enables the corporate mindset to evolve from shareholder value creation to a longer-term stakeholder value creation perspective.

    “With an estimated 80 percent of enterprise value now made up of non-financial assets such as brand recognition, human capital and customer satisfaction, organizations that understand how to create and deliver value will be better positioned to achieve sustainable success,” said Barry Melancon, CPA, CGMA and CEO of the Association of International Certified Professional Accountants. “Accounting and finance professionals are uniquely positioned to bring together the insights and data needed by management teams to inform a value creation agenda, which is particularly important during this time of uncertainty.”

    “Business leaders are under growing pressure to marry profit with purpose. A value creation agenda delivers exactly this,” said Charles Tilley, CEO of the IIRC. “Building on the International Integrated Reporting Framework, this new report will guide CFOs to better understand, measure, and report on value creation and impact. The result is comprehensive measurement based on a company’s value drivers that can be used to steer long-term sustainable development.”

    About IFAC
    The International Federation of Accountants (IFAC) is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of more than 175 members and associates in more than 130 countries and jurisdictions, representing more than 3 million accountants in public practice, education, government service, industry, and commerce.

    About IIRC
    The International Integrated Reporting Council (IIRC) is a global coalition of regulators, investors, companies, standard setters, the accounting profession, academia and NGOs. The coalition promotes communication about value creation as the next step in the evolution of corporate reporting. The IIRC’s vision is to align capital allocation and corporate behaviour to wider goals of financial stability and sustainable development through the cycle of integrated reporting and thinking. Visit: www.integratedreporting.org

    About the Association for International Certified Professional Accountants
    The Association of International Certified Professional Accountants (the Association) is the most influential body of professional accountants, combining the strengths of the American Institute of CPAs (AICPA) and The Chartered Institute of Management Accountants (CIMA) to power trust, opportunity and prosperity for people, businesses and economies worldwide. It represents 650,000 members and students across 179 countries and territories in public and management accounting, and advocates for the public interest and business sustainability on current and emerging issues. With broad reach, rigor and resources, the Association advances the reputation, employability and quality of CPAs, CGMAs and accounting and finance professionals globally.

     

     

  • IFAC Response to the European Commission’s Non-Financial Reporting Directive Review

    English

    IFAC continues to speak out on behalf of the global accounting profession on the topic of non-financial reporting, most recently in response to the European Commission’s review of the Non-Financial Reporting Directive (NFRD). This review marks another valuable step in the dialogue and evolution toward relevant, reliable, and comparable reporting of non-financial information. A summary of IFAC’s response is available on its website.

    IFAC urges the Commission to adopt a global mindset by engaging input from a broad range of international stakeholders in determining the best way forward.  Steps taken must “fit within” a global system and avoid regional regulatory fragmentation.

    Non-financial reporting answers the call from investors and other providers of capital for better, broader information about company performance and prospects for value creation, while also helping identify opportunities to support sustainable—and less carbon-reliant—business models. In the post-COVID world, corporate reporting that reflects the needs of a broad range of stakeholders will be particularly important to communicate on an organization’s performance and priorities.   

    As a Network Partner of the B20, IFAC calls on global bodies—including the G20—to encourage policy-makers, standard-setters, and regulators to facilitate harmonization towards a globally-acceptable approach to reporting ESG metrics and disclosures.

    IFAC supports reporting requirements that address both societal and company performance impacts and that anticipate the needs of specific markets. Any jurisdiction-specific reporting requirements need to conform with metrics and disclosures that are part of a globally accepted system so that comparability is achieved. 

    The accountancy profession is critical to evidence-based decision making, reliable information gathering, and consistent, comparable corporate reporting. Active engagement by the profession on this topic will maximize the benefits of a global solution to non-financial reporting that best serves shareholders and the broader public interest.

    As the global voice of the accounting profession, IFAC remains committed to advocating for a comprehensive approach to non-financial reporting through its contributions to global consultations and engagements.

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