Historic opportunity to influence corporate reporting
Pension funds are being urged to engage with global accounting standards setters amid what is being seen as a “once in a generation” opportunity to help set the agenda on corporate reporting. There’s a raft of new standards being put forward as US generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS) converge. Some 14 so-called ‘exposure drafts’ are due from the International Accounting Standards Board and the US Financial Accounting Standards Board in the near future. The clock is ticking as the bodies have been told by the G20 leaders to complete the convergence project by June 2011. Despite what could be a historic opportunity for investor input, the IASB is finding it difficult to get involvement from pension fund investors. “The voice of the investor is not heard as loudly in the reform agenda,” says IASBboard member Steve Cooper. “There is lots of input from specialist analysts in specialist areas. It is not the same from senior investment officers as from senior preparers. It is at that level that we don’t hear as much. One or two individuals may be active, but the organisations themselves are not.”
The IASB has been making a push to engage investors recently. This year it changed its constitution to make it explicit for the first time that investors are the target audience for financial reporting. It also recently appointed an Investor Liaison Manager, Luci Wright. Its Standards Advisory Council was widened in 2009 to include a greater range of members – although the only pension fund representative on the 45-strong panel isAPG Investments’ compliance officer Gerben Everts. Of its 21 trustees, just Scott Evans, CEO of TIAA-CREFInvestment Management, represents an institutional asset owner. Peter Elwin, head of European Pension Strategy at JP Morgan Cazenove, says on the IASB web site: “The structural issue that the standard-setters face is that investors aren’t that interested until it hits the figures, and then they throw up their hands and say: ‘What is this stuff?’” One avenue for debate is the Corporate Reporting Users’ Forum , which draws its membership from asset managers such as Hermes, Blackrock and Fortis Investments as well as sell-side firms.