This document calls for comments on five specific areas of revision on which GRI is seeking public feedback:

• Application levels - it is proposed to discontinue the 'Application Levels', originally designed to assist organisations in communicating the degree of transparency of their sustainability reports against the Guidelines.  This is on the basis the levels are currently wrongly understood by some report users to be an opinion on the quality of the report, or even a reflection of the sustainability performance of the organisation
• Boundary - Revisions are proposed to the process in the existing protocols to better direct organisations on how to define the content and boundaries of a sustainability report in one sequence of process steps, thus to answer the question of what to report
• Disclosure on management approach - The ED outlines a generic approach for all topics and proposes that the 'Disclosures on Management Approach' (explaining how an entity is managing material economic, environmental, and social impacts) should be provided at the Aspect level to reflect management practices
• Governance - The ED has proposed a number of changes to governance and remuneration disclosures to strengthen the link between governance and sustainability performance
• Supply chain - New and amended disclosures on the supply chain are proposed, including new definitions and disclosure of the procurement practice, screening and assessment as well as remediation.

The Exposure Draft also outlines proposed amendments to improve the clarity and technical quality of the text as well as to facilitate the implementation of the guidelines.

The Exposure Draft does not deal with the following matters, which are expected to be dealt with in due course:

• proposed updates to two or more of the following thematic topics: Anti-corruption, Biodiversity, Greenhouse Gas (GHG) Emissions and Occupational Health and Safety - a further comment document is expected in August 2012
• how to link the sustainability reporting process to the preparation of an integrated report aligned with the guidance to be developed by the International Integrated Reporting Council (IIRC).

Comment on the exposure draft are open until 25 September 2012, with the GRI seeking to launch the new sustainability guidelines in 2013.

Click for GRI press release (link to GRI website).

Michel Prada opened his speech with an overview of the history of standard setting. He traced the beginning of the international success of International Accounting Standards (IASs) to Europe's decision in 2002 to adopt them, from 2005, for the consolidated accounts of listed companies on regulated markets: "Overnight, this transformed the IASB from an interesting but somewhat obscure accounting think-tank into Europe’s accounting standard-setter." And Prada continued to illustrate the increasing demand for global accounting standards with many examples - among them the global financial crisis that showed "the pressing need for a single set of high quality global accounting standards".

For the present, Prada drew a very positive picture pointing at the many countries around the world that require or permit the use of IFRSs, the acceptance of IFRSs among the G20 members and the use of IFRSs by almost half of Global Fortune 500 companies. He also mentioned very encouraging experiences in China and Japan.

However, Prada claimed, the IASB is currently an international standard setter, not the global standard setter. The last part of his speech he devoted to the future of standard setting. According to him, the reviews conducted by the Monitoring Board and the Trustees showed three major areas for improvement and therefore for increased success of IFRSs:

• Standard setting in co-operation with national and regional bodies with an interest in accounting standard setting will increase the effectiveness of the work of the IASB. This will also offer a better integration of the global perspective into the standard setting process and might reduce the risk of non-endorsement of a new standard.
• A stronger focus on the implementation of the standards, in part in co-operation with IOSCO and other international organisations, will ensure that standards are endorsed and enforced on a globally consistent basis.
• Enhancements to the IASB’s due process will enhance confidence in the standard setting process and will improve the robustness of the standards.

Prada closed on the note that international standard setting has made tremendous progress in the past, still does, and has a good chance of doing so in the future if the above aims are achieved.

Please click for the full text of the speech on the IASB website.

IFRS for SMEs was first issued in July 2009. At that time, the IASB announced that after two years, it would assess entities' experiences with implementing IFRS for SMEs. The IASB also said that, after an initial review, it would consider amendments to the IFRS for SMEs approximately once every three years.

The Request for Information is divided into two parts:

• Part A contains specific questions on particular sections of the IFRS for SMEs for respondents. These issues have been frequently raised by interested parties. Respondents are also invited to raise any other specific issues they may have relating to possible changes to particular sections of the IFRS for SMEs.
• Part B contains general questions about the IFRS for SMEs. Respondents are invited to raise any other general issues they may have relating to possible changes to the IFRS for SMEs.

A summary of the questions asked in each Part is set out in the table at the bottom of the article.

During the first half of 2013, the SMEIG is expected review comments on the Request for Information and make recommendations to the IASB on possible amendments. The IASB will convene to develop and approve an Exposure Draft of proposals. The IASB does not expect to publish final revisions to the IFRS for SMEs until the second half of 2013 or first half of 2014, with an estimated effective date of 2015.

Click for:

• Press release (link to IASB website)
• Request for Information: Comprehensive Review of the IFRS for SMEs (PDF, 242k, link to IASB website)

The publication, entitled Making investment grade — The future of corporate reporting, includes contributions from Ernst Ligteringen (Chief Executive, Global Reporting Initiative), Paul Druckman (Chief Executive, International Integrated Reporting Council), Mervin King (Chair, South African King Committee on Corporate Governance), together with representatives from academia, government, business and sustainability organisations, the accounting profession, and investors.

The publication provides a comprehensive look at sustainability and integrated reporting through the eyes of thought leaders, key industry players and others.  Structured as a series of short essays, the publication covers the following topics:

• Context and challenges
• Who drives reporting?
• One report or multiple reports?
• What are the material issues?
• Who reads the report?
• Who governs reporting?
• Who regulates reporting?
• What does the future hold?

We are pleased to host the publication on IAS Plus, with the kind permission of Deloitte (South Africa), the United Nations Environment Programme and the Centre for Corporate Governance in Africa at the University of Stellenbosch Business School.

Click to download Making investment grade — The future of corporate reporting

The Consultation Paper describes different types of public sector combinations, proposes a distinction between acquisitions and amalgamations and considers combinations of entities and operations that both are, and are not, under common control.  The paper makes it clear that it "considers the wide range of combinations that may occur in the public sector, and, consequently, this project is not an IFRS convergence project".

The Consultation Paper uses the term “public sector combinations” rather than “business combinations” (as used in IFRS 3 Business Combinations) on the basis of key differences between for-profit and public sector combinations identified.  These differences include public sector combinations lacking a profit motive, often being conducted by non-exchange transactions, and the frequent involuntary imposition of such combinations by law or other authority.

These differences also lead to some possible accounting approaches that are fundamentally different to the 'acquisition method' contained in IFRS 3 for for-profit entities.  In particular, the paper explores a possible approach for acquisitions where no or nominal consideration is transferred that would result in the recipient recognising acquired assets and liabilities at their carrying amounts in the acquired operation’s financial statements (after adjustment for any different accounting policies).  Similar approaches are also proposed for combinations under common control and amalgamations.

The paper also explores whether the amount of any consideration transferred in excess of net assets acquired should be recognised as goodwill, expensed, or for combinations under common control, as a distribution to or contribution by owners.

The Consultation Paper is open for comment until 31 October 2012.  Click for IPSASB press release (link to IFAC website).

The update reflects the fact that EFRAG has issued a draft endorsement advice regarding the Improvements to IFRSs issued on 17 May 2012. Currently, final endorsement of the improvements might be expected in the first quarter of 2013.

You can find all past endorsement status report here.

The Invitation to Comments asserts, on the basis of research and feedback the IAASB has received on its May 2011 Consultation Paper, that there is clear demand for auditors to provide greater transparency about significant matters in the financial statements, as well as the conduct of the individual audit. Further, the IAASB considers that meaningful change now, rather than incremental change over time, is seen as necessary in order to better meet the information needs of users of audited financial statements.

The Invitation to Comment includes the following key proposals:

• Auditor commentary.  Additional information would be included in the auditor’s report to highlight matters that, in the auditor’s judgement, are likely to be most important to users’ understanding of the audited financial statements or the audit. This information would be required for public interest entities (PIEs) – which includes, at a minimum, listed entities – and could be provided at the discretion of the auditor for other entities.  In the IAASB's view, this new concept of Auditor Commentary is consistent with, and builds upon, the existing concepts of Emphasis of Matter and Other Matter paragraphs included in some audit reports.  It also responds to calls for similar reforms from the US Public Company Accounting Oversight Board (PCAOB), the European Commission (EC)
• Going concern. The auditor's report would contain the auditor's conclusion on the appropriateness of management’s use of the going concern assumption in preparing the financial statements and an explicit statement as to whether material uncertainties in relation to going concern have been identified.  The report would also include a description of management’s responsibilities with respect to going concern
• Other information included with the financial statements. The report would have an auditor statement as to whether any material inconsistencies between the audited financial statements and other information have been identified based on the auditor’s reading of other information, and specific identification of the information considered by the auditor
• Other matters. Further suggestions to provide clarity and transparency about audits performed in accordance with ISAs - including the ordering of the items in the auditor's report (prominently displaying the auditor's opinion), disclosure of the engagement partner’s name in the auditor’s report, an explicit statement of compliance with relevant ethical requirements, disclosure about the involvement of other auditors in the audit, enhancements to the description of the auditor’s responsibility to explain more fully the concept of a risk-based audit and address fraud, internal control and other matters.

The Invitation to Comment includes a section illustrating an example auditor's report prepared in accordance with the proposals.

The Invitation to Comment is open for comment until 8 October 2012.  The IAASB will continue deliberations during 2012 and 2013, including holding roundtables on the proposals, and the next consultative document will be an exposure draft.

Click for IAASB press release (link to IFAC website).

As reported in our earlier story on the precursor Rio+20 Corporate Sustainability Forum, the final outcome document is quite different from the original 'zero draft' proposals which called for a "global policy framework" effectively requiring sustainability reporting.

Instead, the final outcome document reads as follows (with only slight wording changes from the pre-meeting final draft text):

We acknowledge the importance of corporate sustainability reporting and encourage companies, where appropriate, especially publicly listed and large companies, to consider integrating sustainability information into their reporting cycle. We encourage industry, interested governments and relevant stakeholders with the support of the United Nations system, as appropriate, to develop models for best practice and facilitate action for the integration of sustainability reporting, taking into account experiences from already existing frameworks and paying particular attention to the needs of developing countries, including for capacity-building.

Prior to the release of the outcome document, the governments of Brazil, Denmark, France and South Africa announced at the Rio+20 conference the formation of a group of "friends of paragraph 47".  The group's vision is that corporate transparency and accountability are key elements to enhancing the private sector’s contribution to sustainable development and that making sustainability reporting standard practice among companies will contribute to monitor the impacts on and the contribution to sustainable development by the corporate sector.

Brazil, Denmark, France and South Africa are considered pioneers in sustainability reporting practice and policy, having various degrees of sustainability reporting requirements in place.   In the press release announcing the group, it is noted that these countries are now "taking the opportunity provided by the global political agreement at Rio+20 to share their experience with the rest of the world and contribute to making corporate sustainability reporting standard practice".  The Global Reporting Initiative (GRI) and the United Nations Environment Programme
(UNEP) have been invited  to support them, and other governments have been invited to join the group.

Other governments have also announced related initiatives, such as the United Kingdom government's announcement of the introduction of mandatory carbon footprint reporting for FTSE main market listed companies.

Click for:

• Access to the Rio+20 outcome document (link to UN website, available in various languages)
• Press release "Brazil, Denmark, France & South Africa Join in Commitment to Sustainability Reporting" (link to UN website).

The Corporate Sustainability Forum was designed to provide a launching ground for greater private sector and investor involvement in sustainable development, and to call on governments to take steps that would support corporate sustainability globally.  The forum involved nearly 3,000 participants, approximately half from the business and investor community and half from civil society, academia, cities, government and the United Nations.

Some goals relevant to sustainability reporting and related topics included:

• Demonstrating the critical influence of other stakeholders – including investors, stock exchanges, business schools and universities, and cities – in stimulating corporate sustainability
• Motivating a rising number of companies to commit to universal sustainability principles and report on performance.

At the forum, the following sustainability reporting initiatives were announced:

• A commitment by five stock exchanges - NASDAQ OMX, BM&FBOVESPA, the Johannesburg Stock Exchange (JSE), the Istanbul Stock Exchange (ISE) and The Egyptian Exchange (EGX) - collectively listing over 4,600 companies - to promote sustainable investment.  This is considered a first step towards a larger global call by stock exchanges for sustainability disclosure and performance by listed companies as part of the Sustainable Stock Exchanges initiative (link to press release)*
• Chief executives of 37 banks, investment funds, and insurance companies submitted a Natural Capital Declaration (NCD) aimed towards integrating natural capital considerations into their products and services - including a call for "requiring companies to disclose the nature of their dependence and impact on Natural Capital through transparent qualitative and quantitative reporting" (details, link to NCD website)
• The release of a Declaration for Higher Education Institutions, endorsed by over 60 major business schools and universities around the world committed to incorporating sustainability issues into teaching, research, and their own management and organisational activities (details, link to initiative-specific website).

*Separately, the United Kingdom Deputy Prime Minister announced at the Rio+20 conference that all businesses listed on the Main Market of the London Stock Exchange will have to report their levels of greenhouse gas emissions from the start of the next financial year (April 2013).   The UK is the first country to make it compulsory for companies to include emissions data for their entire organisation in their annual reports (see our separate story).

Various individual organisations also pledged specific actions.

The executive summary also notes a call by investors for integration of sustainability issues within annual reports of all listed and large private companies.  To this end, the outcome document from the main Rio+20 conference contains the following updated text:

We acknowledge the importance of corporate sustainability reporting and encourage companies, where appropriate, especially publicly listed and large companies, to consider integrating sustainability information into their reporting cycle. We encourage industry, interested governments as well as relevant stakeholders with the support of the UN system, as appropriate, to develop models for best practice and facilitate action for the integration of sustainability reporting, taking into account the experiences of already existing frameworks, and paying particular attention to the needs of developing countries, including for capacity building.

This is substantially changed from the 'zero draft' version which referred to a "global policy framework" effectively requiring sustainability reporting.

The final version of the Rio+20 outcome document will be issued at the completion of the conference, being held on 20-22 June 2012.

Click for Rio+20 Corporate Sustainability Forum executive summary (link to UN Global Compact website).