The International Integrated Reporting Council (IIRC) is a UK-based global coalition of regulators, investors, companies, standard-setters, accounting professionals and NGOs. Its chief executive, Paul Druckman was in Indore for the international conference on accountancy organised by the Institute of Chartered Accountants of India (ICAI). Here are some excerpts from the interview.
What is the IIRC's role?
See it like this: a listed business company has to prepare six to 12 types of reporting under various government and international norms. It can be financial reporting, which includes financial transactions, audit, etc. Then there is reporting on human resource, labour, industry briefs and environmental impact. But these reportings are done in isolation, in silos. Our objective is to integrate these accounting standards globally for proper growth and governance. It's puzzling but we hope to achieve it in the next five years. We think India can lead this because it has thoughtful people at the top.
How do you plan to do it?
We are establishing dialogue with people who head organisations like SEBI (India), ISO 26000, Financial Accounting Standards Board (sets accounting standards for listed companies in the US), Global Reporting Initiative (US-based organisation that helps businesses, governments to understand impact of business on climate change, human rights and corruption), the Sustainability Accounting Standards Board (which develops sustainability accounting standards to help public corporations disclose material, decision-useful information to investors). The first step is to bring people who set these standards under one umbrella. The second stage is to educate companies and investors. The third is to harmonise the reporting standards globally.
What are the benefits of harmonising accounting standards?
It will help companies look at business as a whole, the values it is creating. For example, it'll help a company know whether depending on one category of customers will help it survive. Business is not only about making money, building brands, customer-relations or doing philanthropy. There is much more to it.
What are the obstacles to harmonising accounting standard globally?
Financial reporting has been in place in most countries for years. The specific problem is the US, where there is a rule for everything. It is not so in the rest of the world. Market forces in the US can help change it. Then, companies are afraid of being held accountable to everything (mishaps taking place), there are liability issues. We want regulators to oversee reporting standards. Designing of reporting standards should be in the hands of market forces because expertise lies with them.