July 23, 2021
Published: The Accountant
The Association of International Certified Professional Accountants (the Association), representing AICPA & CIMA, expressed support for the IFRS Foundation’s proposed amendments to the IFRS Constitution which would create an International Sustainability Standards Board (ISSB) responsible for setting IFRS sustainability standards.
Association CEO of public accounting Susan Coffey said: “The AICPA & CIMA supports the Foundation’s goal in developing globally accepted sustainability standards. This effort is paramount as investors and other stakeholders continue to seek out consistent, comparable information on a variety of sustainability metrics.
“Similarly, it is critical to enhance the reliability and transparency of that information with meaningful reporting and related assurance by regulated accountants. We continue to lead the accounting profession on developing the skills and competencies needed to support the sustainability needs of clients and employers.”
Within its response, AICPA & CIMA highlighted three issues that are critical to a successful implementation:
The Importance of Independent Standard Setting
In its comment letter, AICPA & CIMA said: “Reporting standards derive their legitimacy from the confidence that they are established, interpreted and, when necessary, modified based on independent, objective considerations. The development process must be free — in both fact and appearance — of outside influences that inappropriately benefit any particular participant or group of participants in the financial reporting system.”
In revising the constitution, AICPA & CIMA recommended that IFRS Foundation Trustees ensure that its remit and purpose is expanded to include the creation and work of the ISSB while maintaining adherence to the following criteria:
- Independence – The ISSB should be independent from the undue influence of its constituency.
- Due Process and Standards – The ISSB should follow a due process that is documented and open to all relevant aspects of alternatives. Its aim should be to produce timely standards and that provide for full, fair and comparable disclosure.
- Domain and Authority – The ISSB should have a unique constituency not served by another existing Accounting Principles Rule standard-setting body. Its standards should be generally accepted by its constituencies.
- Human and Financial Resources – The ISSB should have sufficient funds to support its work. Its members and staff should be highly knowledgeable in all relevant areas.
- Comprehensiveness and Consistency – The ISSB should approach its processes comprehensively and follow concepts consistent with those of existing Accounting Principles Rule standard-setting bodies for analogous circumstances.
Skills and Experience of the IFRS Foundation Trustees and ISSB Members
The AICPA & CIMA recommended changing the makeup of the Trustees with an infusion of new Members who understand the evolving sustainability landscape and the impact on related reporting standard setting.
According to the AICPA & CIMA, it is critical that the Foundation recruits Members to the Board with the right breadth of skills and experience, and that the Board includes individual Members with specific knowledge of climate and social matters as well as experience with financial reporting standards, investment decision making and business models – this is critical to cementing real change in business practice. Most importantly, new Members need to have the right mindset and act as catalysts for change.
New Board and Associated Standards Name
The AICPA & CIMA support naming the new Board as the International Sustainability Standards Board. In addition, the AICPA & CIMA letter notes “…that the name ‘the International Financial Reporting Standards (IFRS) Sustainability Standards’ when said in full is confusing. This could be changed to ‘International Sustainability Reporting Standards’ (ISRS) for clarity and brevity.”