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The IFRS Foundation was established to develop a single set of globally accepted accounting standards. It is the organisation behind IFRS Standards—financial reporting standards required for use by more than 140 jurisdictions. The Trustees are responsible for the strategic direction and governance of the Foundation as well as for oversight of the International Accounting Standards Board, which sets IFRS Standards.
Amid heightened focus on environmental, social and governance (ESG) matters, developments in sustainability reporting and increased calls for standardisation of such reporting, the Trustees are now seeking stakeholder input on the need for global sustainability standards and gauging support for the Foundation to play a role in the development of such standards.
The Consultation Paper sets out possible ways the Foundation might contribute to the development of global sustainability standards by broadening its current remit beyond the development of financial reporting standards and using its experience in international standard-setting, its well-established and supported standard-setting processes and its governance structure.
One possible option outlined in the paper is for the Foundation to establish a new sustainability standards board. The new board could operate alongside the International Accounting Standards Board under the same three-tier governance structure, build on existing developments and collaborate with other bodies and initiatives in sustainability, focusing initially on climate-related matters.
Erkki Liikanen, Chair of the IFRS Foundation Trustees, said:
Calls for standardisation and comparability of reporting on sustainability and climate-change issues continue to grow as these matters become increasingly important to capital markets. We therefore seek to assess whether there is demand for global sustainability standards and whether the IFRS Foundation should play a role in developing such standards.
The Consultation Paper sets out critical success factors for the creation of a new board, including achieving sufficient support from public authorities and market participants; working with regional initiatives to achieve global consistency and reduce complexity in the reporting landscape; achieving the appropriate level of funding; and ensuring the current mission of the IFRS Foundation is not compromised.
The consultation is open for comment until 31 December 2020.
The Trustees are required to consult on the Foundation’s strategy every five years and this Consultation Paper, based on work by a smaller Trustee Task Force, feeds into their current assessment of future strategy. Any changes to the Foundation’s remit would be subject to further public consultation.