Experts on accounting, from 52 countries and relevant international bodies have strongly recommended that work on international standards of accounting and reporting be pursued in UNCTAD on an ongoing basis, since reliable, transparent and comparable financial information is necessary for growth and development in general and for a sound banking sector and stock market, as well as for the attraction of foreign direct investment and for successful privatization. They met from 1-5 July at the UNCTAD Intergovernmental Working Group on Experts on International Standards of Accounting and Reporting (ISAR) (see TAD/INF/PR/9617). ISAR has served as the sole focal point for such work in the United Nations system and has produced practical guidance, as well as concrete programmes, for the benefit of developing countries and economies-in-transition.
The meeting was chaired by Dr. Herbert Biener (Germany) and was marked by an international forum on financial disclosure by banks (see TAD/INF/2674). It was attended by representatives of the World Bank, the European Commission, the International Confederation of Free Trade Unions, the Accounting and Auditing Organization for Islamic Financial Institutions, as well as a number of professional organizations such as the Canadian Institute of Chartered Accountants, the Certified General Accountants of Canada and the International Accounting Standards Committee, the UK Chartered Association of Certified Accountants, the Institute of Chartered Accountants of England and Wales, and the German Chamber of Auditors.
Experts from developing countries and economies-in-transition expressed their appreciation for the timely reports of the UNCTAD secretariat on bank disclosure and concessions. It was clear in the Group´s discussion on accounting by banks and later at the high level banking forum that better accounting rules must drive disclosure and that improved disclosure would promote better risk management and less systemic collapse.
The Group saw a continuing need for further harmonization on a worldwide basis, taking into account the different objectives of users of financial statements. They concluded that while it is evident that self-regulation was preferable, it was not practised in all countries. The usage of international accounting standards (IASs) as promulgated by the International Accounting Standards Committee (IASC) was growing among the global players in international financial markets. Clearly it is inefficient, costly and confusing for the so-called global enterprises to prepare two sets of statements -- one for global capital markets and another to meet national requirements. How can an enterprise report two different operating results for the same period? A number of delegates also questioned how far non-listed companies needed to comply with international standards. Unless these issues are addressed there is a very real risk that a two-tiered accounting structure may evolve.
The experts proposed that existing IASs should be reviewed to determine whether they meet the interests of all enterprises; such a review should take into account the costs and benefits of using IASs by small and medium-sized enterprises.
Accounting for the transfer of goods and services between related entities
Opinions differ on transfer pricing methods. Some experts feel that there is need for broader disclosure requirements to enable all users of financial statements, not just tax authorities, obtain sufficient information to allow them to determine if transfer pricing techniques are being abused and if the distribution of profits between related entities is being manipulated. Others believe that it is sufficient if tax authorities receive a special purpose report with information relating to this subject and that no additional accounting rules are required. It was suggested that developing countries would benefit if the text of the UNCTAD report was expanded to include detailed descriptions of transfer pricing methods. It is recalled that abuse of transfer pricing is considered as a restrictive business practice.
Qualification of Accountants
ISAR urged that the UNCTAD secretariat proceed with the development of a global accountancy qualification and accreditation system and that a steering committee be convened on this issue in October. The World Trade Organization´s Working Party on Professional Services has turned its attention to reducing barriers to trade in the accountancy services. Hence, ISAR´s proposal has gained in significance, since, the development of a benchmark for professional qualifications will both strengthen the profession in developing countries and allow them to take advantage of increased liberalization.
UNCTAD has been at the forefront of work on environmental accounting. The Group recommended that it concentrate its future efforts on examining available guidance on the main issues in environmental financial accounting and on identifying key environmental performance indicators and their relation to financial performance. Ultimately, this would result in a framework for environmental accounting which may be used by national standard-setters. Such a framework will comprise a set of recommended "best-practices" which will be drawn from the work of national professional accounting bodies, industry groups and accounting standard setters.