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Contable Propuesta del FASB simplificaría la prueba de deterioro de la plusvalía
¿Cómo prepararse para las nuevas normas de contabilidad de ingresos?
Las compañías mejoran la presentación de informes XBRL mediante nuevas reglas
¿Qué esperan los analistas de los informes financieros?
Una propuesta del Consejo de Normas de Contabilidad Financiera de los Estados Unidos (FASB, por sus siglas en inglés) simplificaría la contabilidad del deterioro de la plusvalía.
Los cambios en las normas contables afectan de manera insidiosa a las compañías más allá de sus departamentos de contabilidad. La nueva norma de reconocimiento de ingresos es apenas el último ejemplo [...]
El Comité de Calidad de la Información de Estados Unidos para XBRL ha publicado un análisis que refleja grandes avances en la calidad de las declaraciones en formato XBRL por parte de las compañías que siguen un nuevo conjunto de reglas de validación. La Comisión de Valores de EE.UU. (SEC por sus siglas en inglés) empezó a establecer requisitos por etapas para que las compañías utilicen XBRL [...]
Las revelaciones realizadas por las compañías públicas deberían contener información más detallada sobre el valor de las marcas y los activos intangibles, de acuerdo con los analistas de valores.
Bajo la Actualización de Normas de Contabilidad (ASU, por sus siglas en inglés) propuesta, Intangibles, Plusvalía y Otros (Tema 350): Simplificar la Contabilidad del Deterioro de la Plusvalía, se eliminaría el Paso 2 de la prueba de deterioro de la plusvalía actual [...] FASB propone más aclaraciones a la norma de ingresos El Consejo de Normas de Contabilidad Financiera de los Estados Unidos (FASB, por sus siglas en inglés) propuso otra ronda de correcciones y cambios técnicos a su nueva norma de reconocimiento de ingresos, la cual incluiría aclaraciones a las directrices sobre costos de contratos y sobre costos de preproducción relacionados con acuerdos de suministro de largo plazo [...]
Advertencia sobre las nuevas normas contables Las firmas de asesoría están advirtiendo a los grupos de propiedades y a otras compañías partícipes en contratos de arrendamiento que deben adquirir un conocimiento profundo de las nuevas normas contables que entrarán en vigor en el 2019, con el fin de manejar los efectos que tendrán en las empresas [...] Reduciendo la brecha - contadores y políticos Si bien la profesión contable a menudo solicita a los gobiernos de todo el mundo adoptar la contabilidad de devengo y administrar más rigurosamente las finanzas públicas, debemos recordar que los contadores y los políticos concuerdan en lo que se refiere a una visión sobre servicios públicos asequibles que apoyen el crecimiento económico [...]
El AcSB demanda mayor comparabilidad de la información financiera global El Consejo Canadiense de Normas de Contabilidad (AcSB, por sus siglas en inglés), junto con muchas empresas canadienses públicamente responsables, han notado los beneficios de proporcionar información financiera que se pueda comparar con compañías de otras jurisdicciones que también han adoptado las NIIF. De hecho, el costo del capital ha disminuido a partir de la adopción de las NIIF en Canadá [...]
El 49 % de los encuestados por Brand Finance aseguraron que las compañías públicas de su sector actualmente no proporcionan información adecuada para los inversionistas sobre el valor de sus activos intangibles, y el 48 % afirmó que las compañías [...] El mundo del mañana: repensar el rol del contador En un entorno de negocios en evolución, que trae una variedad de nuevos desafíos, una iniciativa importante de la ACCA señala las siete cualidades clave que necesitan los contadores profesionales. El mundo está cambiando, y más rápido que nunca. Las innovaciones en tecnología, la globalización continua y la evolución de los modelos de gobierno están moldeando las expectativas.
Auditoría Riesgos estratégicos - no existe explicación clara para la auditoría interna Auditoría interna, prepárense algunos mensajes confusos.
para
Un nuevo informe del Instituto de Auditores Internos (IIA, por sus siglas en inglés) indica que, aunque la gerencia y la junta directiva de una organización desean que los auditores internos se enfoquen más en los riesgos estratégicos, estos riesgos no están claramente definidos. “Los auditores internos deben esforzarse en entender el significado de riesgo estratégico para las partes interesadas y en demostrarles por qué la auditoría interna [...]
Ya está disponible la traducción al español de las normas nuevas y revisadas del IAASB sobre estados financieros auditados Las normas nuevas y revisadas sobre estados financieros auditados del Consejo de Normas Internacionales de Auditoría y Aseguramiento (IAASB, por sus siglas en inglés), Informes sobre estados financieros auditados - Normas nuevas y revisadas y modificaciones de concordancia, diseñadas con el fin de mejorar los informes de los auditores para inversionistas y demás usuarios de los estados financieros, han sido publicadas en español. Esto incluye la Norma Internacional de Auditoría [...]
FRC modifica las NIA para reflejar las reglas de la directiva sobre auditoría de la UE Con miras al cumplimiento de los Reglamentos y la Directiva sobre Auditoría (ARD, por sus siglas en inglés) —que entrarán en vigencia en el Reino Unido, pendiente de la promulgación final de la legislación— el Consejo de Información Financiera del Reino Unido (FRC, por sus siglas en inglés) ha actualizado 23 de las 35 NIA existentes, y solo 12 permanecieron iguales. Aunque las normas han sido publicadas en formato “borrador”, se entiende que esta es una cuestión de debido proceso y que la redacción actual es definitiva [...]
Auditar a los auditores: Estados Unidos reformula el enfoque El regulador gubernamental de auditoría de los Estados Unidos está reformulando la manera en que audita a los auditores. El Consejo de Supervisión Contable de Compañías Públicas (PCAOB, por sus siglas en inglés), que inspecciona anualmente a las firmas de auditoría más grandes, está explorando un cambio hacia una mayor concentración en la evaluación de los esfuerzos de control de calidad de las firmas, en vez de buscar sus fallas en las auditorías individuales a compañías — como lo hace actualmente—, de acuerdo con un miembro del PCAOB [...]
RSE Adquisiciones y responsabilidad social empresarial: una pareja perfecta
3 maneras de construir programas de responsabilidad social empresarial
Las compañías que se comprometen realmente con la responsabilidad social empresarial (RSE) a través de programas enfocados, significativos, constantes en el tiempo y que crean una marca disfrutan las recompensas financieras que conlleva el trabajo duro. Hoy en día, es común aceptar toda la responsabilidad de los productos que se venden, tanto en términos de producción [...]
Los programas de Responsabilidad Social Empresarial (RSE) sostenibles y de alto impacto se basan en la misión y los valores de la compañía y están diseñados para obtener resultados significativos y mensurables. Un programa de RSE atractivo puede mejorar la marca y la reputación, además de resonar entre los clientes [...]
La responsabilidad social empresarial presenta un problema de imagen, pero no es necesario eliminarla
El gasto en RSE debería ser un porcentaje de los ingresos, no de las ganancias
Se sabe que la responsabilidad social empresarial tiene un enorme problema de imagen cuando uno de los primeros ejecutivos en promoverla está pidiendo su “desaparición definitiva”.
Todas las organizaciones tienen la obligación de devolver algo a la sociedad, afirma P.R. Ramesh, presidente de auditorías, asesoría financiera y gestión del riesgo de Deloitte India. Por ende, el gasto en Responsabilidad Social Empresarial (RSE) debería ser un porcentaje de los ingresos y no simplemente de las ganancias, asegura [...]
En la Cumbre de Negocios de The Australian Financial Review, Andre Eikmeier, cofundador de la comercializadora en línea de vino Vinomofo, adoptó una postura similar al afirmar que la responsabilidad social empresarial promovía “estrategias de negocios secundarias” […]
Ética La ética limitarse
corporativa no puede al cumplimiento
En las compañías de todo el mundo están creciendo los niveles de mecanismos de cumplimiento. A primera vista parece tener sentido: tal vez el método directo más evidente para evitar comportamientos poco éticos o perjudiciales es aumentar la cantidad de reglas diseñadas para evadirlos. Sin embargo, una de las consecuencias más perturbadoras e indeseadas de un enfoque único en la ética por cumplimiento [...]
¿La ética de la compañía realmente influye en las decisiones de compra? Están de su lado Para algunas corporaciones, la ética se ha convertido en un gran negocio. Las compañías se han enfocado en más que sus resultados financieros; han convertido la ética en el pilar fundamental de sus negocios o buscan enfrentar asuntos sociales y ambientales. Con esto, muchas empresas buscan influir a su favor en las decisiones de compra de los clientes [...]
La próxima década de la ética corporativa La compañía del futuro está definida por una cosa: la transparencia radical. Con el fin de alcanzar una cultura abierta y transparente, la decisión más importante que pueden tomar hoy las empresas estadounidenses es a quién contratar, despedir, promover y recompensar. Las elecciones sobre el capital humano tomadas en el 2016 tendrán un impacto directo en el número de compañías que continuarán existiendo dentro de 10, 20 y hasta 50 años. [...]
5 principios de ética de alta calidad y programas de cumplimiento Las áreas de ética y cumplimiento sólidas son diseñadas e implementadas como parte de la cultura de una organización. Las prácticas de ética y cumplimiento no son llevadas a cabo por un solo departamento o división. Están integradas a la estrategia de la compañía, no se aplican caso por caso [...]
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FASB proposal would simplify goodwill impairment test A proposal issued by the Financial Accounting Standards Board (FASB) 12 would simplify accounting for goodwill impairment.
or any interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.
Under the proposed Accounting Standards Update (ASU), Intangibles Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment, Step 2 would be eliminated from the current goodwill impairment test, which “should reduce the cost and complexity of evaluating goodwill for impairment”, according to the FASB.
“An entity generally would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value”, the proposed ASU states. “However, that amount should not exceed the carrying amount of goodwill allocated to that reporting unit. An entity would still have the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary”.
An entity currently uses Step 2 to calculate the implied fair value of goodwill and compare it with the carrying amount of that goodwill. “In computing the implied fair value of goodwill under Step 2, an entity must perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in a purchase price allocation for an acquired business”, the proposed ASU states. Under the proposed amendments, an entity would perform its annual
In addition, the proposal would remove the requirement that any reporting unit with a zero or negative carrying amount perform a qualitative assessment and, if it fails that qualitative test, perform Step 2 of the goodwill impairment test. “Therefore, the same impairment assessment would apply to all reporting units with zero or negative carrying amounts and the amount of goodwill allocated to those reporting units”, the proposed ASU states. How would these proposed changes simplify financial reporting? Because they
Contable FASB proposal would simplify goodwill impairment test would eliminate the need to determine the fair value of individual assets and liabilities of a reporting unit to measure the goodwill impairment, according to a PwC In Brief on the potential rule changes. “The amount of impairment recognized under the proposal could be larger or smaller than today, largely depending on the difference between the carrying value and fair value of certain long-lived
assets”, the In Brief states. “For example, an entity with significant unrecognized intangible assets or significantly appreciated assets may recognize smaller impairment, whereas an entity with significant property, plant, and equipment with carrying amounts in excess of fair value may recognize larger impairment than today. Additionally, while some companies may recognize no impairment today, even when they fail Step 1, under
the proposal, those companies would have to recognize some impairment amount”. Comments on the proposal should be submitted to the FASB by July 11. Instructions on how to submit comments can be found in the exposure draft. The current proposal is the first phase of a broader project. In the second phase, the FASB plans to work with the International
Accounting Standards Board to consider whether additional changes to the subsequent accounting for goodwill should be made. Source: Accounting Web – By Jason Bramwell
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FASB proposes more clarifications to revenue standard The US Financial Accounting Standards Board (FASB) proposed another round of technical corrections and changes to its new revenue recognition standard that would include clarifications to guidance on contract costs, and on preproduction costs related to long-term supply arrangements. In May 2014, FASB and the International Accounting Standards Board (IASB) issued a converged revenue recognition standard. Through the boards’ joint Transition Resource Group, financial statement preparers presented issues that the boards decided to clarify. The boards agreed on some clarifications and disagreed on others. The IASB issued its changes in Clarifications to IFRS 15 last month. FASB has issued accounting standards updates addressing narrow-scope improvements and practical expedients, licensing and identifying performance obligations, and principal versus agent considerations. FASB proposed more changes in Proposed Accounting Standards Update, Technical Corrections and Improvements to Update No. 2014-09, Revenue From Contracts With Customers (Topic 606).
The changes proposed would Clarify which contracts are in the scope of existing guidance in FASB Accounting Standards Codification Subtopic 34010, Other Assets and Deferred Costs Overall, and which are in the scope of the new guidance in Subtopic 340-40, Other Assets and Deferred Costs Contracts With Customers. Clarify that when performing impairment testing for contract costs capitalised in accordance with the recognition provisions of Subtopic 340-40, an entity should consider expected contract renewals and extensions and should include both the amount of consideration it already has received but has not recognised as revenue and the amount the entity expects to receive in the future. Clarify that impairment testing first should be performed on assets outside the scope of Topic 340, Other Assets and Deferred Costs (such as Topic 330, Inventory), then assets within the scope of Topic 340, then asset groups and reporting units within the scope of Topic 360, Property, Plant, and Equipment, and Topic 350, Intangibles Goodwill and Other. Require that provisions for losses on construction and production-type contracts
would expand the information disclosed when an entity applies one of the practical expedients. Change Example 7 in the standard to remove what some have perceived as minor inconsistencies with the contract modifications guidance in Topic 606.
be determined at least at the contract level. The proposal would allow an entity to determine the provision for losses at the performance obligation level as an accounting policy election. Remove the term “insurance” from a scope exception to Topic 606 that exists for insurance contracts within the scope of Topic 944, Financial Services Insurance. The proposed amendment would clarify that all contracts within the scope of Topic 944 are excluded from the scope of Topic 606. Provide practical expedients to the disclosure requirement for remaining performance obligations for specific situations in which an entity need not estimate variable consideration to recognise revenue. The proposed amendments also
Create a new Subtopic 924-15, Entertainment Casinos Derivatives and Hedging, which would include a scope exception from derivatives guidance for fixed-odds wagering contracts. The proposed amendments also would include a scope exception within Topic 815, Derivatives and Hedging, for fixedodds wagering contracts issued by casino entities. Align the cost-capitalisation guidance for advisers to both public funds and private funds in Topic 946, Financial Services Investment Companies. The proposed changes would take effect at the same time as the new revenue recognition standard. Comments will be accepted through July 2nd and can be made at FASB’s website. Source: CGMA (Chartered Global Management Accountant) By Ken Tysiac
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How to prepare for new accounting rules on revenue Accounting rules changes have an insidious way of affecting companies far beyond their accounting departments. The new standard for revenue recognition is just the latest example. That’s why company leaders would be wise to start planning now for the new standard that becomes effective for years beginning after Dec. 15, 2017 for public companies and Dec. 15, 2018 for private companies (calendar year 2018 for public companies and calendar year 2019 for private companies). The new standard from the Financial Accounting Standards Board (FASB) is a consolidation of all industry guidance on revenue recognition. The standard deals with revenue from contracts with customers — in short, how, when and how much revenue should be recorded as revenue. If that sounds like accounting mumbo jumbo, consider a few areas where this change could affect your company: Human resources — If you have employees who receive bonuses based on company revenues or other financial metrics, their bonuses could be impacted. Sales
—
If
you
come
up
with
new
contract terms for your customers, accounting for revenues could be affected. Information technology — How and when your systems record revenue might need updating. Investors — If your company is publicly traded, shareholders will need to be informed about how the changes will affect the company’s financials. Starting to grasp the ripple effect? Companies should get started soon evaluating all of their revenue sources and contracts. They should start assessing the impact to their budgets. And they should begin to identify how the new standards will impact their organizations. By project managing the various ways the changes will affect your business, you’ll be better prepared to implement the new standards when the deadline approaches. Yes, your chief financial officer or outside accounting lead should be on the project management team. But so should all of the administrative and operational departments of the company. Starting this project now will make the transition smoother than if you delay. Source: The Business Journals – By Denise Bendele
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Warning over new accounting rules Advisory firms are warning property groups and other companies that are party to lease agreements to gain a thorough understanding of new accounting rules that become effective in 2019, in order to cope with their effects on businesses. The rule-set, which is called International Financial Reporting Standard (IFRS) 16 Leases, will change how, when, and at which magnitude expenses are recognised. In terms of the new rule, the majority of leases will now have to be accounted for in companies’ balance sheets and expensed via a reducing balance method. “At the simplest level, the accounting treatment of leases by lessees will change fundamentally. IFRS 16 eliminates the current dual accounting model for lessees, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. Instead, there is a single, on-balance sheet accounting model”, KPMG SA Services’ department of professional practice, Heather de Jongh says. IFRS refers to the set of regularly updated accounting standards developed by the International Accounting Standards Board (IASB).
The IASB unveiled IFRS 16 this year, with a goal of making balance sheets more transparent. It requires companies to bring most leases on-balance sheet, thereby recognising new assets and liabilities. Previously, leases were classified as either finance leases or operating leases. A finance lease is a way of providing finance and, effectively, a lessor buys the asset for the lessee and rents it to them for an agreed period. The lease also transfers all of the risks and rewards of ownership of the asset to the lessee. These leases were expensed on a decreasing balance basis, so expenses were higher early in the life of the lease. In contrast to a finance lease, an operating lease does not transfer substantially all of the risks and rewards of ownership to the lessee. It would generally run for less than the full economic life of the asset, and the lessor would expect the asset to have a resale value at the end of the lease period, known as the residual value. Operating leases have not been on company balance sheets for years, but now they will be. They will then be amortised and expensed not on a straightline basis, but rather on a decreasing balance basis, meaning the size of the expense incurred each month will vary.
Contable Warning over new accounting rules All companies that lease major assets for use in their business will see an increase in reported assets and liabilities as a result of IFRS 16.
lessees to change existing or new leases to avoid the adverse consequences of the new standards and will have to be more innovative in their lease design.
This will affect a wide variety of sectors, from airlines that lease aircraft to retailers that lease stores, says the IASB.
“Although not directly affecting the accounting principles applied by lessors, the standard could modify the business principles adopted by theses entities. The implementation will also lie in the hands of the sales staff, rather than the accounting staff of organisations”, she says.
“The larger the lease portfolio, the greater the impact on key reporting metrics”, it said in a report. The new leases standard will have more significant business effects for lessees than it will for lessors, according to De Jongh. Under the new standard, the crux will lie in the amount of each lease payment that a lessee must account for. Lessors may get significant pressure from
Gary Berchowitz, a partner at advisory firm PwC, says the new standard has been more than 10 years in the making, and while it makes real changes to accounting for leases and some people are not wholly
in favour it, it is an expected change. He says putting leases on balance sheets will enable analysts to see a company’s own assessment of its lease liabilities, calculated using a prescribed methodology that all companies reporting under IFRS will be required to follow. Bringing operating leases onbalance sheet also changes the profit or loss account of lessees. This would based on profit remuneration in
affect metrics figures, such as certain cases.
Currently, operating lease expenses are
charged to the profit or loss account on a straight-line basis over the life of a lease. “From 2019, leases will be accounted for as if the firm had borrowed funds to purchase an interest in the leased asset. This typically results in a higher interest expense in the early years than in the later years, similar to any amortising debt. In turn, this means that total lease expense in the profit and loss account will be higher in the early years of a lease, even if a lease has fixed regular cash rental payments”, De Jongh says. Source: Business Day BDlive – By Alistair Anderson
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Bridging the divide—accountants and politicians While the accountancy profession regularly calls upon governments around the world to adopt accrual accounting and stronger public financial management, we must remember that accountants are on the same page as politicians in terms of having a vision for affordable public services that support economic growth and tackle poverty. In every country and corner of the world, today’s and future generations deserve effective education, public health programs, and living conditions that require the effective prioritization and management of resources. I strongly believe that the accountancy profession across the public and not-forprofit sectors is at the heart of making lives better. And the rewards of feeling you have made a difference vastly outweigh the extra complexities of delivering political mandates that must be assessed for social impact as much as fiscal rate of return. The Chartered Institute of Public Finance and Accountancy’s (CIPFA) Financial Management Model has for many years set out a maturity model where we first ensure strong stewardship and good governance, secondly improve performance, and thirdly develop enhanced cross-cutting and soft skills that underpin transformation. We are all on this journey, and with governments generally representing 25 % - 75 % of GDP, the stakes
are high. As demonstrated by CIPFA’s Whole Systems Approach many including financial managers, auditors, regulators, standard setters, and decision makers have a vital role to play, and no single player on its own can ensure strong public financial management. We have to build systems with the right roles and competencies. Public expectations, of course, about the quality of public services are growing, and long lasting improvements are often being sought in accountability and transparency of the spending of public funds. Because of the scale, size, and complexity of the public sector, it can be hard for politicians to know where to begin, even though we often look to them to initiate reform. Although the sovereign debt crisis and its aftermath provided a wake-up call, financial reform still isn’t seen as a priority by some governments, where reporting is patchy and can lead to a lack of public trust and confidence from citizens and the business sector. At its worst, where systemic fraud and corruption goes unchecked, governments have difficulty attracting inward investment from the capital markets and donors. But while the accountancy profession has a
pivotal role to play in promoting and delivering strong public financial management in the public interest, we must get better at explaining how this benefits society. If we simply make it sound like a better process it will not win hearts and minds. Nor will we succeed if we simply lecture politicians or suggest that all the answers can be imported from elsewhere. We must respect local differences as well as build strong local institutions and solutions.
Most of all, the profession can at times slip into the mistake of assuming that public services and governments are second best to the corporate sector and simply need to adopt its approaches. Elected politicians can easily interpret this as self-serving and it’s not the right formula to gain influence. What most sets political hearts fluttering is not better process but effective policy making.
Contable Bridging the divide—accountants and politicians Policy decisions supported by robust financial information and analysis are more likely to succeed. The “golden thread” that links policy with resource deployment and public service outcomes is the most effective means to bring politicians on board because it is meeting their needs for the short, medium, and long-term. A good government finance profession really can add value. The Whole Systems Approach also sets out that the financial literacy of parliamentarians is vital to facilitate the effective scrutiny of financial statements and programs.
Legislatures often need to do more for example, introduce development for new members to ensure oversight and challenge. If decisions become harder to agree on and are challenged and changed along the way by insights from citizens and politicians (both ministerial and scrutiny roles), then usually it means better decisions are made. Finally, good public finances rely on effective tax systems. Competent tax authorities rely on a range of taxes to avoid the risks of over-reliance on any one source of revenue. Resilience is an important facet of an effective
Whole Systems Approach. I hope that a positive outcome of the Panama Papers scandal is that the accountancy profession is seen as stepping forward with constructive solutions. Politicians need our advice to curb offshore tax avoidance schemes and profit shifting tactics that, if left unchecked, will cause increasing public outrage as well as undermine public finance resilience. As a trainee, in what feels a lifetime ago, it was made clear to me that accountants in public service are never just there to make the numbers fit the policy aspiration. Speaking
truth to power and never being afraid to do the right thing is as vital a part of our training scheme as it has always been. But, we need new skills too not least data analytics, cyber, and value for money and personally I am as passionate about developing these new skills into the profession as I am the traditional ones. A collaborative process, where we share skills and approaches, is for me the best way forward. Source: IFAC Global Knowledge Gateway – By Rob Whiteman
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Companies improve XBRL filings by following new rules The XBRL US Data Quality Committee has released an analysis showing big improvements in the quality of filings in Extensible Business Reporting Language format by companies that follow a new set of validation rules.
2016 compared to the first quarter of 2015. The error count for accelerated filers (that is, large companies with equity securities valued at more than $5 billion) declined by 70 percent, while the error count for smaller reporting companies declined by 60 percent.
The SEC began phasing in requirements for companies to use XBRL, a data-tagging technology, for their financial filings in 2009, as a way to help investors and financial analysts compare financials across companies and industries. However, the quality of the filings has long been a problem, making it difficult for analysts to use the technology. Still, the SEC has been able to make some use of XBRL to look for outlying data that could be a sign of accounting problems. XBRL US, an industry consortium that helps develop XBRL technology, has a Data Quality Committee that has been producing documents to provide guidance and validation rules to be used for improving the quality of SEC filings.
The Data Quality Committee’s validation rules—which enabled validation of more than 1.9 million data points in the first quarter of 2016—are designed to help public companies detect inconsistencies or errors in their XBRL-formatted financial data. The rules identify potential errors (such as incorrect negative values, improper value relationships between elements and incorrect dates) that obstruct automated processing and analysis of the data. The DQC approved the rules in November 2015 after a 60-day public review, and they became effective Jan. 1, 2016.
A new analysis by the XBRL US Data Quality Committee shows that errors for filers who used its first set of validation rules reduced errors by 64 percent in the first quarter of
“The early success of the DQC’s validation rules in reducing errors is the first step in its mission to improve the usability of XBRL data”, said DQC chairman Mike Starr in a statement. “We expect that as more registrants use these rules, we will see a further decrease in the number of errors
Contable Companies improve XBRL filings by following new rules in the data covered by the DQC’s rules”.
processing and analysis of XBRL data”.
The DQC intends to publish a second release of guidance and validation rules for public comment next week. In addition, the DQC plans to issue for public comment a discussion document later in June that will be the first of a series on a proposed framework for element selection and extension use. “We’re pleased that we now have clear evidence that filers are actively embracing the new data quality rules. Greater consistency and quality in XBRL-formatted financials significantly improves investor access to financial data”, said Craig Lewis, a professor of finance at Vanderbilt University and a former SEC chief economist.
The rules are available for free and can be accessed on the XBRL US web site or through certain XBRL service providers. When the rules identify a potential error, they provide detailed information on the potential error with guidance on how to correct it. In addition, an explanation of each rule’s function is available on the XBRL US website in a downloadable PDF file. Software providers can have their implementation of the rules approved by the XBRL US Center for Data Quality. To view results of the analysis, visit https://xbrl.us/data-quality/ dqc-results/. To access the rules, go to https://xbrl.us/data-quality/rules-guidance.
“Compliance with the proposed framework would improve the element-selection process, constrain the use of extensions and eliminate unnecessary extensions”, said Starr. “The use of unnecessary extensions has been one of the major reasons that data aggregators and investors have not moved from manual to automated
The XBRL US Center for Data Quality provides funding for the Data Quality Committee. Members of the Center include Altova, the American Institute of CPAs, Certent, DataTracks, DisclosureNet, Merrill Corporation, P3 Data Systems, Vintage, a division of PR Newswire, and Workiva. Source: Accounting Today – By Michael Cohn
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Accounting Standards Board (AcSB) calls for increased comparability in global financial reporting How are we going to reduce the differences?
We are looking to the oversight bodies to encourage their respective standardsetters around the world to guide their jurisdictions toward globally comparable financial reporting outcomes. This approach would mean focusing on narrowing differences between frameworks. And, by working closely together, more jurisdictions just may end up using one global set of standards. IFRS Foundation’s “trustees” review of structure and effectiveness”
The AcSB, along with many publiclyaccountable enterprises in Canada, has seen the benefits from providing more comparable financial information with companies in other jurisdictions who have also adopted IFRS. In fact, the cost of raising capital is lower as a result of Canada’s adoption of IFRS, given that investors can readily compare Canadian entities to those from other jurisdictions. What about the countries who don’t use IFRS? There are several significant jurisdictions
still out there who have not adopted IFRS. So how are we going to see any comparability between financial reporting globally if we’re not using the same accounting framework? We think that standard-setters around the world can work to reduce differences between frameworks. This is the key to enhancing comparability of financial reporting outcomes in the global marketplace. And we mean this regardless of which accounting framework is used whether it’s IFRS, U.S. GAAP or another framework.
Our views on narrowing differences in accounting frameworks worldwide are outlined in our response to a Request for Views issued in November 2015 by the IFRS Foundation in “Trustees’ Review of Structure and Effectiveness”. The Trustees are responsible for the governance and oversight of the International Accounting Standards Board (IASB). The trustees review the structure and effectiveness of the organization every five years in order to enhance the governance, accountability and operational efficiency of the IFRS Foundation and IASB. In our response, we get down to brass
tacks. While we are happy and encouraged to see ongoing increases in the number of jurisdictions applying IFRS, more than 50 per cent of the world’s capital markets have either not yet adopted IFRS or don’t require an unreserved statement of compliance with IFRS and it appears that full adoption is not imminent. Intermediate goal We think there’s a way to get to a common reporting outcome by taking an intermediate step working toward getting comparable results despite the framework used. “(We) encourage the Foundation to consider that the path to achieving its primary strategic goal of developing ‘a single set of high quality, understandable, enforceable and globally accepted financial reporting standards’ is through participating in the development of accounting standards that produce comparable results in global capital markets, regardless of the framework…”. Source: CPA (Chartered Professional Accountants) Canada – By Linda Mezon
Contable
What analysts want from financial reports? The disclosures made by public companies should contain more detailed information about the value of brands and intangible assets, according to equity analysts.
provision on this subject adequate), channel and distribution strategy (48 %), and new product development activity (46 %).
Forty-nine per cent of those polled by Brand Finance said that public companies in their sector do not currently provide adequate information for investors on the value of their intangible assets, and 48 % said companies did not provide sufficient information on the value of their brands.
If additional marketing information were to be provided, the analysts polled said that the most appropriate place for it is in analyst/investor presentations (38 %) or in the strategic review section of the annual report (29 %). Just 6 % said it should be presented in a separate marketing report.
The survey data suggest, however, that significant progress has been made in this area over the last 15 years. In the previous edition of the survey, conducted in 2001, 68 % of those polled were dissatisfied with the information on intangible assets, and 76 % said companies did not provide sufficient information on the value of their brands. The 2016 edition highlighted some aspects which analysts largely found to be satisfactory, such as the degree and quality of information provided by companies in areas such as future market trends (61 % of respondents deemed
Analysts were divided on the question of whether the disclosure of detailed marketing information would compromise an organisation’s competitive position. Nine per cent said it would harm competitiveness very seriously, 27 % quite seriously, 36 % somewhat, 24 % to a very limited extent, and 4 % not at all. The brand-related metrics deemed to be most useful in investment decisions include customer retention, market share (growth, volume, and value), customer satisfaction, sustainable price premium, perceived quality, and brand awareness.
Contable What analysts want from financial reports? Inclusion on the balance sheet Some aspects of the survey, conducted for the Global Intangible Financial Tracker 2016 report, were extended by The Chartered Institute of Management Accountants (CIMA) to include the views of CFOs. Seventy-nine per cent of analysts and 80 % of CFOs think that all acquired intangible assets should be separately included in the balance sheet. Sixty-eight per cent of analysts and 58 % of CFOs think all internally generated brands should be separately included in the balance sheet. Furthermore, 58 % of CFOs and 73 % of analysts think that
all intangibles should be revalued each year to better reflect fair value. However International Accounting Standard (IAS) 38, Intangible Assets, currently forbids such an inclusion, prompting the report’s authors to call for change in accounting standards relating to intangible assets. CFOs and analysts agreed that the valuation of intangible assets for inclusion in annual financial accounts should be conducted by an independent third party. Who should prepare intangible assets?
valuations
of
CFOs Analysts Independent third-party intangible asset
valuers 46 % 58 %
management, and lending decisions.
Intangible asset valuers working for the company’s auditors 19 % 29 %
The following percentages agree that brands are becoming more important in.
Staff and directors of the companies concerned 30 % 11 % Source: Brand Finance, CIMA.
CFOs Analysts
Brand’s influence on other areas of the business
Risk management 68 % 53 % Lending decisions 53 % 47 %
The sphere of influence of brand is growing – 53 % of CFOs, and the same proportion of analysts, view brand as being important in 2016 in traditionally unbranded sectors. It is also becoming an increasingly important factor in other areas of the business such as M&A, risk
Financial reporting 53% 38%
M&A activity 76 % 72 %
Source: CGMA (Chartered Institute of Management Accountants) – By Samantha White
Contable
Tomorrow’s world: rethinking the role of the accountant With an evolving business environment bringing a range of new challenges, a major ACCA initiative highlights the seven key qualities that professional accountants need. The world is changing – and faster than ever. Innovations in technology, ongoing globalisation and the evolution of governance models are moulding the expectations that employers, clients, regulators and other stakeholders have of professional accountants. Against this backdrop, ACCA has launched a major initiative looking at how the main drivers of change will shape the practice of accounting over the next decade and beyond. This is the culmination of two years of extensive global research, including workshops in 21 cities across 19 countries, interviews and a major survey of members of the C-suite, carried out by ACCA’s professional insights team. The results are shown in a new report, Professional accountants– the future, which draws together the findings and identifies seven key technical, interpersonal and broader qualities that
professional accountants will need to have in order to continue adding value to businesses, other organisations and economies in the years to come. ‘As the global business landscape evolves, so will the practice of accounting and what is expected and required of professional accountants’, says Faye Chua, head of futures research in ACCA’s professional insights team. ‘They need to be on the front foot, highly skilled in technical areas but with a vision and a strategic mindset – an ability to see the bigger picture’. Take seven Technical knowledge, skills and abilities and ethical competencies – the professional accountant’s technical and ethical quotient (TEQ) – will remain the core quality underpinning their success. It is technical expertise and the integrity with which it is applied that makes a professional accountant unique. This knowledge will encompass not only accounting, tax and other specialisms, but also knowledge about governance and risk.
Contable Tomorrow’s world: rethinking the role of the accountant Workshop participants had no doubts about the importance of ethical and governance strength for the future success of professional accounting. ‘Things change, people change, values change and a lot of external factors affect a person. But when it comes to ethics, the profession needs a gold standard’, said Wayne Soo FCCA, managing partner of accountancy practice Fiducia in Singapore. ‘If your corporate reporting has a strong ethical framework, everything else will fall into place by itself’. Similarly, a participant from South Africa said: ‘The world is changing and our profession is changing. Technical ability is important but so is character. Trust is going to be the commodity of the future’. Given the changing environment, however, technical knowledge and sound ethics will not be enough to add real value. Professional accountants of the future will instinctively need to complement their technical and ethical competencies (TEQ) and experience (their experience quotient, or XQ) with intelligence (IQ) and digital awareness (DQ). The awareness and application of new technologies on working practices and business expectations was a regular theme in ACCA’s workshop discussions.
‘By 2020 everything will be about technology’, said a survey participant from Ghana. ‘As finance professionals, we will need to have a broader range of IT skills’. In addition, professional accountants will need to demonstrate interpersonal behaviours, skills and qualities. ‘Accountants for the future need to develop more networking skills’, said a participant from Zambia. ‘We need to understand the global village in which we operate’. Similarly, a participant in Singapore commented: ‘People in financial management need to learn more about working in teams, collaborating, communicating, influencing, persuading, presenting and dealing with adversity. These are very important characteristics’. These types of skill and ability are reflected in ACCA’s model in the quotients for creativity (CQ), emotional intelligence (EQ) and vision (VQ). Professional accountants’ VQ, for example, represents their ability to predict future trends accurately by extrapolating from existing information and filling in any gaps through innovative thinking. ‘Finance people will more and more be
focused on the future’, said Marek Krejcí FCCA, finance director at Rautaruukki Oyj in the Czech Republic. ‘We need to be able to give reliable forecasts based on understanding the business, not statistics’. Similarly, a participant from the UK said: ‘Accountants need to be less focused on what happened last year or last month and more focused on the strategic position of the company, where it is now, where it wants to be in the future – and not just the end of the year’. Drivers for change ACCA also examined how the technical and interpersonal competencies expected of professional accountants could be affected in six technical areas: audit and assurance; corporate reporting; financial management; strategic planning and performance management; tax; and governance, risk and ethics. We will look at the expectations for each of these technical areas in a series of articles to be published in AB over the coming months. Survey participants were asked to select six factors (out of a list of 21) that might have the largest impact on the profession in the medium term (over three to 10
years) and the longer term (over 10 years). The findings (see box, right) indicate that developments in four broad areas are likely to have a significant impact on professional accountants in future. These areas are regulation and governance, technology, the expectations of multiple stakeholders, and globalisation. Changes in regulation and governance are particularly likely to have an impact over the longer term. When asked to look beyond 10 years, the largest percentage of respondents focused on changes in the direction for global governance and roles, and the influence of emerging global powers and regional and global institutions. While governance structures are likely to become more complex, so their scope will expand to include more non-financial reporting. Similarly, most professional accountants will be affected by a greater emphasis on tax transparency and increased government action on tax and information-sharing. New developments in information and digital technologies will also continue to change accountants’ roles and the way they work. In the medium term, a majority of survey respondents (55 %) identified the development of intelligent automated accounting systems as the factor likely to have most impact, while
Contable Tomorrow’s world: rethinking the role of the accountant 41 % highlighted the impact of cloud computing. Smart software and systems will replace manual bookkeeping and automate complex processes such as the financial close. Technology will support more realtime reporting and analysis, as well as a transition from retrospective to predictive analysis. The spread of social media will also have an impact, improving collaboration, disclosure, presentation and stakeholder engagement. Many respondents (42 %) identified the broadening measurement and expectations of business value and the demands of external stakeholders as likely to have a major impact on professional accountants in the medium term. Similarly, in the longer term, a majority highlighted the impact of changing social attitudes to the profession. Many participants believe that professional accountants will increasingly need to present a holistic view of organisational
performance, looking beyond pure numbers as well as providing forwardlooking analysis. The fourth core driver of change – globalisation – takes many forms. It is foreseen in the continuing harmonisation of accounting and business standards (an important medium-term factor, selected by 42 % of survey participants) and in the increasing global mobility of professional accountants, who will require the necessary interpersonal skills to work successfully with people from different countries and cultures. Individuals will increasingly need to understand developments in global tax and governance systems as well as alternative forms of finance, such as Islamic finance. ‘Lead the change’ The culmination of all this analysis is the clear understanding that, in order to add value to employers and clients,
professional accountants of the future will need an optimal and changing combination of professional competencies: a collection of technical knowledge, skills and abilities, combined with interpersonal behaviours and qualities. Central to this are the seven key qualities identified. Together, these amount to a personal ‘Professional Quotient’ (PQ), tailored as appropriate to an individual’s particular role and stage of career. For any individual, developing the range of quotients that will be expected of the professional accountants of the future may appear challenging. ACCA believes, however, that an individual’s performance level across all these quotients can be improved through appropriate teaching, training and development. The ultimate vision for those who are able to develop the future skills and qualities most valued among professional accountants is an exciting one. ‘As businesses look to exploit new
opportunities, respond to new markets and adjust to the changing dynamics of a global economy, the strategic planning role of finance executives will become more important’, said a participant from Kenya. If so, the historical backroom image really will have become a relic of the past. Accountants can be agents of change in the evolving future. In the words of Roman Fink FCCA, CFO of CSOB Penzijní společnost in the Czech Republic, ‘Accountants should not sit and wait. They should lead the change’. Source: Accounting and Business magazine – By Sarah Perrin
Auditoría
Strategic risks not clearly spelled out for internal audit Internal audit, get ready for some mixed messages. A new report from the Institute of Internal Auditors (IIA) indicates that while an organization’s management and board members want internal auditors to focus more on strategic risks, those risks aren’t clearly defined. “Internal auditors have some work to do to understand what strategic risk means to stakeholders and to demonstrate to stakeholders why internal audit engagement in nontraditional areas could deliver great value to the organization”, the report states. The report, Relationships and Risk: Insights from Stakeholders in North America, is based on a survey of 1,124 respondents and more than 100 interviews. For stakeholders, the basic focus of internal audit is assurance, the report states. They assume assurance is done well, but advisory services also are valued. Those should include identification of known or emerging risks, monitoring risk management, and identifying the right way to contain the risk. So, it’s no surprise that respondents
said internal audit could add the most value beyond assurance through risk management. And that’s where we get into strategic risks. As one unnamed CEO who was interviewed for the report says, “We need to better define how we link internal audit objectives to the achievement of strategic objectives”. Two areas of strategic risk that internal audit could be involved in drew tepid interest from respondents: 27 percent said internal audit should offer advice on new products or projects, and 44 percent think internal audit should be consulted about new technology. In case you missed it, not everyone is on the same page or speaking with one voice, as the report puts it. Management might have one viewpoint, while the audit committee or board has another. That means the chief audit executive’s (CAE) professionalism is key. “Business maturity is important. The CAE must be strong, realizing there are competing interests between the audit committee/board and management”, according to an unidentified audit committee chair that the report quotes.
CAEs soon will face the quandary of deciding what can and can’t be done, and reconciling that decision with stakeholders, the report states. How to do that? Here’s how respondents rated various tactics for CAEs to resolve their conflict: • The majority (77 percent) said CAEs must build strong relationships with management and, it should go without saying, let their people skills shine. • Reporting into the C-suite alone isn’t going to resolve the conflict, and only about
half (51 percent) of respondents indicated that as a tactic for setting priorities. • Slightly less than half (49 percent) chose regular attendance at board or board committee meetings. • Getting involved in enterprise risk management drew 48 percent of respondents’ support. • Reporting directly to the audit committee got a thumbs-up from 44 percent. Source: Accounting Web
Auditoría
Spanish Translation of IAASB’s New and Revised Auditor Reporting Standards - Now Available The International Auditing and Assurance Standards Board (IAASB)’s new and revised auditor reporting standards, Reporting on Audited Financial Statements – New and Revised Auditor Reporting Standards and Related Conforming Amendments, designed to enhance auditor’s reports for investors and other users of financial statements have been published in Spanish. This includes the International Standard on Auditing (ISA) 701, Communicating Key Audit Matters in the Independent Auditor’s Report, and changes to other ISAs related to auditor reporting, as well as to those addressing the auditor’s responsibilities in relation to going concern and communication with those charged with governance.
translation, which is a result of the IberoAmerican cooperation framework, known as the IberAm project. Established in 2012, the IberAm project—which includes IFAC and member organizations in Argentina, Mexico, and Spain—is an IFAC-authorized translation and review process that strives to achieve longer-term, sustainable processes for single, high-quality Spanish translations of international standards and other IFAC publications. The Interamerican Accounting Association, IFAC’s regional organization for Latin America and the Caribbean, is an observer to the project. The project also involves a Review Committee of technical experts representing IFAC member organizations in nine Spanish-speaking countries.
The Instituto de Censores Jurados de Cuentas de España performed this Spanish
Source: IFAC Global Knowledge Gateway
Auditoría
FRC revises ISAs to reflect EU audit directive rules As a result of compliance with the new Audit Regulations and Directive (ARD) due to come into force on 17 June 2016 in the UK, pending final enactment of legislation, the FRC has updated 23 of the existing 35 ISAs, with only 12 remaining unchanged. Although the standards have been released in ‘draft’ form, it is understood that this is a due process issue and the current wording is final. The reason for ‘draft’ labelling is due to the time lag in legislative and regulatory processes being completed. The FRC will require a single effective date to apply, and that will be 17 June 2016 (or the date thereafter that the UK implementing regulations are effective, pending legislation). As the effective date for revised ISAs (UK and Ireland) is later than that used by the International Auditing and Assurance Standards Board (IAASB), the FRC said it plans ‘to permit early adoption of those ISAs amended by the IAASB following the Reporting, Other Information and Disclosures projects,
in order to facilitate global audit firms in the update of their materials’. Catherine Horton, audit policy adviser at the FRC said: ‘The revised ISAs should be seen as a whole package and the guidance has improved around the audit function. This is a package of measures relating to the audit directive’. In general, the standards have been revised to simplify the language and the application material has been expanded to clarify the inter-relationship between the ISA requirements and the requirements of the directive. ISA 700 In ISA 700, Independent Auditor’s Report on Financial Statements (Revised June 2016), the FRC has simplified the text of the standard, but said that there remains ‘ambiguity over the regulation requirement for the auditor to “explain to what extent the audit was considered capable of detecting irregularities, including fraud”, and whether this requirement should be applied
Auditoría FRC revises ISAs to reflect EU audit directive rules in an entity specific way, or generically’. The FRC text copies out the ARD language and the FRC continues to work with other European regulators to monitor how this requirement is applied The FRC’s position is to avoid, wherever possible, boiler-plate reporting unless required to comply with law or regulation. In the feedback statement, FRC stated: ‘Where respondents identified language they considered to be confusing, we have sought to clarify through drafting changes (for instance, by removing references to statutory audits derived from the Directive), and in the case of ISA 701 (Communicating Key Audit Matters in the Independent Auditor’s Report), by moving the key audit matters definition
contained in a UK plus, to application material. In doing so the FRC hopes to encourage auditors to continue to develop relevant and insightful auditor reports’. ISA 570 / ISA 700
material (paragraph A34-1) in ISA 210 Agreeing the Terms of Audit Engagements (Revised) in the finalised standard, and will withdraw Bulletin 2008/4 The Special Auditor’s Report on abbreviated accounts in the United Kingdom, at the same time.
Redrafting has also focused an eliminating unnecessary overlapping of material and simplifying language, for example in ISA 570 Going Concern and ISA 700, in an effort to clarify the positioning of reporting on material uncertainty within the auditor’s report.
ISA 720B
ISA 210
Cost implications
In terms of auditing micro-entities, the FRC will retain the additional application
The cost implication for companies is estimated at £338,000, due to the impact
ISA 720 B has been withdrawn and the requirements will be integrated into a single standard, IAS 720 (Revised June 2016) The Auditor’s Responsibilities Relating to Other Information.
of the implementation of the Regulation and Directive relating to regulatory decisions. Costs arising from complying with legislation are included in the impact assessment prepared by the Department for Business, Innovation and Skills (BIS), and submitted to the Regulatory Policy Committee. Source: CCH Daily
Auditoría
Auditing the auditors: U.S. rethinks approach The U.S. government’s audit regulator is rethinking how it audits the auditors.
her speech, while a focus more on quality control is further down the line and more “aspirational”.
The Public Company Accounting Oversight Board, which inspects major audit firms each year, is exploring a shift to focusing more on assessing the firms’ quality-control efforts, rather than looking for deficiencies in the firms’ individual company audits as it does now, according to a PCAOB member. In addition, some of the individual audits the PCAOB does inspect could be selected at random, rather than by the board’s current method of focusing only on the audits it believes are the most difficult and the most likely to have defects.
The Center for Audit Quality, which represents public-company auditors, “welcomes” Ms. Franzel’s comments and thinks “it is important for the inspection process to evolve”, Executive Director Cindy Fornelli said in a statement. The PCAOB, created in 2002 by the Sarbanes-Oxley Act, oversees firms that audit public companies and sets and enforces the rules governing publiccompany audits. Its inspection reports amount to official assessments of how accounting firms are performing. The inspections are intended to help the firms improve their work, and any audit deficiencies the board finds don’t result in penalties for the firms.
The changes are still in the discussion stage, especially the shift to f ocusing more on quality control, and the PCAOB has made no decision about enacting them. They would be designed to help the PCAOB better assess a firm’s overall performance and prevent deficiencies in audits from occurring rather than just identifying them after the fact, said PCAOB member Jeanette Franzel. She outlined the possible changes in a speech at an accounting conference at Baruch College in New York.
PCAOB inspections. To make sure they continue improving, “it makes sense to start thinking about how our inspection approach could or should change”, Ms. Franzel said in an interview with The Wall Street Journal.
The firms, she said, have improved the quality of their audits in response to past
The PCAOB is “currently exploring” the possibility of random selection, she said in
If adopted, the PCAOB’s potential changes could make life easier and harder for accounting firms at the same time. A shift toward inspecting quality control would mean the board would review fewer individual audits than the 50 to 60 at each large firm that are inspected annually now. That change could mean less disruption for the firms.
The changes could also result in a lower rate of audit deficiencies. In inspection reports issued last year, the PCAOB found one or more deficiencies in 35 % of the audits it inspected at the Big Four firms— PricewaterhouseCoopers LLP, Deloitte & Touche LLP, KPMG LLP and Ernst & Young LLP. Since those rates are based on inspections focusing on the audits most prone to mistakes or defects, looking at audits selected at random might lower the deficiency rates and thus improve public perceptions of the firms. Ms. Franzel said in the speech that looking at randomly selected audits might turn up problems the inspectors haven’t found before. Currently, the firms know the PCAOB will be looking at what it considers their riskiest audits, and so they devote a lot of resources to those audits, while randomly chosen audits could actually have more problems because there is less attention paid to them, Ms. Franzel said. Devoting more attention to inspecting the firms’ quality control may be “a quicker and more efficient way of finding weaknesses” in audit procedures and thus could help head off audit mistakes before they happen, Ms. Franzel said in the interview. Source: The Wall Street Journal – By Michael
RSE
Procurement and corporate social responsibility: a perfect couple Rapoport
Companies that make real commitments to corporate social responsibility (CSR) with programs that are focused, meaningful, consistent over time and branded enjoy the financial rewards that come with the hard work. Today, it’s common to accept full responsibility for the products you sell both in terms of production, sourcing, distribution, maintenance and return flows, and in how they affect people and the planet. This reality is penetrating boardroom agendas everywhere, implicitly or explicitly, under the umbrella of CSR.
win for both CSR and procurement. The reality is procurement will need to evolve with the radical changes in demand, supply, and production patterns that are driven by changing regulation, policymaking, consumer preferences and rising commodity prices. These factors, in turn, are increasingly influenced by social and environmental concerns. This fact can serve as the cornerstone to build buy-in for your initiatives. Below are several ways to wed your CSR and procurement goals.
In sourcing and procurement alone, there’s a real opportunity to make an impact. According to a Zurich Insurance study, major corporations have an 85 percent chance of at least one supply disruption in the next 12 months—and the top five risks are CSR-related. CSR and procurement goals are intertwined like a double helix, and the natural way of doing business today. There are many ways to connect procurement to CSR, but a prerequisite is to align the leadership of both.
Share your CSR goals in your supply chain
Launching or accelerating a sustainable and/or social procurement initiative with a large company’s procurement team is a challenge. You want to be sure that there’s consensus that produces a win-
For example, there is a widely used code of conduct for the electronics industry, the Electronic Industry Code of Conduct (EICC) and the Global e-Sustainability Initiative GeSI-ETASC for telecommunications.
You need to understand the standards you want to set and these may be expressed in many forms. A supplier code of conduct may help to express the standards to be met throughout your supply chain. You can use it to share the standards for suppliers on the ethical, social, environmental, health, safety and labor standards you expect. These typically include health and safety, environmental, and labor and human rights standards. By ensuring your suppliers meet your responsibility criteria, you can mitigate the risks that can affect
both the performance of your supply chain and CSR efforts. But change doesn’t happen overnight. Sharing the goals widely within your
RSE Procurement and corporate social responsibility: a perfect couple supply is an important first step to create visibility around the expected standards, and the foundation to track progress and onboard new suppliers. Integrate CSR into corporate buying Businesses spend an estimated $6.7 trillion on global trade annually. By tapping into this stream and redirecting a percentage of it to a social cause, businesses can easily embed CSR into their everyday procurement efforts. Recognizing the opportunity to kickstart this form of impact buying via
e-procurement technology, Trade-shift recently partnered with the (RED) brand to help raise awareness and funds to eliminate HIV/AIDS in Africa. Integrating social procurement onto the e-procurement platform encourages and delivers a steady stream of money to the fight against AIDS while giving our customers a seamless way to reach their CSR objectives through impact buying. Share your organization
goals
inside
your
Share the same sustainability and social goals internally within the organization
where the buying decisions are being made. Different departments and teams may have different ways of supporting the overall company goals and this may eventually involve changing spending behavior. By making it visible to employees how their spending behavior contributes to the overall company goals, when the buying decision is being made, you can show everyone how their decisions are connected to the overall company goal. You can also see this as an opportunity for procurement to harvest information that can help you drive better and more efficient contractual decisions.
Finally, organizations implementing these programs will have the need for and will foster greater supply chain transparency. Open networks that promote collaboration not just within the supply chain, but also between companies, people and services will go a long way to making sure the metrics, analytics and visibility are in place for procurement to track and report progress toward CSR goals. Source: Supply & Demand Chain Executive – By Gerts Sylvest
RSE
3 ways to build corporate social responsibility programs The most impactful and sustainable corporate social responsibility (CSR) programs are informed by a company’s mission and values and are designed to deliver meaningful and measurable outcomes. A compelling CSR program can improve brand and reputation, plus it will resonate with your customers. According to the Reputation Institute’s March 2016 Reputation Leaders Study, the most successful companies and organizations fully integrate CSR into their strategy and brand the program is then infused into everything they do. Findings from the study show that these companies are able to establish a powerful link that ensures that their corporate purpose helps improve their overall reputation. Following are three steps successful companies take to build and then share effective CSR programs: 1. Ensure that CSR is derived from and integrated into your corporate purpose and strategy CSR is a key driver of reputation. Merely
checking the “CSR box” is not enough. The communication of overall CSR goals and achievements helps build trust within a company and across all of its business units and brands. As most business leaders know, trust is an invaluable asset in today’s highly-competitive global marketplace. 2. Make sure your CSR program is meaningful and authentic REI, the national outdoor retail co-op, made headlines in 2015 for closing its stores nationwide on Black Friday. REI employees and customers showcased their activities throughout the day via the handle #OptOutside to show how they spent the day outdoors. In addition, REI donated $5.9 million to non-profits and invested $60 million in the “outdoor community.” It was a bold move rejecting Black Friday commercialism to compel people to take time to get out and enjoy nature. The campaign worked because it was honest and delivered against the company’s mission and brand. This is what businesses can realize when they take time to develop a meaningful and creative approach to CSR. In this instance, a major retailer chose nature over commercialism which is totally authentic to this outdoor-focused brand.
3. To ensure the right story gets heard, companies must organize a consistent message and a shared storyline, and then broadcast it across multiple media platforms The REI effort generated a significant amount of both earned and social media attention. It is no longer enough to publicize CSR initiatives in corporate board reports alone. Good CSR storytelling is dynamic and interactive. It uses the power of storytelling, combined with the ubiquity of social media channels to leave an emotional impression that remains when the memory of underlying plot points disappears. A company’s reputation is about legitimacy and is largely owned by external stakeholders. Reputations are based on the experiences, judgments and perceptions of others. Consumers want to hear your story they want to be proud of doing business with you they want to “share” and “like” your story. When done right, CSR storytelling can achieve more than just good publicity, it can lead to lasting customer loyalty. Source: The Business Journals – By Regan Lamb
RSE
Corporate social responsibility has an image problem, but don’t kill it much more than philanthropy. And CSR by definition should not be something left only to the CSR team.
You know corporate social responsibility has a major image problem when one of its earliest chief executive supporters is calling for its “final demise”.
The best international definition of CSR, says Dr. Black, is “the responsibility of an organisation for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour” that, among other things, “is integrated throughout the organisation and practised in its relationships”.
At The Australian Financial Review’s Business Summit, Andre Eikmeier, the cofounder of online wine retailer Vinomofo, took a similar line, saying corporate social responsibility promoted “token side strategies”, rather than a “greater business vision”, which also turns a long-term profit. “As soon as you start using that [CSR] as an expression you’re approaching it in the wrong way”, he said. In Connect, Browne and co-authors McKinsey partner Robin Nuttall and former McKinsey consultant Tommy Stadlen say companies need to kill off CSR and instead integrate social and environmental issues into their core profit-seeking strategy because “connection with society is the new frontier of competitive advantage”. This kind of thinking is not new. In 2011, Michael Porter and Mark Kramer coined the term “shared value” as the new way for a business to thrive while benefiting the community in a Harvard Business Review article. Now many businesses embrace the concept.
2. CSR and shared value can co-exist Many firms, such as National Australia Bank, try to embrace both CSR and shared value, seeing them as separate but complimentary things. But here are four reasons we should keep CSR too, however uncool it has become.
energy giant collapsed in a rotten heap of corruption.
1. Bad agenda
But while some firms manage CSR poorly or treat it like a fluffy, irrelevant cost centre others take it seriously and integrate it into their business.
apples
shouldn’t
set
the
There are companies that cynically use CSR initiatives to mask irresponsible behaviour elsewhere. Enron had a winning CSR team that scooped up six awards in 2000 alone. The next year the
Leeora Black, the managing director of the Australian Centre for Corporate Social Responsibility, points out modern CSR is
Shared value is about solving social problems in a commercial way, but not everything that a company might do to reduce negative impacts of their business and create positive impacts will be profitable. Issues like supporting human rights and stamping out internal corruption appear to be better tackled by the CSR approach than shared value. Unlike shared value, CSR is also focused on measuring a company’s existing impacts,
RSE Corporate social responsibility has an image problem, but don’t kill it so it can provide useful information to ethical investors. 3. Corporate spin can confuse things The idea that you can profit by “doing good” is wonderful, but it can also lead to many companies putting a whole new spin on what they should be doing anyway; providing products or services that customers are willing to pay for. Take IBM, which Browne lauds for connecting well with society. Browne
writes that after chief executive Sam Palmisano sold off the company’s PC business in 2004 and started focusing heavily on business-to-business software, data, analytics and consulting, IBM had an identity crisis. Palmisano and his staff were struggling to explain what their company actually did. After months of work, they came up with this purpose: “IBM is building a smarter planet”. Sure, “Smarter Planet” was great for marketing and employee morale. But did that slogan fundamentally change what IBM was already doing?
4.
CSR can make staff happier
Even the chief executives who told Browne that they were underwhelmed with CSR admitted that it did boost staff morale. Hank Paulson told the authors this was actually the primary driver for CSR when he ran Goldman Sachs, saying “a lot of what we did with stakeholders, like the community programmes, was about the employees. These things kept our people happy and persuaded others to join the firm”.
Lifting staff morale is not a small thing, given the barrage of statistics we get each year about low levels of employee engagement. Many people like the idea of changing the world. The reality is most are toiling away in jobs that do no such thing, no matter what their company’s marketing slogans might say. Source: Financial Nickless
Review
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Rachel
RSE
CSR expenditure should be a percentage of revenue, not profit of every organization to give back to the community because businesses use resources of the community and they do not exist in isolation. Besides, given the social development index rankings of India, a lot of action is needed from all sectors—be it government or private, individuals or institutions—in social development activities. Can legislations like the CSR rules in the Companies act of 2013 make a change?
Every organization has an obligation to give back to society, says P.R. Ramesh, chairman of auditing, financial advisory and risk management firm Deloitte India. Hence, corporate social responsibility (CSR) expenditure should be a percentage of revenue and not just profit, he says. “If CSR is about giving back to society, it cannot be about profit”, Ramesh insists.
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Why is it important for companies to do anything apart from making a profit? Every organization responsibilities—economic, ethical and philanthropic. responsibility deals with corporate citizenship. It is
has
four legal, Philanthropic the idea of an obligation
It is important to point out that, as many believe, the legislation is only a trigger to set into motion the duties arising from the obligation to give back. This legislation is one of a kind globally and is a great beginning. This legislation has helped firms approach not-for-profit activities in a strategic manner, moving away from philanthropy to responsibility. But that said, a question arising from the CSR rules is why are only profit-making companies being asked to do development work? In my view, social development and giving back to society is an obligation applicable to all. CSR is about the need and guidelines
for a corporate to act as a citizen of the community/country and society of its operations. My personal opinion is that expenditure on CSR should be a percentage of the revenue and not the profit. If CSR is about giving back to the society, it cannot be about profit. What are the challenges for companies while working with notprofit organizations? Over the past two years, the biggest challenge that has appeared is the lack of capacity and infrastructure in the country to absorb resources. There are not enough agencies to execute the funds being made available for social development. It is not appropriate for corporates themselves to work in social activities. If each company were to undertake social work, it would need to build inhouse capacities, human resources and infrastructure, which is a redundant exercise, in my view. Resources to create and manage the ecosystem required for such work are high and not every company can meet these. Another big challenge that we are observing is the lack of an established
RSE CSR expenditure should be a percentage of revenue, not profit system to measure the outcomes.
constructed.
So far, everyone—the company, auditors, consultants and even the government—is only comparing the outlays. Responsibility is not about outlays, it is about outcomes. Community involvement and partnership with companies is yet to evolve. Corporates need to recognize that firms cannot make a difference in any social initiative unless they partner with the community. For instance, it is an absolute must that those who have taken the call to join the Swachh Bharat Abhiyan partner with the community to ensure operation and maintenance after toilets have been
The law seems to have come into force before the ecosystem has evolved to absorb and support the requirements of this law. How can the social/community development initiatives of companies be incentivized? A corporate is responsible only when individuals within that corporate are responsible. Companies themselves can incentivize by promoting individual social responsibility. Incentivization can also
happen if we have impact measurement metrics, which will automatically bring recognition and reward for companies. However, incentives cannot be about tax benefits. How can CSR or philanthropy be about tax breaks? If it is, then it stops being philanthropy and becomes a commercial transaction. Any advice for companies when they take up social development work? Currently, the challenge is that companies are treating social development/community work as a separate department. They are
not galvanizing the entire organization to think about society and the prevailing inequalities. What they need to do is make social responsibility part of the company’s DNA. They need to go beyond the one paragraph in annual reports. Source: Live Mint – By Moyna Manku
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Corporate ethics can’t be reduced to compliance At companies across the globe, the layers of compliance mechanisms are growing. At first blush this seems to make sense: perhaps the most obviously straightforward method of preventing unethical or damaging behavior is increasing the number of rules designed to curtail it. However, one of the more unsettling and unintended consequences of a singular focus on ethics-as-compliance is a checkbox mentality that gives the illusion of reducing risk without really doing so. Moreover, unless an organization is careful, a compliancefocused approach to eliminating unethical behavior can stunt a company’s efforts to innovate and to take intelligent risks. So what can a company do to excel ethically? Instead of focusing on the poor choices you want employees to avoid, focus on the positive virtues you want them to exhibit. Plato emphasized a virtue-based system of ethics 2,400 years ago in his Academy. The philosopher believed that virtues were best encouraged through questions and discussions rather than through statements and proclamations. In other words, we learn ethics in conversation with others. So rather than getting together with senior managers to craft a “values statement”, corporate leaders should instead foster a
series of structured conversations between leaders at all levels and their teams. The goal of these conversations should be to develop a common language to help frame examples of how people live out the organization’s values or classical virtues. This is inherently a social process virtue is learned, not inherited. Leaders are already teachers of their culture, whether they are aware of it or not, so they should ask themselves how they can teach it better. Here are questions for each of the seven classical virtues that companies can use to shape these conversations and shift their focus from complying with the rules to excelling ethically. Trust: confidence in one another • When has trust made us faster and more agile? • How can we restore trust? • At our best, how do we earn and deepen trust? Compassion: an understanding another’s challenges
of
• How does compassion support our business goals?
Ética Corporate ethics can’t be reduced to compliance • How does compassion increase engagement?
• When have we been our best in serving the needs of each of our stakeholders?
• When have acts of compassion improved our business results?
Wisdom: having good, sound judgment
Courage: strength in the face of adversity • When have you witnessed courage in our company? • Who is effective at encouraging people to be courageous? • How can we help people to be more courageous? Justice: a concern for fairness • As a company, when did we go out of your way to help a coworker? • How can we further empower our people so they are more engaged in setting their own performance criteria?
• What have been our wisest decisions? • When faced with our most difficult decisions, when did we choose the best course and have strength to endure? • How can we be more intentional about integrating wisdom into decision-making? Temperance: having self-restraint • How can we balance two competing rights, such as concern for the company and concern for the individual, or compassion and justice? • How can we help people practice self-control? •
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at encouraging life-work balance? Hope: a positive, optimistic expectation of future events • What are the parts of working for our company for which you are grateful? • What do we do well, and how could we do more of it? • When was our culture at its best? Leaders can assess how well they’re modeling virtue-based ethics by asking employees five questions about how the company is exercising its moral muscle: • How well are we teaching character in our company? • How might character development benefit our company? • What is being done to encourage or discourage character development in our company? • How does character development reduce risk?
• How does character development promote growth? The goal isn’t perfection; organizations are neither completely virtuous nor completely free of virtue. The goal is for companies to be better than they have been and for leaders to teach virtuous behavior by example. We suggest that it is strategically smart for an organization to make sure that stories about the practice of virtue are actively and intentionally shared throughout the organization. Character is the result of daily actions planning meetings, quarterly reports, RFPs, customer interactions, and so on. As Aristotle famously said, “We are what we repeatedly do. Excellence, therefore, is not an act, but a habit”. Virtues in turn permeate the broader organizational culture and define “the way things are done around here”. That’s a force that’s a lot stronger than a narrow focus on following the rules. Source: Harvard Business Review
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Do company ethics actually affect purchase decisions? They’re on your side For some corporations, ethics has become a big business. Companies have turned their focus on more than just the bottom line. They tout ethical practices as a central tenant of their business or seek to address social and environmental issues. By doing so, many businesses hope to influence consumer purchase decisions in their favor.
In reality, less than half of internet users said they would buy products from a company they believe is ethical. However, they are more likely to stop supporting brands they think are unethical, and tell others about it. Indeed, a 2008 experiment done by the Wall Street Journal found that consumers punished unethical goods more than they rewarded ethical ones.
Consumers punish rather than reward
The lure is in the product
But, do company ethics really affect purchase decisions? A recent study by Mintel and Lightspeed would suggest perhaps not. While consumers don’t necessarily reward ethical companies by shopping with them, they are more likely to punish perceived unethical companies.
Overall, both companies found that half of internet users were “sometimes” influenced by a company’s ethics.
Of the 2,000 US adult internet users surveyed, more than 50 % said they would stop buying products from a company they believe to be unethical. When it comes to telling others, over one-third of respondents said they would. While it seems pretty clear that just about anyone would prefer to buy from an ‘ethical’ company, their study found this may not be the case.
Even though being considered an ethically good company doesn’t mean users will end up choosing them more often or recommending them to a friend, other research suggests that web users respond to ethical products instead. One poll found that consumers tend to seek out products with social or environmental benefits. Therefore, while companies themselves are not more appealing, the lure for consumers may be in the socially or environmentally centered product. Source: The American Genius
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The next decade of corporate ethics
The company of the future is defined by one thing: radical transparency. To attain an open and transparent culture, the most important decision American companies can make today is who to hire, fire, promote and reward. The human capital choices made in 2016 will have a direct impact on which companies ultimately continue to exist 10, 20 and even 50 years from now. Fifteen years since WorldCom, Enron and Arthur Andersen imploded, and nearly a decade since the onset of the Financial Crisis, corporate ethics - or in some cases the lack thereof - is beginning to emerge as a performance differentiator. Forty-nine percent of attendees at the 2016 Global
Ethics Summit earlier this month said that the immediacy of social media has had an extreme impact on company accountability. Firms that have effectively adapted to this new marketplace, under 24/7 scrutiny by the media, consumers and investors, have begun to gain an advantage. For those companies that have not yet adopted a mantra of transparency, they are now at a pivotal junction. They must move beyond typical compliance standards to build and facilitate an ethical culture within their organizations that would stand up to outside scrutiny. But will they? The imperative for this new ethical mandate is clear. Our research shows that
firms that rank among the World’s Most Ethical Companies outperformed the S&P 500 last year by 3.3 percent. Additionally, as we saw in the Financial Crisis, in many cases these firms will outlast their competitors. Ensuring that an organization fits within this class of ethical corporations requires a long-term strategy intricately linked to talent at all levels to implement and sustain.
those who reported employee satisfaction as an important value for companies to affirm. In addition, the 2015 ACSR study by the insurance company, Aflac, showed that 69 percent of consumers are likely to purchase stock in a company wellknown for its ethical standards and that 75 percent of consumers confirmed that they would be happier to work for a company with a strong CSR program.
The good news for companies is that Millennials, the largest generation to enter the workforce since the Baby Boomers, are actively looking to work for and patronize firms with transparent, ethical operations. According to 84 percent of executives in attendance at the 2016 Global Ethics Summit, Millennials are in some cases willing to pay more for goods and services from a company that is recognized as a good corporate citizen.
Attracting talent with an ethically-led value proposition requires an environment in which upstanding business practices and leadership tactics are continually implemented and nurtured. Several examples of how this environment can be successfully fostered can be seen in the practices of Voya Financial (NYSE:VOYA), Aflac Incorporated (NYSE:AFL), U.S. Bancorp (NYSE:USB) and Ford (NYSE:F). All of these firms operate within highly scrutinized industries, and yet each has been able to construct an open and transparent culture in its own way.
Beyond just exerting their purchasing power, when considering where they want to work, the Deloitte Millennial Survey 2016 found that this generation of new hires is less fixated on a company’s financial performance and more interested in a business’s potential to do good. One in four Millennials said ethics, trust, integrity and honesty are essential values to supporting business success, on par with
In the case of Voya Financial, a retirement company that serves 13 million customers across the United States, a culture of ethics and corporate responsibility is reflected in its approach to corporate governance. As a new company that went public in 2013, Voya designed board
Ética The next decade of corporate ethics diversity into its DNA. Today, four of Voya’s nine independent directors are women and its board represents a diversity of gender, ethnicity, age and skills. Voya made a purposeful decision to create a truly diverse board because its leaders saw it as critical to business success and cultural transformation. Ethical business practices in the financial services industry can also be seen in the cases of Aflac and U.S. Bank. Aflac errs on the side of overdisclosure with its clients, employees and investors. In 2008, Aflac became the first U.S. publicly traded company to hold a say on pay vote, giving shareholders a voice in the executive pay
process. In 2009, when questions arose regarding some of Aflac’s investments in struggling economies, which impacted the company’s stock price, Aflac chose to publicize its investments on its website and to issue a press release driving investors to insights on the corporation and its practices. This dedication to transparency was rewarded. Aflac’s stock price rebounded. U.S. Bank has embraced a straightforward, easy-to-understand, and transparent approach to client communications that is reflected in its products and services. This approach allows U.S. Bank to deliver banking products and services that demonstrate that it is the most trusted
choice in the banking industry. In addition, the bank’s leadership is passionate about the role of banks within its communities and is proud to fulfill the local banker role across the U.S. even while being the fifth largest commercial bank in the country. Beyond the financial services sector, Ford Motor Company is a leader in ethics among automakers. Under Executive Chairman Bill Ford, the company first introduced its framework for investing in sustainability. Over the last several years, this investment has paid off and enabled Ford to further its commitment to ethical operations. In fact, for the month of February, Ford U.S. sales rose 18 percent year-over-year and its European sales also rose 18 percent
for the best February performance in six years. Implementing ethical operating standards over the last decade has proven to be a make-or-break factor for many companies, ultimately ensuring their survival and growth during one of the most difficult periods in global economic history. But the next stage of evolution for ethical companies is the infusion of an ethical culture, moving beyond the box checking exercises of compliance to improve corporate behavior in a way that positively impacts the world. Source: Huffpost Business – By Timothy Erblich
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5 principles of high-quality ethics and compliance programmes standards should be shared outside company walls. Third-party risk, such as supply chain abuse or corruption, reflects poorly on not just the vendor but also the parent company. If a supplier is aware of a company’s stance on ethical behaviour, and is offered training on how to respond to potentially compromising scenarios, it is more likely to take the high road. The Ethics and Compliance Initiative (ECI) recently released a report offering these five principles of high-quality ethics and compliance programmes:
Strong ethics and compliance functions are designed and implemented as part of an organisation’s culture. Ethics and compliance practices aren’t carried out by a single department or division. They’re ingrained in a company’s strategy, not applied on a decision-by-decision basis. Emphasis on ethics and compliance seems to be growing, according to a CGMA survey from late 2014. Safeguarding reputation is the primary motivation. Protecting an organisation’s reputation is one critical reason ethics and compliance
1. Ethics and compliance is central to business strategy: the best ethics and compliance programmes are not add-ons, the same way innovation or continuous learning are themes that spread across an organisation. While the function “can be found on the organisational chart, it is also considered to be an essential element within every other operation”, the ECI report said. The ethics and compliance function should have an independent voice, such as a chief compliance officer, that officer should be counted on to contribute to a company’s strategic discussions and daily operations. Proposals for new initiatives should be measured by alignment with a company’s values. In other words, an ethics and compliance department doesn’t exist only
when a crisis related to an ethical lapse arises. Reports on compliance performance or audit results are regularly shared with company leaders. 2. Ethics and compliance risks are identified, owned, managed, and mitigated: risk assessments can help organisations identify key risks and assign a risk leader or owner to each risk. Organisations with high-quality ethics and compliance programmes communicate regularly with the workforce to explain how risks can be mitigated and to create a risk response plan. Clear policies and standards, and systems for raising risk concerns are all part of a strong ethics and compliance function. 3. Leaders at all levels build and sustain a culture of integrity: “culture is understood to be the largest influencer of business conduct”, the report says. So, if leaders want strong ethics and compliance programmes, they should exhibit that behaviour for managers and lower-level staff to emulate. 4. The organisation encourages, protects, and values the reporting of concerns or suspected wrongdoing: if employees are scared to speak up about possible abuses related to ethics and compliance, even high-quality training and clear policies won’t do much good. Leaders
must create an environment of openness, the ECI report says. Employees should be comfortable raising issues early, before those issues become outright misconduct. Organisations intent on establishing highquality ethics and compliance programmes should listen to employees’ concerns and should praise those who speak up. 5. The organisation takes action and holds itself accountable when wrongdoing occurs: while fewer ethics and compliance lapses are likely in organisations with a strong culture of compliance, those organisations can demonstrate accountability through fast and responsible action. Investigation of alleged misdeeds should be thorough and fair, but should not drag on. Consequences should be appropriate, regardless of who violated the ethics and compliance standards. And when wrongdoing does happen, a company should use the incident as a learning opportunity for employees. Source: CGMA Magazine
“El INCP se une a la consciencia ecológica para la conservación del equilibro ambiental. ¿Sabías que de un árbol de 2,5 metros de alto se pueden producir 10.000 hojas? Pero según estudios mundiales el 70% resulta en la basura. Con el eGlobal no solo damos alcance a las necesidades de nuestros socios sino también ayudamos a preservar el planeta.”