The IASB is the International Accounting Standards Board, and the IFRS is the International Financial Reporting Standards Foundation. The IFRSF is the Parent of the ISAB.

The International Accounting Standards Board (IASB) is an independent, private-sector body that develops and approves International Financial Reporting Standards (IFRSs).

According to their website www.ifrs.org The International Financial Reporting Standards mission, as an organisation, is to develop IFRS standards that bring transparency, accountability and efficiency to financial markets around the world. Their work serves the public interest by fostering trust, growth and long-term financial stability in the global economy.

The International Accounting Standards Board (IASB) is an independent group of experts with a mix of practical recent experience in setting accounting standardunns, in preparing, auditing or using financial reports, and in accounting education. Broad geographical diversity is a prerequisite. The IFRS being the Parent to IASB, has a constitution outlining the full criteria of the Board. The Board approves interpretations of the IFRS standards – created by its interpretations Committee.

Members are appointed by IFRS Trustees involving an open and rigorous process that includes advertising vacancies and consulting relevant organisations. (refer to IFRS website www.ifrs.org).

On the surface, everything looks impressive, well organised, well structured, operable, and we should have no cause to think otherwise. So what is the problem?

WHO MAKES THE ACCOUNTING RULES? WHY WE NEED COUNTRY-BY-COUNTRY ACCOUNTANCY AND TAX REPORTING

(For the next part of this Article, we draw on a substantial amount of information and direct quotes –  from Susan George’s Book ‘Shadow Sovereigns – How Global Corporations are seizing power,’ pp 44-48). Susan George is a Franco-American Political Scientist and Activist and author of 17 books.

According to Susan George (American Political Scientist and Activist and author of ‘Shadow Sovereigns – How Global Corporations are seizing power,’ (pp44-48):

‘they, not elected legislators, make the accounting rules, not just for Europe but well beyond….anyway, isn’t accounting the most boring subject on earth, unless you’re an accountant or someone who is professionally obliged to follow its standards? Why should we care who makes the rules?

…When the EU (European Union) was first confronted around 2001 with enlargement and the nightmare of more than 20 different stock exchanges, sets of regulations and company accounting rules, it called on an ad hoc group of advisers from the Big Four transnational Accounting firms for help.’ (The Big Four being – you guessed it Price Waterhouse Coopers, Ernst & Young, Deloitte, and KPMG).

‘Over the following years, this informal advisory group quietly morphed into an official one with an iron-clad structure.

…the IASB, still made up primarily of talent from the big four accountancy firms, and the foundation’s Interpretation Committee made up of 14 voting members who are ‘aware of the current issues as they arise and [possess] the technical ability to resolve them. These two spaces are where the action takes place; they are overseen by the foundation’s trustees and its monitoring board charged with ensuring public accountability.

The IASB became official through the unrelenting efforts of a single unelected EU Commissioner, Charlie MacCreevy…himself a chartered accountant. There was no parliamentary review…The IASB and the interpretations committee have the capacity and the…incentive to preserve the status quo and tailor the agenda to whatever system is most congenial to the big four accounting firms themselves, plus the TNC corporate clients whose accounts they help define and audit and whose tax advising and planning they may well do in addition.’ (TNC stands for Transnational Corporation).

‘Their ability to limit the horizon in the era of financial globalization is detrimental to all the citizens of all the countries that are obliged to follow ISAB rules and to accept the interpretation committee’s decisions, because they are the only game in town.

In practice, this includes all the citizens of all the member countries of the European Union…plus those of countries where ‘convergence’is in process…We should care that the ISAB is deciding the rules for Europe…and many other developing countries because…until we can oblige TNCs to adopt country-by-country accountancy and tax reporting, they will continue to pay – quite legally – minimal taxes in most of the countries where they have branches. They can practise ‘transfer pricing,’ which allows the company to buy and sell from itself at whatever price best suits its purpose and to play with national tax rules.

…To tax effectively, fiscal authorities would need to know what the figures for sales, expenditures, profits and taxes actually are in each national jurisdiction. That is the goal of country-by-country reporting. Today, they cannot find out, because the accounting rules are designed to avoid disclosure. Small businesses limited to a single country and families with a fixed national address will continue to bear most of the tax burden or their country will simply do without the state services that fair taxation of TNCs could have provided.

We know the sovereign remedy for tax evasion: it’s country-by-country reporting. It wouldn’t totally solve the problem, but corporations couldn’t get away with lying to everyone. Now they need only declare sales and profits in their headquarters country and make one entry for ‘Rest of the World.’ The Tax Justice Network has all the details and its chartered accountant adviser Richard Murphy has been championing country-by-country reporting for years. Murphy likes to say that the transnationals ought to be considered for the prestigious literary Booker Prize because their accounts are works of fiction.’

GLOSSARY

IASB – International Accounting Standards Board

IFRS – International Financial Reporting Standards Foundation – (parent of IASB)

EU – European Union

Transnational Corporations (TNCs) – are formal business organisations that have spatially dispersed operations in at least two countries.

BIBLIOGRAPHY

Susan George ‘Shadow Sovereigns – How Global Corporations are seizing Power’(2015) UK:Polity Press (pp 44-45)