The Association of International Certified Professional Accountants, representing AICPA & CIMA, today responded to the IFRS Foundation in support of the Foundation’s proposed amendments to its constitution to create an International Sustainability Standards Board (ISSB). The new sustainability standards board would be responsible for developing globally accepted sustainability standards.
In their comment letter, AICPA & CIMA expressed that they are in favour of the proposed amendments suggested in the Foundation’s consultation document issued in April, and believe that the changes are an important step forward.
The comment letter highlighted three issues that are critical to a successful implementation:
Independent standard-setting
“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,” AICPA & CIMA said in their comment letter.
The accounting professional body added that for the ISSB to achieve success in developing new sustainability standards, it must adhere 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 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.
Right skills and experience
AICPA & CIMA recommended a change to the makeup of the IFRS Foundation Trustees to include new members who understanding the evolving sustainability landscape and the impact of the related reporting standard-setting.
It is critical that the Foundation recruits members with ESG-related experience and adequate financial reporting expertise, the comment letter said.
“We believe that the Board [ISSB] as a whole should be made up of individual members that have specific knowledge related to climate and social matters as well as experience with financial reporting standards, investment decision-making, and business models, as these are key to cementing real-life changes in business practice,” according to AICPA & CIMA.
Name of new board and standards
AICPA & CIMA support naming the new board the International Sustainability Standards Board but suggest the new standards be named International Sustainability Reporting Standards (ISRS) for clarity and brevity.
After the current consultation period, the Foundation had said that it plans to review the comments on its proposal and announce the creation of the new sustainability standards board at the UN Climate Change Conference (also known as COP26), in November.
— Alexis See Tho (Alexis.SeeTho@aicpa-cima.com) is an FM magazine associate editor.