UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT Promoting Transparency in Corporate Reporting: A Quarter Century of ISAR UNITED NATIONS New York and Geneva, 2009 GE.09-50151 NOTE Symbols of United Nations documents are composed of capital letters combined with figures. Mention of such a symbol indicates a reference to a United Nations document. ______________________________________________________________________________ The designations employed and the presentation of the material in this publication do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations concerning the legal status of any country, territory, city or area, or of its authorities, or concerning the delimitation of its frontiers or boundaries. Views expressed in this publication are those of the respective authors and do not necessarily represent those of UNCTAD. ______________________________________________________________________________ Material in this publication may be freely quoted or reprinted, but acknowledgement is requested, together with a reference to the document number. A copy of the publication containing the quotation or reprint should be sent to the UNCTAD secretariat at: Palais des Nations, CH-1211 Geneva 10, Switzerland. UNCTAD/DIAE/ED/2008/3 ii Preface Member States of the United Nations have long realized the critical role of the private sector in achieving their economic and social development goals. The private sector provides goods and services, employment, tax revenue and hard-currency. Member States also recognized the need for comparable and reliable corporate reports. At the United Nations, Member States have been deliberating on these issues for over three decades. In October 1982, the Economic and Social Council established the Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR) as a standing Group of Experts. Since then, ISAR has been holding annual sessions - first in New York and after 1993 in Geneva under the umbrella of UNCTAD. Over these years, ISAR has been serving as an inclusive and neutral forum where experts from all Members states - developed and developing as well as countries with economies in transition - come together to exchange views and experiences on various aspects of corporate accounting and reporting. On many occasions, ISAR took up topics of a pioneering nature and concluded its work with consensus in a concrete manner. ISAR has been developing practical guidance with a view to assisting Member states with implementation. These include: accounting and reporting for environmental costs and liabilities, requirements for professional qualification of accountants, the accounting and financial reporting needs of small and medium-sized enterprises, corporate governance disclosure, corporate responsibility indicators in annual reports and practical implementation of International Financial Reporting Standards (IFRS). ISAR has often been cited as a good example that other Intergovernmental Working Groups of Experts at UNCTAD could emulate. This year, ISAR is marking its twenty-fifth anniversary session at a critical juncture. Financial markets across the world are facing a major crisis. The call for meaningful, reliable and comparable financial reports has never been louder. Although significant progress has been made over the last three decades in promoting comparable corporate reports around the world, accounting and financial reporting requirements need to keep up with the rapidly changing and globalizing world of finance. At the twelfth Ministerial Conference that took place in Accra, Ghana, in April 2008, Member States have called upon UNCTAD to assist them with adopting and implementing international standards and codes such as IFRS. In this respect, the role of ISAR is indispensable. This publication has been prepared by various experts from the ISAR network in commemoration of the twenty-fifth anniversary session of ISAR. It highlights some of the significant areas of corporate accounting and reporting that ISAR has contributed to over the years. It is my hope that this publication will provide policy-makers, regulators, standard-setters, academics and other readers a useful introduction to ISAR and an overview of its work over the past quarter-century. Supachai Pantichpakdi Secretary-General of UNCTAD Geneva, October 2008 iii Acknowledgment UNCTAD is grateful to all the ISAR experts past and present who contributed to the work on accounting and reporting over the past quarter century. Most of ISAR’s conclusions on this subject were produced by ad hoc consultative groups whose membership is listed in Annex B. UNCTAD is especially grateful to the authors and commentators of each chapter who took the time to record ISAR’s achievements. Their contributions are acknowledged by chapter. UNCTAD extends special appreciation to Lorraine Ruffing, retired UNCTAD staff member and special resource person, for her valuable contribution to the publication. UNCTAD would also like to express its appreciation to the members of the Secretariat who took the lead in initiating this work, supervised, edited, collated and produced this publication: Nazha Benabbes Taarji-Aschenbrenner, Sophie Combette, Estève Morel, Karima Aoukili and Peter Navarrette. iv Contents page Preface .................................................................................................................................... iii Chapter I. Origin and Evolution of the Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR) 1 A. Introduction ................................................................................................... 1 B. Origin............................................................................................................. 1 1. Group of Eminent Persons and Group of Experts on International Standards of Accounting and Reporting................................................... 1 2. Creation of the Ad Hoc Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting ........................ 3 3. Creation of the Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR)................. 4 4. The Mandate of ISAR............................................................................... 4 C. Evolution of ISAR’s work and contributions to the field.............................. 4 1. Work on the minimum list........................................................................ 4 2. Building capacity for improving disclosure ............................................. 5 3. Work on non-financial accounting ........................................................... 6 4. Accounting reform and training in transition economies ......................... 7 5. Strengthening of the accounting profession ............................................. 9 6. Accounting by Small and Medium-Sized Enterprises.............................. 9 7. Role of Accounting in Financial Crises and Challenges to Accountants and Auditors.............................................................................................. 10 8. Corporate governance and corporate social responsibility....................... 10 D. Role of ISAR as a global forum for corporate disclosure ............................. 11 Chapter II. Objectives and concepts underlying corporate reporting: Have we reached the frontiers of accounting?.............................................................. 15 A. Introduction ................................................................................................... 15 B. ISAR's conceptual work: objectives, achievements and shortcomings......... 15 C. Moving East- accounting reform as part of economic transition .................. 17 D. Reaching the frontiers of accounting............................................................. 19 E. Conclusions.................................................................................................... 20 Chapter III. Reporting on Environmental Performance............................................... 21 A. Introduction ................................................................................................... 21 B. Review of Legislation and Practices and Development of Recommendations and Guidance .................................................................. 22 1. Annual Report of the Board of Directors ................................................. 22 2. Country Survey, 1989-1990...................................................................... 22 3. Initial Draft Recommendations, 1990....................................................... 24 4. Follow- up Survey, 1990/91 ..................................................................... 26 5. Final Recommendations, 1991 ................................................................. 27 6. TNC’s Compliance Survey, 1991/92........................................................ 28 7. Conclusions on Accounting and Reporting by TNCs, 1994..................... 29 8. Survey Update, 1993/94........................................................................... 29 9. Review of Legislation, 1995..................................................................... 30 v page 10. National and International Standards and Guidance on Various Aspects of Accounting for Environmental Measures, 1998................................... 32 11. Position Paper: Accounting