News of the merger of two of the world’s standard setting bodies that focus on non-financial reporting is welcome. The International Integrated Reporting Council and the Sustainability Accounting Standards Board have agreed to come together to form the Value Reporting Foundation.
Any observer of the debate over non-financial reporting knows that frameworks have over the past few decades bobbed up like toadstools at the edge of a forest. Each framework has dealt with issues that are the same in a slightly different way.
This is a function of committees doing what they do. It is a kind of Tower of Babel in the narrative reporting space and it needs to be cleaned up.
What the IIRC and the SASB have done is look at the landscape to see where things are moving internationally. They have also sought to reduce the number of authorities people look to for guidance and an opinion on what ought to be happening.
They also have a precedent. Look at the way in which standardisation has taken place in the context of accounting standards. Work done by the International Accounting Standards Board forms that chassis for financial reporting regulation in many parts of the world.
Nobody could have foreseen the development of an international framework in the mid-1990s in the way the IASB has it now. It is almost two decades since the IASB began its work and it is accepted as the key standard setter in the area of financial reporting.
This does not mean that differences of opinion on accounting issues are eliminated by having a single international body setting the principal documents on which individual jurisdictions base their reporting regulations. The differences are just played out more frequently on the global stage rather than domestically.
One of the challenges for the IIRC and the SASB will be to determine what they collectively stand for because it is unclear whether the Value Reporting Foundation is the best name for the body. Those proposing might think it is a good name but what the heck do they mean by value?
Does value reporting denote the fact that there is value in reporting other information?
Does it refer to the metrics that that are covered in the sets of guidance put forward by the two predecessor bodies? Is there an element of aspiration to the name to the extent that reporting value is what they aspire to be doing?
It is unclear at least to me how the name of the merged body differentiates that organisation from the work of the International Accounting Standards Board, which itself produces standards that require entities to report in a manner that provides users a semblance of the overall value of an entity.
Why not call this merged body dealing with non-financial reporting and sustainability reporting something like the Extended Stakeholder Reporting Foundation or Foundation for Enhanced Stakeholder Reporting? Both of those names actually suit the merged body. Value Reporting Foundation seems a rather soulless label.
Another issue that will be plain to people watching this debate unfold is whether this new body that is meant to be about value reporting becomes the body of choice to be taken over by the IFRS Foundation should it choose to establish a sustainability reporting standard setter.
Could this merger be an attempt to shape this new body into something that could be taken over by the global standard setters in London?