PAIB Committee Meeting Highlights
October 2008
Contacts:
Stathis Gould, stathisgould@ifac.org
Vincent Tophoff, vincenttophoff@ifac.org
The Professional Accountants in Business (PAIB) Committee met in
New York, October 6 – 8, 2008. This summary is for information
purposes only. Vincent Tophoff vincenttophoff@ifac.org
The Financial Crisis
The Committee discussed the current global financial crisis to determine
its impact on professional
accountants
in business and how it related to
Vincent Tophoff
vincenttophoff@ifac.org
current committee projects and future project selection. The Committee
welcomed the recent René Ricol (former IFAC President) report for the
President of the French Republic on the crisis. This covered the main
causes of the financial crisis, its implications and possible measures to
Vincent
Tophoff
vincenttophoff@ifac.org
deal with some of
the most
important
issues relating to the accountancy
profession. The Committee felt that the report provided useful
background and relevant discussion points to support all senior
professional accountants in business in their roles in delivering effective
oversight, governance,
Vincentrisk
Tophoff
and internal
vincenttophoff@ifac.org
control and ethical practice in
organizations. The Committee felt that the main issues and themes
arising from the crisis connected to several recent and current projects
on ethics, governance and control as well as business reporting. As the
crisis unfolded Vincent
and as Tophoff
financialvincenttophoff@ifac.org
institutions started to regain some
semblance of stability, the Committee should be in a better position to
consider how to incorporate lessons learned into the planning of its
forward work program.
Publication of New
Report
Performance
Measurement in the Public
Vincent
Tophoff
vincenttophoff@ifac.org
Sector
As part of its mission to serve all professional accountants in business,
including those working in the public sector, the Committee conducted a
survey designedVincent
to obtain
Tophoff
information
vincenttophoff@ifac.org
about the financial and nonfinancial performance measurement and reporting processes in various
public sector entities around the world. The Committee approved the
survey results and these will be published in November 2008. The
results identify similarities
and differences
in performance measurement
Vincent Tophoff
vincenttophoff@ifac.org
structures and the extent to which these structures help public sector
entities meet their objectives.
Vincent Tophoff vincenttophoff@ifac.org
IFAC Sustainability Framework
The Committee approved the launch of its sustainability framework for
professional accountants in business in expectation of publication by
December 2008. The framework is being developed into a web-based
tool that consolidates all the important aspects of managing a sustainable
organization to help professional accountants in business to support their
organizations in embedding sustainability in the way they do business.
For each of the critical areas identified in successfully managing an
organization on a sustainable basis, the framework highlights key
considerations and approaches, and refers to examples of good practice
as well as to IFAC member body and other resource material for further
information. The framework will be promoted using a number of
supporting resources such as summaries and key questions professional
accountants in business should be asking about managing sustainability
issues.
Roles, Domains and Competencies of Professional Accountants in
Business
The Committee approved a project focused on enabling IFAC to take a
global leadership position in tracking and promoting the domain of
professional accountants in business, their diverse roles and key
differentiating competences. This project has three key phases involving
understanding employers’ expectations of PAIBs, clarifying the roles,
domains and competencies of professional accountants in business and
developing a categorization framework for the Committee’s work plan
of activities. The first deliverable will be in 2009 and will be a
discussion paper on what employers expect of professional accountants
in business in the next five years.
Business and Financial Reporting
The Committee discussed the progress of the IFAC Business Reporting
Board Project that will provide a global overview of the (regulatory)
developments in the areas of governance, reporting and auditing.
Additional interviews with investors, preparers, auditors and regulators
should influence participants in the financial reporting supply chain by
providing good and inspiring examples (and explanations) on what
should further be done, how and why in the area of business reporting.
Developing International Good Practice Guidance (IGPG)
The Committee approved a project proposal to develop an IGPG on
calculating and using the cost of capital. This recognizes that six of the
responses to the 2007 exposure draft on Project Appraisal Using DCF
requested follow-up guidance on the cost of capital. It also recognizes
the importance of this topic for those professional accountants in
business, and non-accountants, working in ‘technical’ roles in the
finance area, and in ‘strategic’ roles involving investment decisions.
The cost of capital is a key factor in a range of decisions including
capital management, share repurchases, debt offerings, business
acquisitions, investments, pricing and risk mitigation. It also featured in
financial reporting standards covering impairment testing and fair value
measurement. One of the significant issues raised in current financial
crisis has been that some banks set their cost of capital for the appraisal
of certain business lines too low.
The Committee discussed the high level issues arising from the
responses to the proposed IGPG on Evaluating and Improving
Governance in Organizations, which were mostly supportive of the
approach the Committee had taken. The Committee approved its
publication subject to a number of minor changes (that do not affect the
principles). The IGPG will be launched by the end of 2008.
The proposed IGPG on Costing to Drive Organizational Performance
received a mixed response. Although most respondents were positive
about the IGPG, it is has become obvious that there is confusion
between what is required of a costing approach to support financial and
regulatory reporting and that required to support decision-making in
organizations. The Committee will restructure this IGPG to better
distinguish good practice for costing for decisions with a view to final
publication in the third quarter of 2009.
Date of Next Meeting
The next PAIB Committee meeting will be held on April 22-24, 2009 in Hong
Kong.