I've had a letter from the EU in response to the initial request that TJN made for a review of IFRS 8 in the EU context. This is dated 12 June but has only just reached me by snail mail, but that's what happens when you use old technology. The letter is available here.
The good news is that the EC has put pressure on the IASB to change its consultation processes. That is essential.
The bad news is that the EC has suggested we are raising a CSR issue. That's completely untrue. The issue we are raising is of central importance for users of financial statements. It is completely untrue that financial standards are only intended for use by the financial markets as is claimed in the Commission's letter. This claim ignores their use by a wide range of stakeholders.Even the IASB know that. Take this from the IASB Plus web site that summarises the IASB conceptual framework:
The principal classes of users of financial statements are present and potential investors, employees, lenders, suppliers and other trade creditors, customers, governments and their agencies and the general public. All of these categories of users rely on financial statements to help them in decision making. [F.9]
Admittedly, the following is added:
The Framework also concludes that because investors are providers of risk capital to the enterprise, financial statements that meet their needs will also meet most of the general financial information needs of other users. Common to all of these user groups is their interest in the ability of an enterprise to generate cash and cash equivalents and of the timing and certainty of those future cash flows. [F.10]
Two observations flow from this:
a) The Commission is wrong. Accounting standards are not aimed just at financial markets. They are aimed at all users, for whom the investor is generally, but not always considered a proxy.
b) We have not raised a CSR issue. There are several reasons for saying so. The first is that we are asking for information to allow the user of the financial statements of a company to appraise financial risk arising from its operation in particular countries. That's key financial data critical to the decision to engage, or not. Second, we're asking for tax data. Tax is, according to companies, not a CSR issue. That's a separate debate, but what is clear is that it is an issue covered by financial reporting standards, so it must be fair and square within the accounting standards arena. Third, we're addressing issues of sustainability: sustainability of products, services and tax charges. That has to be key to valuation, and that's definitely market based data.
This means the cannot argue as it has. Rest assured, I will let them know.