Changes to Accounting Principles Would Not Increase Attractiveness of Long-term Financing, Panel Says

A panel formed by the six largest international accounting networks concludes that – for the most part – changes to accounting principles would not increase the attractiveness of long-term infrastructure investments.

However, the panel supports the IASB's ongoing work to improve financial reporting.

The recommendation was made in light of the importance of infrastructure and other long-term investment for the global economy.

The panel was created upon the recommendation of the B20, a forum through which the private sector produces policy recommendations for the annual meeting of the Group of 20 (G20) leaders.

The panel found that information about key inputs for investment decisions is often not captured in a cohesive, balanced and structured way by the existing corporate reporting model.

Therefore, the panel recommends corporate reporting innovations and initiatives that provide investors with a longer-term and broader perspective on shareholder value creation.

These should complement the historical financial performance and current financial position perspective provided by financial statements should be encouraged. The relevance of integrated reporting was also noted.

The panel also investigated suggestions that the use of fair value accounting principles has led to short-termism in investor behaviour.

However, the panel found that when making investing decisions, investors tend to place the emphasis on the underlying features and risks of investment opportunities.

Therefore, the panel concludes that changes to accounting principles would not increase the attractiveness of long-term infrastructure investments.

However, the panel supports the IASBs efforts to improve financial reporting and recommends that the IASB should continue working with priority on the issuance of a global standard on insurance contracts in the near future.

The panel urges the IASB to give further consideration to performance reporting as part of the Conceptual Framework and disclosure initiative projects.

Regulators are also advised to evaluate whether risk charges or calculations are appropriately aligned with the risk patterns of investments in infrastructure projects desired in their respective jurisdictions.

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