August 2011

IFAC NewsA N e w s B r i e f i N g f r o m t h e i N t e r N A t i o N A l f e d e r A t i o N o f A c c o u N t A N t s

In This Issue

In early August, US Government debt was downgraded for the first time in history, the European Central Bank entered the bond

market, trying to prevent the crisis from engulfing Italy and Spain, and British regulators began looking at banks’ exposures to other troubled countries, such as Belgium. The crisis that first paralyzed Greece is spreading to other countries, and will have a substantial impact on both the public and private sectors. The state of the global economy and the sovereign debt crisis continue to dominate the headlines as the situation evolves in Europe and the US.

While the most urgent problems appear to lie within the Euro zone, many governments have fiscal positions that are highly vulnerable. The sovereign debt crisis has entered a dangerous new phase; just how bad it will get and what effects will be felt in the world economy are yet to be seen.

"Sovereign debt tensions impact core economies and cause adverse regional and global implications. We have seen the difficulties associated with fiscal imbalance in many countries, notably in Europe. While recovery throughout the EU is viable, many, including the IMF, have warned that unresolved fiscal and debt problems in Greece, Ireland, Portugal, and elsewhere could threaten the global economy. Policies that will enable countries to regain fiscal balance and also resume economic growth are now paramount," commented former Public Interest Oversight Board Chair Stavros Thomadakis.

The financial problems in Greece that triggered the sovereign debt crisis included concealing deficit and debt positions. Clearly, the need for transparent financial reporting by governments and improvements in the management of public sector resources has never been greater.

What is the answer? Strong accrual accounting standards are vital in enhancing government financial reporting and accountability. They are an essential tenet of solid accounting and reporting for public companies—and should be for governments as well.

IFAC, as the worldwide organization of the accountancy profession, has long recognized that a fundamental way to protect the public interest is to develop, promote, and enforce a common set of high-quality international standards. IFAC believes that in order to change the paradigm for government reporting, and create an international environment in which cash-basis accounting is recognized as deficient, governments should adopt the accrual-based International Public Sector Accounting Standards (IPSASs), set by the International Public Sector Accounting Standards Board (IPSASB).

The good news is that the momentum toward adopting IPSASs is definitely building globally.

"We are all impacted by a government’s financial management decisions. A single set of internationally accepted accounting standards for the public sector would improve the quality of financial reporting, add stability to the global economic system, enhance accountability and efficiency, improve asset, debt, and cash management, and enable consistent and comparable reporting," said Andreas Bergmann, IPSASB chair.

While adopting IPSASs won’t solve the sovereign debt crisis, enhancing government financial reporting and financial management would be a strong step toward enhancing economic growth and stability worldwide as governments will have to face the consequences of financial decisions today, rather than passing them on to future generations.

IFAC CEO Ian Ball stated, "While improving financial reporting by governments is necessary, it is not sufficient. We are in the current situation because the institutional arrangements for public finance in many countries are simply not up to the job required of them. There are mechanisms that can discourage governments from engaging in the short-term financial decision making, which is so damaging to the public interest. The profession must speak more loudly in calling for the necessary reforms—no longer can anyone pretend that fiscal responsibility is anything other than the highest priority. Adopting and implementing IPSASs is a critical first step."

The Sovereign Debt Crisis: Is there an Answer?

2 International Auditing and Assurance Standards Board

2 International Ethics Standards Board for Accountants

3 President’s Message

4 International Accounting Education Standards Board

5 International Public Sector Accounting Standards Board

6 CReCER 2011

7 Professional Accountancy Organization Development Committee

8 Professional Accountants in Business Committee

9 Public Policy and Regulation

10 Small and Medium Practices Committee

11 Translations and Permissions

12 Compliance Advisory Panel

12 Upcoming Events

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International Auditing and Assurance Standards Board News

International Ethics Standards Board for Accountants News

As we have seen, the global business environment and increasingly complex financial reporting requirements have put a spotlight on audit

quality, which has been magnified by the recent financial crisis. While the audit is valued, investors and financial analysts want additional, more pertinent, information for their decision making, and regulators are also demanding further insights into the audited entity.

The auditor communicates to financial statement users primarily through the auditor’s report, so it comes as no surprise that the outputs of the audit—the auditor’s report and other communications—substantially influence perceptions of audit quality. The International Auditing and Assurance Standards Board (IAASB) explored this topic in Audit Quality: An IAASB Perspective as part of its continuing efforts to stimulate additional debate and discussion on audit quality among stakeholders in the financial reporting process.

To further explore this area, the IAASB recently released a consultation paper, Enhancing the Value of Auditor Reporting: Exploring Options for Change. The paper describes issues with financial reporting—including the "information gap" perceived by some

The International Ethics Standards Board for Accountants (IESBA) is continuing work on its three standard-setting projects: Breach of an

Independence Requirement—to reconsider the paragraphs in the Code of Ethics for Professional Accountants (the Code) that address an inadvertent violation of the Code; Conflicts of Interest—providing additional guidance in the Code on conflicts of interest; and Responding to a Suspected Illegal Act—providing additional guidance for professional accountants on how to respond in situations where they encounter a suspected illegal act.

In the Breach of an Independence Requirement project, the IESBA is developing guidance on how to address a breach of an independence provision of the Code. Under the guidance, a firm would be required to take steps as soon as possible to suspend or eliminate the breach, and communicate all breaches to those charged with governance as soon as possible. If action cannot be taken to address the consequences of the breach, the firm would be required to resign. An exposure draft is expected in the fourth quarter of 2011, with a final standard in 2012.

The Conflicts of Interest and Responding to a Suspected Illegal Act projects continue to progress, as

stakeholders—and discusses potential changes. It seeks input on these potential changes and whether they would enhance the quality, relevance, and value of auditor reporting on an international basis. Key participants in the financial reporting process are invited to comment on the paper through September 16, 2011.

In addition, acknowledging the evolving field of assurance engagements, the IAASB recently released proposed revised International Standard on Assurance Engagements (ISAE) 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial Information. This principles-based standard can be applied to a broad range of assurance engagements, including both reasonable and limited assurance engagements. The revised standard clarifies how some of the core concepts should be applied, and achieves an important balance by including requirements that will enable consistent high-quality engagements, while being sufficiently flexible to apply to the broad range of relevant engagements. Interested parties are invited to comment through September 1, 2011.

These publications can be found at www.iaasb.org.

outlined in the April 2011 IFAC News. Exposure drafts are still expected in the fourth quarter of 2011.

The IESBA is also continuing work with small- and medium-sized practices (SMPs) and small- and medium-sized entities (SMEs). At its June 2011 meeting, the board received an interim report on the SME/SMP Working Group, which was developed with input obtained from participants at the March SMP Forum, IFAC’s SMP Committee, national standard setters, and SMP Committee poll respondents. The interim report contained draft recommendations for ways the IESBA could respond to the unique and challenging issues that SMEs and SMPs face in complying with the Code.

As a step to further its objective of convergence, the IESBA also conducted a benchmarking exercise. The independence requirements set out in Section 290 of the Code were compared to the requirements of eight jurisdictions. The IESBA believes that when focusing on the Code as the catalyst for convergence, it is important to understand how all of the key independence provisions in the Code compare to the independence standards and regulations of other jurisdictions and how, in totality, the Code compares to those other standards and regulations.

For more information visit www.ifac.org/Ethics.

IAASB Focuses on Audit Quality, Assurance

IESBA Project Update

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President’s Message

Göran Tidström

Since the last edition of IFAC News, IFAC has continued to seize opportunities, speak on behalf of the profession, and partner with other

organizations to enhance the relevance and stature of the global accountancy profession.

In May, I was personally gratified to be present at the launch of the Pan-African Federation of Accountants (PAFA)/Fédération Panafricaine des Experts-Comptables (FEPEC)—a regional organization composed of 37 professional accountancy organizations from 35 countries. The formation of PAFA has been supported by IFAC for a number of years and is a historic event for the accountancy profession, and for Africa. We expect PAFA to play a key role in enhancing collaboration, developing the profession, and supporting emerging economies within Africa.

In June, we co-organized a very successful CReCER in Buenos Aires. On the day preceding the event, IFAC organized a meeting with the presidents of the Latin American and Caribbean professional accountancy organizations. It was an extremely productive meeting, and it was gratifying to see how the links between IFAC and the Latin American and Caribbean member bodies have become stronger over the years—as well as how vibrant the profession is in this region of the world. You can find more details on these events on page 6.

Also in June, IFAC submitted the Private Sector Taskforce of Regulated Professions and Industries’ (PSTF) interim report to the French Ministry of Finance, for consideration by the G20 deputies. The PSTF—which is comprised of private sector representatives from professions and industries subject to regulation, including accounting, auditing, investment, banking, insurance, and related areas—aims to facilitate economic stability in the world’s capital markets. The report, Regulatory Convergence in Financial Professions and Industries, emphasized that international standards are essential for a sound and stable global economy; they provide comparability and consistency for investors, regulators, and market participants, and are a critical issue for capital markets. A final report will be submitted in September 2011.

In July, we responded to consultation papers on the IFRS Foundation Trustees’ Strategy Review and the European Commission’s (EC) Green Paper on the EU Corporate Governance Framework. We consider these comment letters to be valuable opportunities for IFAC to raise our profile and the profile of the global accountancy profession, and will continue to respond to consultations where our views are relevant. More details on IFAC’s responses can be found on page 9.

Also in July, we met with the Monitoring Group (MG) to review our progress in addressing the recommendations

in the Review of the IFAC Reforms—Final Report. This was our first meeting under new MG chairman Fernando Restoy, and we were pleased that the discussions continued to go well and that the MG expressed satisfaction at the actions we have taken and those we have planned. We are very proud of the improvements IFAC has made, and continues to make, and remain committed to enhancing diversity, transparency, and accountability in the public interest. At this meeting, we also discussed the EC’s signals that it is considering the best way to introduce ISAs into national laws; needless to say, we welcome this consideration.

As the year progresses, IFAC continues to spotlight our strategic focus areas, including sovereign debt and public sector finance. Ian Ball, IFAC CEO, has made a number of key speeches on this topic in recent months, and the IPSASB has increased outreach activities and is developing new tools and resources to communicate the value of IPSASs and accrual accounting. We will continue to advocate in this area, as well as to comment on the evolving situation in Europe—and its impact on both the public sector and the private sector.

Sustainability and integrated reporting also continue to be important strategic issues. Our work with the International Integrated Reporting Committee (IIRC) is progressing, and we have made strides in raising awareness. We expect the IIRC to produce a discussion paper in the third quarter; the paper is intended to demonstrate the links between environmental, social, governance, and financial factors, and lay the foundation for a framework for these factors to be systematically taken into account in reporting and decision making.

From stronger alliances with regions of the world, different industries, and other organizations, to the rapidly evolving sovereign debt crisis and the push to sustainability—the world, the economy, and our profession will change dramatically in the coming months and years. We must keep pace with this change—indeed, we must lead it. I am confident in IFAC’s and the profession’s ability to do so.

Seizing Opportunities, Pursuing Our Goals

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International Accounting Education Standards Board News

Following the successful completion of the International Association for Accounting Education and Research (IAAER)/Association of Chartered

Certified Accountants (ACCA) research projects to inform the work of the IAESB (Informing the International Accounting Education Standards Board: A Summary of IAAER/ACCA Research Projects), the IAAER approved a second round of research projects. These projects, in addition to the first round of projects, are funded by

The IAESB has had several opportunities to reach out to its stakeholders and receive input on the revisions project. Saleem Kharwa and Kim

Langfield-Smith, members of the IAESB, and David McPeak, IFAC Senior Technical Manager, presented a concurrent session on the ongoing revision of IESs 4 and 6 at the Southern African Accounting Association International Conference 2011 in June. Dennis Reigle, IAESB Technical Advisor, provided an update on the IES revision project to the National Association of State Boards of Accountancy at their 4th Annual International Forum in Vancouver. Professor Susan Wright, the Accounting and Finance Association of Australia and New Zealand (AFAANZ) representative of the IAESB Consultative Advisory Group, provided an update on the board’s activities and the IES revision project at

the ACCA.The three proposals selected are: "Exploring

Models of Accounting Education and IESs Adoption by Professional Bodies and Tertiary Institutions in Australia, Japan, and Sri Lanka"; "A Framework of Best Practice of Continuing Professional Development for the Accounting Profession"; and "Ontology-based e-Assessment for Accounting Education." For more details on the projects, please see www.iaaer.org/research.

the Accounting Education Interest Group Symposium held in conjunction with the 2011 AFAANZ Conference during July.

IAESB member Azza Raslan spoke at the Talal Abu-Ghazaleh Graduate School of Business (TAGSB) on the board’s work assisting professional accountancy organizations in the development and delivery of professional accountancy education. TAGSB represents a partnership between the private and public sectors in the Arab world, bringing the business expertise of the Talal Abu-Ghazaleh Organization to academics.

Finally, the IAESB spoke at the American Accounting Association Annual Meeting, held early August in Denver. Participation included a teaching and learning event on Foundations for the Profession and a session discussing the revisions project.

Revisions to International Education Standards (IESs) 1 and 5 were recently released for exposure by the International Accounting Education Standards

Board (IAESB).IES 1, Entry Requirements to a Program of Professional

Accounting Education, currently prescribes the principles to be used by professional accountancy organizations, including IFAC member bodies, when setting entry requirements for professional accounting education and practical experience. The proposed revision of IES 1 places more emphasis on protecting the public interest by both establishing fair and proportionate entry requirements—which help those individuals considering professional accounting education make appropriate career decisions—and ensuring that requirements for entry to professional accounting education are not misrepresented. The comment deadline is September 21, 2011.

IES 5, Practical Experience Requirements, currently prescribes the practical experience IFAC member

bodies should require their members to obtain before qualification as professional accountants. The revision of IES 5 proposes a requirement that practical experience be a part of the Initial Professional Development of an aspiring professional accountant, and provides IFAC member bodies with more flexibility to establish their preferred approach to measure practical experience using one of the following three approaches: output-based, input-based, or a combination of input-based and output-based approaches. The comment deadline is October 8, 2011.

The IAESB is revising and clarifying its suite of eight IESs as a result of an environment that is becoming increasingly globalized and requiring a greater level of specialized knowledge and professional judgment. The current timetable envisages that all IESs will have been revised and redrafted, or redrafted only, by the first quarter of 2013. All stakeholders are encouraged to comment. To access the exposure drafts and submit your comments, please visit www.iaesb.org.

Proposed IESs 1 and 5 Revisions Open for Comment

New Research to Inform the IAESB Commences

IAESB Recent Events Update

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International Public Sector Accounting Standards Board News

The International Public Sector Accounting Standards Board (IPSASB)’s highest profile project—with a goal of completion in late 2013—The Conceptual

Framework for General Purpose Financial Reporting by Public Sector Entities (the Conceptual Framework) seeks to establish and make explicit the concepts that are to be applied in developing International Public Sector Accounting Standards (IPSASs) and other documents that provide guidance on information included in general purpose financial reports. All four phases of development have begun, with phases one through three being the most advanced.

Responses to the two Conceptual Framework Consultation Papers and the Exposure Draft, issued in December 2010, have been posted on the IPSASB website.

Phase 1: The Exposure Draft Objectives and Users, Scope, Qualitative Characteristics, and Reporting Entity elicited over 50 responses, and covered: the concepts related to the objectives and users of public sector general purpose financial reports; the scope of financial reporting; the qualitative characteristics of information included in general purpose financial reports; and the reporting entity and group reporting entity.

One important IPSASB view is that the scope of financial reporting in the public sector needs to go beyond the general purpose financial statements to encompass broader types of information.

Phase 2: The Consultation Paper Elements and Recognition in Financial Statements received over 30 responses. Elements are the basic building blocks of financial statements needed to meet the information needs of the users of these financial reports. This paper

The IPSASB is currently working on a Consultation Paper, Service Performance Information, to develop a consistent framework for reporting service

performance information of public sector programs and services that focuses on meeting the needs of users. The paper highlights and analyzes existing approaches used by public sector entities around the world where the reporting of service performance information is a feature of public sector financial management.

The reporting of service performance information will assist public sector entities in meeting the responsibility of public accountability. Such reporting provides users with information that will assist them in assessing performance of services provided, and the effects of those services.

addressed the following key questions:

• What are assets in public sector financial statements?

• What are liabilities in public sector financial statements?

• What are revenues and expenses in public sector financial statements?

• Are there other elements needed in public sector financial statements?

• What are the recognition criteria for public sector financial statements?

• How should IPSASs approach reporting public sector financial performance?

Phase 3: The Consultation Paper Measurement of Assets and Liabilities in Financial Statements received over 30 responses. It explored the measurement bases that may validly be adopted for the elements that are recognized in public sector general purpose financial statements. The term "measurement basis" refers to the concept that is used in determining the amount at which an asset, liability, revenue, or expense is stated in the general purpose financial reports.

Measurement of Assets and Liabilities in Financial Statements also discussed how measurement bases may be classified according to whether or not they reflect historical or current attributes of an asset or liability; represent an entry or an exit perspective; and reflect either a market- or an entity-specific perspective.

Responses to the Exposure Draft and to the two Conceptual Framework Consultation Papers may be viewed at www.ipsasb.org.

The primary objective of the consultation paper is to present a principles-based approach for a framework for such reporting. The proposed framework includes the components of service performance information—identified during research—that are necessary to meet the needs of users. A report on service performance should include: information on the scope of the report; information on objectives; information on the achievement of objectives; and narrative discussion of results.

The IPSASB considered earlier drafts of the consultation paper in March and June—the goal is for final approval at the September meeting, and release for public comment soon after.

The paper may be accessed at www.ipsasb.org.

IPSASB Conceptual Framework Responses Posted

Consultation Paper on Service Performance

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CReCER 2011

CReCER 2011 delegates collaborate in a breakout session during the VIP Roundtable

IFAC, the World Bank, the Inter-American Development Bank (IDB), and the Global Public Policy Committee (GPPC) celebrated the 5th Annual Conference for

Accounting and Accountability for Regional Economic Growth (CReCER, or Contabilidad y Responsabilidad para el Crecimiento Económico Regional) for Latin America and the Caribbean, held June 29–July 1 in Buenos Aires. CReCER was hosted by IFAC member body Federación Argentina de Consejos Profesionales de Ciencias Económicas (FACPCE). This year’s theme was (translated into English): "Development of Capital Markets in Latin America and the Caribbean." CReCER 2011 encompassed several notable events: a VIP Roundtable bringing together top decision makers from the private and public sectors and an Open Event for all professionals and interested parties. A Train the Trainers session on International Financial Reporting Standard for small- and medium-sized entities (IFRS for SMEs) for 105 professionals from Latin American countries was also conducted during the conference.

At the VIP Roundtable that officially launched CReCER 2011, IFAC President Göran Tidström delivered the keynote speech, "Key Factors of Development of Capital Markets," in which he presented to an audience of regional leaders and the donor community regarding the contributions of IFAC and the accounting profession to the development of capital markets and strong sustainable economies.

The Open Event began with an International Standards on Auditing (ISA) Seminar for the profession

in the region. Prof. Arnold Schilder, chairman of the International Auditing and Assurance Standards Board (IAASB), presented "ISAs: Implementation Challenges

and Success Factors" to more than 400 professionals from the private and public sectors of the Latin American and Caribbean regions. According to Prof. Schilder, in the past year, the number of countries using or committed to using the clarified ISAs has grown from about 30 to more than 70. In addition to many countries in the region, this now includes the United States (for private companies), the United Kingdom, Canada, Japan, Australia, South Africa, and China. FACPCE President Jorge Paganetti presented "Adoption and Implementation of ISAs in Argentina," in which he discussed plans for adoption and implementation of ISAs for listed companies, banks, and insurance companies, which will be effective in 2013.

CReCER 2011 was enhanced by the official announcement of The Grupo Latino-Americano de Normatizadores Contábeis—GLASS (the English acronym for Group of Latin American Accounting Standard Setters)—formed to bring together the regional accounting standard setters to evaluate and respond to pronouncements of the International Accounting Standards Board (IASB). On June 28, a meeting was held to finalize the inaugural act and to elect a board of directors. Juarez Domingues Carneiro, president of the Brazilian IFAC member body, the Conselho Federal Contabilidade (CFC), was unanimously elected to chair the group, and FACPCE Vice President Jorge Gil will serve as vice president of GLASS. In addition to Brazil and Argentina, Venezuela (represented by Rafael Rodriguez Ramos), Mexico (represented by Felipe Perez Cervantes), Uruguay (represented by Jorge Bergalli), and Chile (represented by Florindo Nuñez Ramos), are also a part of the GLASS Board.

GLASS aims to work in partnership with IFAC, while respecting the national sovereignty of each member country, to promote the adoption and convergence of international standards. In addition, GLASS will work with governments, regulators, and other regional organizations by helping to improve the quality of reporting for financial information and dissemination of standards issued by IFAC.

In the five years since its inception, CReCER has established itself as an important initiative that helps to facilitate the adoption and implementation of international standards. The CReCER organizers are reflecting on its achievements and working to determine how to further develop the event in the coming years. IFAC is very proud of how these events have progressed and matured, and of our deepening connections with the Latin American and Caribbean member bodies.

CReCER 2011: Notable Events and Highlights

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Professional Accountancy Organization Development Committee News

During the second quarter of 2011, the Professional Accountancy Organization (PAO) Development Committee finalized its Strategy and Work Plan

2011-2014, which formalized three overarching strategic goals and objectives for the committee’s work with PAOs in emerging and developing countries.

The committee’s first strategic goal is to further develop the capacity of the accountancy profession by supporting the establishment and strengthening of PAOs in all countries, as well as recognizing progress that has been made. The committee will also conduct targeted outreach activities for PAOs and their stakeholders, as well as use information from the Member Body Compliance Program to respond to development needs.

The second goal is to increase awareness-building and knowledge-sharing on the adoption and implementation of international standards, as well as create a greater understanding of the important role IFAC and national and regional PAOs play in international development. To do this, the committee will encourage

sharing of good practices and information between stakeholders and continue to support mentoring between PAOs, which has demonstrable benefits for all involved.

The committee’s third and final strategic goal is to engage in and deepen development partnerships with the international donor community, regional organizations, and public and private sector stakeholders to share resources, knowledge, and experience, and to deliver guidance, advice, and assistance in a more efficient and effective manner. These partnerships with stakeholders—as well as those yet to be established—will develop a common strategic focus for capacity development in the accountancy profession in order to support both the public and private sectors.

For more information on the PAO Development Committee, the Strategy and Work Plan for 2011-2014, and the development of the accountancy profession worldwide, please visit www.ifac.org/DevelopingNations.

PAOs can make major contributions to reform and development efforts—benefiting their members, as well as public financial management, financial

stability, economic growth, and social progress. In order to work toward these goals, PAOs must have sufficient resources and support.

Governmental support for the development of PAOs is vital for the development of the profession and the growth of a nation, since a strong accountancy profession that has legislative backing contributes to financial stability, and overall economic and social progress. Unfortunately, in many developing and transitioning nations, PAOs do not have sufficient governmental support and they struggle to create awareness of the important role PAOs can play in the economy and the financial sector.

These critical realities for the PAO Development Committee were some of the issues Göran Tidström, IFAC President, shared with leaders of the profession during a recent conference organized by the World Bank. Accountancy Development for Results, held in

Washington, D.C., brought together 150 participants, including the president of the Pan-African Federation of Accountants, the head of the Accounting Standard and Transparency Bureau in Indonesia, officials from the World Bank, and other government officials, accounting professionals, academics, international organizations, and members of the donor community.

Mr. Tidström also explained how IFAC, through the PAO Development Committee, addresses these concerns. "In developing and transitional countries, we have focused our efforts on awareness building, knowledge sharing, and collaborative efforts," he stated during his address. He went on to explain how the PAO Development Committee works—by providing tools, resources, and staff support to developing PAOs—to build strong PAOs and a competent and capable accountancy profession, which in turn increases awareness, recognition, and support for PAOs and the profession.

Mr. Tidström’s speech and presentation are available in the Media Center on the IFAC website.

New Strategy and Work Plan Establishes Goals for Development

IFAC President: PAO Development Vital to Economic Development

New Website Coming Soon!The new IFAC website will feature a clean and modern design, a more intuitive architecture/navigation, expanded content, and topical and timely issues and insights. We’re looking forward to launching the site soon, and to hearing your feedback.

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Professional Accountants in Business Committee News

As the business environment changes for organizations around the world, employer’s needs and expectations of professional accountants in

business (PAIBs) are also changing. These changes will require PAIBs to embrace a broad range of skillsets. IFAC’s PAIB Committee recently published Competent and Versatile: How Professional Accountants in Business Drive Sustainable Organizational Success to outline the breadth of roles PAIBs have, and the mindset and professional competences that they will require to keep up with changing expectations and needs.

The publication identifies eight drivers of sustainable organizational success. These drivers include those factors every organization needs to focus on to achieve long-term sustainable success, and areas the global accountancy profession will also need to focus on to ensure PAIBs remain relevant and prepared for the changing needs of employers. These drivers provide the framework for areas of professional competency, which will help IFAC members and associates, as well as employers, benchmark their education, learning, and professional development.

The publication also outlines the specific ways in which PAIBs serve as creators, enablers, preservers, and

Integrated reporting—an organization’s use of one primary statement to report financial and non-financial information, including environmental, social,

and governance performance—continues to be at the forefront of global discussions on best practices in business reporting to improve transparency and accountability. This is due in part to the upcoming release of the discussion paper on integrated reporting from the International Integrated Reporting Committee (IIRC), expected to be released for public comment in September 2011.

The IIRC was formed to create a globally accepted integrated reporting framework that will allow companies to use a clear, concise, consistent, and comparable format. It is working to reach a consensus with governments, listing authorities, businesses, investors, accounting bodies, and standard setters on how this should be achieved. The IIRC has also held discussions around the world to ensure input from different perspectives, and the recently launched Pilot Programme will include organizations from various

reporters of sustainable value for their organization—the cornerstones of the services professional accountants provide. PAIBs can excel in these areas with the right attitude and mindset. According to the report, the professional accountant’s mindset will need to embrace five different areas: professionalism and ethical behavior; professional judgment; organizational and environmental awareness; a wider stakeholder and investor focus; and a high level of comfort working with change, uncertainty, and complexity.

An employer-focused summary publication highlighting key messages from this publication has also been developed for use by IFAC members and associates as a tool to demonstrate how employers can make the most of the professional accountants they work with, and ensure the continued development and growth of those accountants. For use of this publication, please contact stathisgould@ifac.org.

regions and industries.The discussion paper will make the regulatory,

business, and investment case for integrated reporting and explain how integrated reporting needs to progress by 2020. The paper will also provide a high-level roadmap for the development of integrated reporting and highlight the enablers of and barriers to change that need to be acted on.

After the close of the comment period, the IIRC will use the discussion paper and feedback, along with results from the Pilot Programme, to create an initial Integrated Reporting Framework, which will be released for testing by Pilot Programme participants before it becomes public.

IFAC and Accounting for Sustainability will be hosting a discussion forum on the IIRC’s discussion paper through the community forum www.a4s.ifac.org after the paper is released in September. Register on the forum’s website to join current conversations and receive notifications of upcoming discussions.

As Organizational Needs Change, So Must PAIBs

Integrated Reporting Update

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Public Policy and Regulation News

IFAC is one of nine organizations comprising the Private Sector Task Force (PSTF) that was established at the request of the Presidency of the G-20 in May

2011.The mission of the PSTF is to provide analysis of

the development of financial policy and regulation to facilitate economic stability in the world’s capital markets, focusing particularly on issues of international convergence. It is comprised of representatives from private sector organizations of professions and industries that are subject to regulation and operate

In keeping with its commitment to support the global adoption of International Financial Reporting Standards (IFRS), IFAC has responded to the IFRS

Foundation’s Report of the Trustees’ Strategy Review, IFRSs as the Global Standard: Setting a Strategy for the Foundation’s Second Decade. Issued this past April, it is the second consultation paper for public comment on the strategy review.

Overall, IFAC supports the principles and recommendations outlined in the report and commented on several keys areas, which included:

• IFAC supports the Trustees’ view that it is important to define what the public interest means in relation to the IFRS Foundation’s activities.

• IFAC believes that the International Accounting Standards Board (IASB) does not currently meet the appropriate requirements for governance,

IFAC has commented on the European Commission (EC)’s Green Paper examining the European Union (EU) Corporate Governance Framework. Responses

were provided to just over half of the questions posed, where IFAC's expertise is most relevant. While supporting the majority of the proposals outlined in the Green Paper, IFAC made several general observations:

• A focus on a wider range of stakeholder issues, application of the governance principles in spirit rather than in name, and reporting that embraces a broader, integrated reporting approach, are important aspects of effective corporate governance.

• It is important that corporate governance reforms proposed in Europe are considered in light of what

within the financial sector.The PSTF delivered an interim report in June—ahead

of the final report due in September—that focuses on global regulatory convergence, a critical issue for capital markets. It is a matter on which the private sector has expertise that can assist the G-20 in its objective to achieve a level playing field in relation to regulation and standards, and provides comparability and consistency for investors, regulators, and market participants.

The interim report is available at www.ifac.org.

skills, and resources that would accommodate embracing public sector accounting standards. IFAC supports the need for transparent financial reporting requirements for not-for-profit and public sector bodies, and notes that the argument for a single body responsible for setting accounting standards for all entities—public sector, private sector, and not-for-profit—has conceptual merit.

• IFAC recognizes the critical importance of legitimacy, accountability, and independence in the standard-setting process, and supports proposals that advance these aims.

IFAC also stated that it welcomes the proposal by the Trustees that the IASB should establish, or facilitate the establishment of, a dedicated research capacity.

The response is available at www.ifac.org and on the IFRS website.

is occurring internationally.

• When considering regulatory reforms, policy makers should be cognizant of differences between the operations, structures, ownership arrangements, number and type of stakeholders, and the objectives of small- and medium-sized entities vs. public interest entities.

• An important aspect of corporate governance that is not considered in this Green Paper relates to the role of an audit committee and, in particular, the relationship between it (and therefore, the Board) and external auditors.The response can be viewed at www.ifac.org/

Publications and the EC website.

Private Sector Task Force

IFAC Responds to the Trustees’ Strategy Review on IFRS

Response to the EC Green Paper on EU Corporate Governance Framework

Göran Tidström

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Small and Medium Practices Committee News

Panelists at the IFAC-FEE SME Roundtable

Following its July committee meeting in Brussels, the IFAC Small and Medium Practices (SMP) Committee co-hosted a debate with the Federation

of European Accountants (FEE) on regulation for small- and medium-sized entities (SMEs). Speakers from the European Commission, FEE, the French Ministry of Economy and Finance, and the European Financial Reporting Advisory Group provided updates and background on the current environment, challenges, and regulation issues facing SMPs and their SME clients. SMP Committee Chair Sylvie Voghel presented the results of the April SMP Quick Poll, which showed that SMPs are concerned about the impact of regulation on their SME clients and SMPs.

Chaired by Francis Chittenden, professor and chair of the FEE SMP Task Force, the event aimed to raise delegates’ awareness of regulatory issues facing the SME sector, while generating possible solutions to them. Delegates were asked: What needs to be regulated and to what degree? What principles should be observed in developing accounting and auditing regulations that will affect SMEs and SMPs? And, what is the appropriate balance between principles, rules, and reliance on

professional judgment?Ultimately, participants agreed on the need for

"smart" regulation—meaning, regulation that imposes a burden proportionate to the size and complexity of the entity, is relevant to the particular needs and circumstances of SMEs and SMPs, and changes at a pace that is practicable. Delegates recognized that such regulation has benefits, such as promoting transparency, efficiency, and sustainability among SMEs.

Ms. Voghel's presentation is available in the Media Center on the IFAC website.

SMP Committee Debates: IFAC-FEE SME Regulation Roundtable

IFAC’s online International Center for Small and Medium Practices (SMPs) hosts a broad range of resources, from comprehensive implementation

and practice management guides, to short articles with tips and tools to support your practice. For a 2011

update on IFAC’s activities to support SMPs, see the recent interview with SMP Committee Chair Sylvie Voghel. Here’s a run-down on the SMP Committee’s new and updated resources.

In July, the SMP Committee released the 3rd edition of the Guide to Quality Control for Small- and Medium-Sized Practices, 3e. This edition of the guide features enhancements to

the two sample manuals as well as other refinements for clarity and consistency with International Standard on Quality Control 1 (ISQC 1). This guide is designed to promote consistent implementation of ISQC 1, and offers a practical "how-to" approach to help

practitioners develop their firms’ quality control systems. For more implementation support, see the article Tips for Cost-Effective ISQC 1 Application. An updated version of the committee’s ISA implementation guide will be released in December.

The Guide to Practice Management for Small- and Medium-Sized Practices (PM Guide) is comprised of eight standalone modules covering a broad range of topics—from strategic planning to succession planning—each of which can be used as the basis for education and training. Look for the second edition, featuring updated further readings, references, and case studies, in November 2011. Several practice management articles focusing on tools to help practitioners operate proficiently and overcome current challenges and obstacles are being released later this year. The business advisory and practice management tips for success articles are now available for IFAC member bodies.

To stay informed of further developments, visit www.ifac.org/SMP, follow us on Twitter, and sign up for the SMP eNews. Finally, get involved by participating in the SMP Discussion Board and taking the August SMP Quick Poll, designed to take a quarterly snapshot of key issues facing SMPs (deadline September 9).

Updated Resources to Support Small- and Medium-Sized Practices Available

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Translations and Permissions News

Representatives from Russian-speaking organizations at the translations meeting held during the WCOA

IFAC and the World Bank are partnering on the Spanish translation of the Handbook of International Public Sector Accounting Pronouncements, 2011 Edition

(IPSASB Handbook). This translation will support and enhance the implementation of the International Public Sector Accounting Standards (IPSASs) in Spanish-speaking countries, thereby contributing to enhanced comparability, transparency, and accountability in the public sector. A call for nominations was issued in May 2011 to identify and select a principal translator and several review committee members.

A large number of highly qualified candidates from 14 different countries were received. The University of Zaragoza, Spain, with Professor Lourdes Torres, were chosen as the translating agency/principal translator. The University of Zaragoza currently performs the authorized Spanish language translation of the

WCOA Meeting Fosters Collaboration on Russian Translations: At the 2010 World Congress of Accountants (WCOA) in Kuala Lumpur,

representatives of 14 Russian-speaking organizations (mainly IFAC member bodies and associates) from eight countries came together to discuss the possibility of collaborating on future Russian language translations of IFAC publications, in order to make the best use of time and resources while maintaining a high level of quality. This meeting marked a historic milestone as the participants discussed ways to work collaboratively to establish mechanisms for sustainable performance and review of the Russian language translations of international standards. As a result, several Russian language translations are already in progress.

Additional Collaborative Successes: A Spanish translation of the 2009 Handbook of International Standards on Auditing and Quality Control, a two-and-a-half-year-long endeavor between Spanish-speaking nations in Europe, and North, South, and Central America is nearing completion. This is the result of a project coordinated by IFAC and involving the joint translating

International Financial Reporting Standards (IFRS) and has extensive experience translating IPSASs.

The selected review committee members are: Ms. Carmen Inés Giachino de Palladino, Former Accountant General of Argentina; Ms. Veronica Ruz, Professor, University of Santiago, Chile; Mr. Moisés Alcalde Virgen, Accountant General of Mexico; Ms. Maria Eugenia Zugaza Salazar, President, Public Sector Commission of the Institute of Chartered Accountants of Spain; and Mr. Isaac Umansky, former Accountant General of Uruguay and current IPSASB member.

IFAC recently signed an agreement with the IFRS Foundation for use of the translated IFRS as a basis for the translated IPSAS. This agreement will go into effect for this project and is an important step to establishing a sustainable translations process for future editions of the IPSASB Handbook.

bodies in Spain: Instituto de Censores Jurados de Cuentas de España (IFAC member body) in cooperation with Instituto de Contabilidad y Auditoría de Cuentas (regulatory body). The translation has been reviewed by the Directorate General of Translations (DGT) of the European Commission and a Latin American review committee led by Federación Argentina de Consejos Profesionales de Ciencias Económicas. This review committee is comprised of representatives from IFAC member bodies in Bolivia, Chile, Colombia, Costa Rica, Mexico, Panama, Paraguay, and Uruguay, in addition to other key stakeholders.

In June, Institut der Wirtschaftsprüfer published a synoptic (English/German) version of Part 1 of the 2010 Handbook of International Quality Control, Auditing, Review, Other Assurance, and Related Services Pronouncements. This translation is the result of collaborative efforts of IFAC member bodies in Germany, Austria, and Switzerland and has also been reviewed by the DGT.

Collaboration among IFAC member bodies, as demonstrated with the Russian, German, and Spanish examples above, can have many benefits, including efficiency from a cost and human resource perspective, as well as producing high-quality translations and fostering strong working relationships. IFAC can help facilitate collaboration, and we encourage our member bodies to consider working together on translations and other mutually beneficial projects. Contact KellyAnerud@ifac.org to learn more. To see additional completed translations, as well as those in progress, visit www.ifac.org/Translations.

IFAC Member Bodies Collaborate to Produce High-Quality Translations

Spanish IPSAS Principal Translator and Review Committee Announced

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12 ©2011 International Federation of Accountants

I n t e r nat iona l Fe de r at ion of Ac c ou n ta n tsPublication and Editorial Office: 545 Fifth Avenue, 14th Floor, New York, NY 10017 Tel: +1(212) 286-9344 Fax: +1(212) 286-9570 Website: www.ifac.org

Chief Executive Officer: Ian Ball (IanBall@ifac.org)Editors: Laura E. Wilker (LauraWilker@ifac.org) Jennifer K. Younts (JenniferYounts@ifac.org)

Compliance Advisory Panel

Upcoming Events

The Compliance Advisory Panel (CAP) is in the process of revising the Statements of Membership Obligations (SMOs), with a plan to make

recommendations to the IFAC Board in November 2011. If approved, the revised SMOs will be exposed for public comment thereafter.

The SMOs serve as a framework for credible and high - quality professional accountancy organizations (PAOs) focused on serving the public interest by supporting adoption and implementation of international standards and maintaining adequate enforcement mechanisms to ensure professional behavior of their individual members.

Originally issued in 2004, the SMOs form the basis of the IFAC Member Body Compliance Program, which requires members to perform self-assessments against the SMOs and prepare Action Plans to address SMO requirements. Through those Action Plans, the CAP and IFAC compliance staff have gained a more in-depth understanding of how the SMOs are being addressed in different jurisdictions around the world, and how a core concept of the SMOs, "best endeavors," is being understood and applied.

By revisiting the SMOs in the context of current

developments in international standards and regulatory environments, revisions made to the SMOs will ensure that they reflect current best practices; present requirements in a clear and consistent manner; and continue as a globally recognized and effective framework for PAOs.

While many changes are editorial in nature to improve presentation of the SMOs, others suggest significant enhancements. For example, revisions will seek to clarify application of the "best endeavors" concept with an emphasis on different levels of responsibility that a member body may have to each SMO. The draft refers to adoption and implementation of international standards, including incorporation into national standards, in order to be aligned with IFAC strategy and reflect advancements made regarding adoption. In addition, the CAP considered whether the scope of quality assurance review programs should be expanded beyond audits of listed entities, consistent with developments noted through the Compliance Program.

Additional information will be available at www.ifac.org/ComplianceProgram as the project continues to develop.

SMO Revisions Project Undertaken by the CAP

Month Conference Organizer Location

AUGUST AAA Annual Meeting AAA Denver, CO, USA

XXIX Inter-American Conference on Accountancy: Accountants without Borders, Unifying the Profession

IAA and PRSCPA San Juan, Puerto Rico

SEPTEMBER 2011 CAPA Conference CAPA Brisbane, Australia

OCTOBER 30th Anniversary Conference FIDEF Paris, France

CIMA World Conference CIMA Cape Town, South Africa

FSR Conference FSR Copenhagen, Denmark

The 12th Annual Auditing Conference PNCSA Jachranka, Poland

The Sixth EARNet Symposium EARNet, hosted by Norweigan School of Economics

Bergen, Norway

NOVEMBER 1st Africa Congress of Accountants: Accountancy & Infrastructure in Africa

ACOA, hosted by ICPAK Nairobi, Kenya