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Contable 5 cosas a considerar con las nuevas normas de contabilidad para arrendamientos El Consejo de Normas de Contabilidad Financiera de los Estados Unidos (FASB, por sus siglas en inglés) emitió el 25 de febrero la muy esperada norma de contabilidad para arrendamientos. El primer borrador de consulta sobre el tema fue lanzado originalmente en agosto del 2010 y ha pasado por varias revisiones. A pesar de los muchos elementos de la norma, el más significativo es que exige a los arrendatarios incluir los futuros pagos por arrendamiento en el balance de situación, como un pasivo y su correspondiente activo con derecho de uso. Los arrendamientos con términos menores a un año son excluidos de este reconocimiento. [...] El ICAEW quiere que haya mayor claridad en cuanto al acceso al régimen de contabilidad simplificada El Colegio de Contadores Certificados de Inglaterra y Gales (ICAEW, por sus siglas en inglés) ha advertido que existe confusión sobre cuándo, cómo y con qué frecuencia las compañías necesitan informar a sus accionistas sobre planes para aplicar un nuevo e importante marco de revelaciones reducidas en la contabilidad anual.
En respuesta a la solicitud de comentarios del Consejo de Información Financiera del Reino Unido (FRC, por sus siglas en inglés) sobre la norma FRS 101 del Reino Unido, el Colegio aseguró que existe incertidumbre respecto al requisito para las entidades recogidas por la norma de notificar a sus accionistas antes de aplicar el régimen de revelaciones reducidas. […] La profesión de la gerencia contable se duplicará para el 2024. ¿Estamos preparados? Como gerente contable y director ejecutivo, sé de primera mano que el campo continúa creciendo y expandiéndose. Me complació escuchar que la Oficina de Estadísticas Laborales de Estados Unidos espera que los gerentes contables y los auditores experimenten un crecimiento de dos dígitos de aquí al 2024. A pesar de este crecimiento, ha aparecido un patrón preocupante en la profesión. […] El FASB propone fijar reglas clasificación de flujos de efectivo
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El Consejo de Normas de Contabilidad Financiera de los Estados Unidos (FASB, por sus siglas en inglés) está proponiendo directrices que reducirían la diversidad en la práctica de la clasificación y la
presentación en el estado de flujos de efectivo de los cambios en el efectivo restringido. Bajo el Tema 230, Estado de Flujos de Efectivo, en este informe las compañías clasifican las transferencias entre efectivo y efectivo restringido como actividades operativas, de inversión o de financiación, o como una combinación de las tres. […] Un informe del Parlamento Europeo revela fallas en el gobierno para la creación de normas de contabilidad en la UE La Comisión de Asuntos Económicos y Monetarios (ECON) del Parlamento Europeo (PE) votó el borrador de texto de un informe de propia iniciativa (INI) que resalta varias fallas observadas en las actividades de creación de normas de la UE. El borrador de informe INI, cuyo ponente es Theodor Dumitru Stolojan, aborda las NIA, así como la evaluación y la actividad de la Fundación IFRS, el EFRAG y el PIOB (Consejo de Supervisión del Interés Público). […] El FASB busca corregir varias áreas de codificación El 21 de abril, el Consejo de Normas de
Contabilidad Financiera de los Estados Unidos (FASB, por sus siglas en inglés) propuso una variedad de correcciones y mejoras técnicas a su Codificación de Normas Contables. Según el FASB, no se espera que las correcciones —en respuesta a las sugerencias de las partes interesadas— tengan un efecto considerable en la práctica contable actual, ni que generen costos administrativos significativos para la mayoría de las entidades. […] El IPSASB publica la aplicabilidad de las IPSAS El Consejo de Normas Internacionales de Contabilidad para el Sector Público (IPSASB, por sus siglas en inglés) ha publicado la Aplicabilidad de las IPSAS y un Prólogo corregido a las Normas Internacionales de Contabilidad para el Sector Público (Prólogo), el cual cambia la manera en que el IPSASB comunica el tipo de entidades del sector público que considera a la hora de elaborar una IPSAS o una Directriz de Práctica Recomendada (RPG, por sus siglas en inglés). […]
Gestión Financiera Las matemáticas fantásticas están ayudando a las compañías a convertir pérdidas en ganancias Las compañías, si se les da suficiente margen, con seguridad presentarán sus resultados financieros con la mejor iluminación posible. Además, por supuesto que intentarán persuadir a los inversionistas de que lo cálculos que prefieren, en los que se excluyen ciertos costos, representan de la mejor manera posible la realidad de sus operaciones. […]
Riesgo – Control Interno Por qué la educación financiera no salvará las finanzas en Estados Unidos Desde los préstamos para pagar por la educación superior, hasta las inversiones para el retiro, los estadounidenses se están haciendo cargo de niveles enormes de responsabilidad financiera, más ahora que nunca. Al mismo tiempo, los productos financieros han proliferado y se han vuelto mucho más complejos. Actualmente, los estadounidenses se enfrentan a una sopa de letras (y números) de opciones de ahorro e inversión (401(k), 529) y a una variedad de opciones de crédito enloquecedora (tarjetas de crédito, hipotecas, préstamos para vivienda o patrimonio). […]
Consejos para manejar las finanzas de su pequeña empresa Al empezar o ampliar una pequeña empresa hay una variedad de asuntos que considerar, entre los cuales no es irrelevante el manejo de las finanzas del negocio, además de las personales. El mundo de las finanzas empresariales es mucho más grande que el de las finanzas personales y al principio puede ser un poco abrumador. Obtener un préstamo, pagar impuestos y adquirir un seguro son asuntos diferentes cuando se trata de una pequeña empresa, como aprenderá de estos útiles consejos. […]
Wall Street baja las proyecciones para las tasas, en contraste con la visión de la Reserva Federal
Mantener la seguridad de las empresas de servicios públicos y el riesgo para la reputación es de vital importancia
El riesgo cibernético: ¿las empresas son conscientes de las amenazas internas?
Los economistas se desviaron aún más de la Reserva Federal al predecir el camino de las políticas restrictivas estadounidenses y bajar sus proyecciones sobre el nivel máximo al que el banco central podrá subir las tasas de interés.
Construir la reputación de una empresa de servicios públicos puede tomar años, pero los asuntos de seguridad pueden dañarla o destruirla rápidamente. El riesgo para la reputación es percibido como la amenaza más grande para el valor de mercado de una compañía y su posición ante la comunidad.
Existen amenazas “ahí afuera” y son reales, pero tal vez se enfatiza mucho la aleatoriedad de los ataques, en la importancia del blanco para las noticias, o en la habilidad de los atacantes anónimos.
En respuesta a una encuesta de Bloomberg, varios analistas rebajaron sus expectativas para el máximo de la política de tasas de la Reserva al final de este ciclo contractivo —conocida como la tasa terminal— a una media de 2,5%, desde 2,875% en febrero y 3,375% en julio. […]
Construir y mantener una reputación sólida es importante para las organizaciones de cualquier tipo, y particularmente para las empresas de servicios públicos. […]
Para la mayoría de las empresas en este país y los altos ejecutivos que las manejan, la mayor amenaza viene de la excesivamente mundana capacidad de los seres humanos para cometer errores. […]
Cómo enfrentarse a la “revisión de controles de la gerencia”
Las compañías están atrasadas en la predicción de riesgos críticos
En un discurso presentado a finales del 2015 ante la Conferencia Nacional del AICPA sobre Desarrollos Actuales de la SEC y el PCAOB, la Presidente de la SEC, Mary Jo White, aseguró que “es difícil pensar en un área más importante que el Control Interno sobre los Informes Financieros (ICFR, por sus siglas en inglés) para nuestra misión compartida de proporcionar información financiera de alta calidad en la que los inversionistas puedan confiar”. […]
Una nueva encuesta, publicada en la Conferencia Anual sobre Gestión del Riesgo y del Aseguramiento, sugiere que ecos de la controversia respecto a la introducción de la contabilidad de valor razonable a principios de la crisis financiera del 2008 han empezado a aflorar en la gestión del riesgo corporativo. […]
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5 things to consider under the new lease accounting standards
Sostenibilidad ¿Cómo medir el desempeño sin una definición de la sostenibilidad corporativa? BMW es la corporación más sostenible del mundo. Esto según el índice Global de las 100 Corporaciones más Sostenibles del Mundo (Global 100 Most Sustainable Corporations in the World), publicado por Corporate Knights en el Foro Económico Mundial. La corporación más sostenible del año pasado, Biogen, ocupó el lugar número 30 este año. Evidentemente, estas compañías han tenido un buen desempeño en cuanto a un conjunto de rigurosos criterios ambientales y sociales, ¿pero son sostenibles? En realidad, no lo sabemos. […]
Por qué la sostenibilidad debería hacer parte de los Recursos Humanos Existe un desafío urgente para los líderes en recursos humanos: garantizar que sus organizaciones anticipen y se preparen para los efectos inevitables de las súper fuerzas de la sostenibilidad. En la medida en que la globalización —con sus cambios demográficos y su competencia por los recursos mundiales al borde del agotamiento— exige un cambio transformacional, las compañías necesitarán un liderazgo preparado y conocedor de la sostenibilidad para prosperar en este valiente nuevo mundo. […]
La transparencia genera sostenibilidad Las compañías se están enfrentando a mayores demandas por parte de los reguladores, los inversionistas y los clientes, quienes solicitan mayor transparencia en su gobierno ambiental, social y corporativo. Los líderes de las empresas ya no pueden ser complacientes y sentirse satisfechos simplemente con el desempeño financiero. Existen varias motivaciones para que las compañías conviertan la sostenibilidad en una prioridad del negocio. […]
La sostenibilidad es la clave para el bienestar corporativo a largo plazo El mundo en el que vivimos está pasando por cambios extraordinarios, cambios como nunca antes se han visto. En cabeza de esta transformación se encuentra una explosión sin precedentes de la población humana, acompañada de un impulso en el crecimiento económico y la creación de riqueza. Las consecuencias para este mundo natural que nos sustenta son serias y, en algunos casos, potencialmente irreversibles. […]
The Financial Accounting Standards Board (FASB) released the long-awaited lease accounting standard on Feb. 25. The first exposure draft on the topic was originally released in August 2010 and has undergone several revisions. Although there are several elements of the standard, the most significant is the requirement for lessees to include the future lease payments on the balance sheet as a liability and a related right-ofuse asset. Leases with terms less than one year are excluded from recognition.
There are several things that should be considered to be ready for implementation. Plan early to facilitate adoption Besides the accounting changes, companies are required to disclose more qualitative and quantitative information about their leases. The plan should be tailored for each business group, include a schedule for completing key activities and the recording of important milestones. Review existing systems
The impact on the income statement is not expected to be as significant, but depending on the lease agreements, the impact to the balance sheet could be large. A review of fiscal 2014 public company filings found more than a trillion dollars of undiscounted lease obligations not already capitalized.
CFOs should think about whether their companies have appropriate systems and internal controls to record the lease data needed to comply with the new rules, including the expanded disclosure requirements. Business units likely will need to interact and communicate with the finance function in new ways.
The lease standard is expected to provide readers of financial statements with a clearer picture of a company’s lease obligations, but will require significant work to account for this change. The effective date of the standard is 2019 for public entities and 2020 for non-public entities.
Consider the impact on loan covenants Many credit agreements include financial covenants which require companies to maintain certain levels of liquidity and earnings. Understanding the impact on these calculations in current negotiations of debt terms could prevent the need
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ICAEW wants greater clarity over access to simplified accounting regime
5 things to consider under the new lease accounting standards and costs to renegotiate and amend the credit agreement in the future. Unlike current capital leases, the amortization of the right of use asset will be included in lease expense in the operating section of the income statement and will not increase EBITDA. The company’s debt to equity ratio, on the other hand, could be significantly impacted. If the definition of liabilities is not adjusted to exclude the lease liability, or the acceptable ratio is not adjusted, noncompliance could occur.
Set aside time to evaluate leases As part of the new lease standards, each contract will need to be evaluated to determine whether there are lease and nonlease components. Non-lease components could include a service agreement which should be allocated a portion of the consideration and are excluded from the lease liability calculation. Each contract will need to be reviewed to determine if the lease is an operating lease or a financing
lease. The definitions of operating and financing leases are similar to operating and capital leases under current guidance. This contract evaluation is expected to be time intensive and will likely require significant changes to the current internal control systems of an entity. Consider educating investors and other financial statement readers As the point of implementation draws near,
it will also be important that the readers of financial statements are aware of the impact and are educated on the change to reduce frustration and confusion down the line. The increased assets and liabilities could likely make an entity appear to be substantially larger, but without an increase in equity, and could give the impression the company is less efficient in its use of assets. Source: Houston Business Journal – By Chirs Hatten / Nicole Riley
There is confusion over when, how and how often companies need to tell their shareholders about plans to apply a new and important framework for reduced disclosures in annual accounts, ICAEW has warned. In its response to the FRC’s call for comments on the UK standard FRS 101, the institute said there is uncertainty surrounding the requirement for qualifying entities to notify shareholders before they apply the reduced disclosure regime. FRS 101 is based very closely on international accounting standards, but allowing qualifying entities to exclude certain disclosures required by IFRS from their individual financial statements. Under FRS 101, those planning to apply its
reduced disclosure framework are required to notify shareholders in writing, and those shareholders must not have objected. FRS 101 is reviewed by the FRC on an annual basis to ensure consistency with changes to international standards. Head ICAEW’s financial reporting faculty Nigel Sleigh-Johnson said: “Our outreach to members over FRS 101 has identified a worrying degree of confusion about how and when companies need to notify shareholders of plans to use FRS 101. Questions include whether the notification is required once, or every year, or in the second and subsequent years only when there is a change in shareholders?” Source: Accountancy Age – By Calum Fuller
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The management accounting profession will double by 2024 - Are we prepared? As a management accountant and a CEO, I know first-hand the field continues to grow and expand. I was happy to learn that the Bureau of Labor Statistics expects management accountants and auditors to experience double-digit growth through 2024. Despite this growth, a troubling pattern has emerged in the profession. Students at many U.S. colleges and universities are largely preparing for entry-level audit and compliance work, but not for long-term careers in our rapidly growing field. The skills needed to succeed in management accounting extend well beyond audit, compliance and reporting to include financial planning and analysis, merger and acquisition activity, strategic cost management and more. According to a survey, most professionals stay in public accounting only three to six years before moving to a management accounting (CFO team or controller) position inside an organization (forprofit, private and nonprofit). Why is this so important? Because when these professionals move from the audit pathway to the corporate financial management pathway, they may not have the full range of competencies to succeed long-term, creating a gap between what is desired by
organizations and what skills accounting talent actually possess. This skills gap is not just limited to young professionals; it exists at the executive level as well. According to the 2015 Crist/ Kolder Volatility Report, 33.3 percent of Fortune 500 and S&P 500 companies recruit CFOs from outside of the company. Clearly, there’s a lack of succession planning and internal grooming for CFOs, compared to, for example, the CEO succession pipeline. When businesses promote employees without training for higher-level skills, or they only import established managers from other businesses, they contribute to the established and harmful “entry-level economy”. What’s the answer? To address a multipronged problem that threatens the next generation of management accountants, we must execute a multi-pronged approach. Academia’s responsibility In 1986, the Bedford Report, commissioned by the American Accounting Association, found that the courses accounting educators teach do not align with what accountants (broadly defined) actually do and need in practice. While we’ve seen
The management accounting profession will double by 2024 - Are we prepared? some broadening of accounting curricula over the decades to include decision support, the expanded role of the CFO team to include financial management, strategy and operations has actually exacerbated the talent gap. A study published by the Institute of Management Accountants (IMA) and the American Productivity & Quality Center (APQC) showed the skills gap in entry-level management accounting and finance has expanded worldwide, with 90 percent of organizations struggling to hire the right management accounting talent. Businesses say that entry-level employees lack many necessary skills— from leadership (the most needed but least possessed competency) to planning, budgeting and forecasting, and strategic thinking and execution. So what’s the solution to prevent the skills gap from extending into 2024? Accounting education must focus on an integrated, balanced and long-term career approach and not just prepare students for their
first job in audit and public accounting. Accounting curricula must be “future ready”, and prepare all levels of accounting professionals for influential positions and careers in both financial accounting (e.g., audit, tax and compliance—the value stewardship role) and management accounting (e.g., FP&A, M&A—the value creation role).
quality of work output, unfilled positions and added workloads for existing employees leading to unwanted employee turnover. Therefore, it’s essential that companies also help attract, nurture and develop the next generation of leaders, making them critical assets to organizations.
Academic institutions can also participate in the IMA’s Endorsement of Higher Education program, which recognizes institutions whose curricula aligns with the CMA (Certified Management Accountant) body of knowledge, thereby taking an integrated, balanced and longer term approach to curriculum and career development.
Individuals, in turn, have a responsibility to continue their education to meet their long-term career goals. Accountants must conduct a self-assessment of their skills to identify gaps in their knowledge and obtain any necessary training and certification. They also can advocate for more training opportunities within their organizations programs for training and education available through accredited institutions of higher learning, for-profit training programs and internally sponsored programs.
Corporate responsibility If burgeoning talent is misidentified or disengaged, these challenges can lead to increased time to fill open accounting positions, increased recruiting costs, hiring of less-qualified professionals, diminished
Individual responsibility
There are also professional associations that offer development programs, earned certifications for accounting and finance
professionals (such as CMA, CIA, CFE and CFA), and provide mentoring and career planning tools. All stakeholders’ responsibility for the call for action Everyone has a hand in the talent challenge. The stakes are high because competent and ethical accounting professionals enable sustained organizational growth and an unwavering commitment to ethical behavior. All stakeholders—students, educators, professionals and employers— need to step up to address this call to action in order to enrich careers, organizations and the public interest. By working together, we can develop capable professionals who do more than secure that entry-level job and fuel the doubledigit growth of our profession. Source: Accounting Today – By Jeff Thomson
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FASB proposes fix to cash-flow classification rules The Financial Accounting Standards Board (FASB) is proposing guidance that would reduce diversity in practice in how changes in restricted cash are classified and presented in the statement of cash flows. Under Topic 230, Statement of Cash Flows, companies classify transfers between cash and restricted cash as operating, investing, or financing activities or as a combination of the three on the statement of cash flows. However, “some entities present direct cash receipts into, and direct cash payments made from, a bank account that holds restricted cash as cash inflows and cash outflows, while others disclose those cash flows as noncash investing or financing activities”, the FASB said. In addition, current GAAP does not include specific guidance on the cash-flow classification and presentation of changes in restricted cash or restricted cash equivalents, other than in limited guidance for not-for-profit entities. The amendments in the proposed Accounting Standards Update (ASU),
Statement of Cash Flows (Topic 230): Restricted Cash, which was issued on April 28, would require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. “Therefore, amounts generally described as restricted cash and restricted cash equivalents would be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows”, the FASB said. The proposed ASU was developed by the FASB Emerging Issues Task Force. If approved by the FASB, the amendments would apply to all entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows under Topic 230. The amendments would be applied retrospectively to all periods presented. Source: Accounting Web – By Jason Bramwell
European Parliament report reveals shortcomings on governance of EU accounting standard-setting The Committee on Economic and Monetary Affairs (ECON) of the European Parliament (EP) voted the text of an own-initiative draft report (INI) which highlights several shortcomings observed in EU standardsetting activities. The INI draft report, whose rapporteur is Theodor Dumitru Stolojan, tackles IAS and the evaluation and activity of the IFRS Foundation, EFRAG and the PIOB (Public Interest Oversight Body). Although not legally binding, the final version of the INI report will reflect the EPs’ position on these issues and will be used as guidance and reference in any future EU law-making process. The EP’s political groups agreed yesterday at the ECON the version that will be possibly voted in a plenary session in May. A draft document, seen by The Accountant, reflects the compromises agreed yesterday between the MEPs who are part of ECON, which shows considerable shortcomings particularly in the way the EP is involved in the accounting standard-setting process. Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group and shadow rapporteur, said in a
statement: “The message of the MEPs is clear: We are not just letting others decide on new standards. The European Parliament needs to be included when new standards are negotiated. Since the EU funds 14% of IASB’s budget and 60% of EFRAG, both organizations have to follow European standards of democratic legitimacy, transparency, accountability and integrity”. Highlights of MEPs compromises On the activities of the IFRS Foundation, EFRAG and the PIOB, MEPs drafted the following compromises: •
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Further progress regarding the governance of the IFRS Foundation and the IASB: notably in terms of transparency, prevention of conflicts of interest and diversity of hired experts. Better integration of the IASB into the system of international financial institutions; ensure a broad representations of interests; as well as public accountability ensuring high quality accounting standards. Dominance of private actors in the
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IASB and medium-sized businesses not represented at all. IFRS Foundation continues to rely on voluntary contributions, often from the private sector which may give rise to a risk of conflicts of interests. The European Commission should urge the IFRS Foundation to aim for a more diversified and balanced financing structure also based on fees and public sources. Recall requests made in the Goulard report: enhancing democratic legitimacy, transparency, accountability and integrity which, inter alia, concern public access to documents, open dialogue
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with diverse stakeholders, the establishment of mandatory transparency registers and rules on transparency of lobby meetings as well as internal rules, in particular prevention of conflict of interests. The EC should speed up the recruitment process of EFRAG Board President, fully taking into account the role of the Parliament and of its Committee on Economic and Monetary Affairs.
Commenting on these governance issues Giegold added: “Accounting standards are a public good.
Standard setting expert bodies therefore must not only include former bankers and accountants but also small and medium sized enterprises, consumer protection agencies and finance ministries. The representation of women has to be raised”. The draft document also includes calls for a compromise on the EC to consider turning EFRAG into a public agency in the long run. An EU source, who preferred not to be named, told The Accountant that other MEPs have proposed that the IFRS Foundation and EFRAG should become international agencies (instead of private organizations).
The same source said it is understood that the rapporteur of the INI, Theodor Dumitru Stolojan, supports enhancing transparency and accountability in accounting standard-setting. However he is not “as aggressive” as other MEPs, and prefers to maintain a more moderate approach when it comes to the governance reform of those organizations.
Source: International Accounting Bulletin – By Carlos Martin Tornero
FASB looks to amend several areas of codification The Financial Accounting Standards Board (FASB) on April 21 proposed a handful of technical corrections and improvements to its Accounting Standards Codification.
interchangeably. Removes the term “debt” from the Master Glossary. The current definition was codified from guidance that was specific to troubled debt restructuring. The definition might be used by analogy to other guidance that uses the term “debt” but are unrelated to troubled debt restructuring. The amendment would restrict the use of the current definition to Subtopic 310-40, Receivables Troubled Debt Restructurings by Creditors, and Subtopic 470-60, Debt Troubled Debt Restructurings by Debtors.
The amendments, which are in response to suggestions made by stakeholders, are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities, according to the FASB. “The board has a standing project on its agenda to address suggestions received from stakeholders on the Accounting Standards Codification and to make other incremental improvements to GAAP”, the proposal states. “This perpetual project will facilitate Accounting Standards Codification updates for technical corrections, clarifications, and minor improvements, and should eliminate the need for periodic agenda requests for narrow and incremental items”. The proposed Accounting Standards Update, Technical Corrections and Improvements, includes simplification and minor improvements to guidance on insurance and troubled debt restructuring that would result in numerous changes to the Codification. Specifically, the proposal includes the following amendments:
Consistent use of the term “participating insurance.” Currently, the terms “participating contract”, “participating insurance contract”, and “participating insurance” are used interchangeably throughout the Codification. Consistent use of the term “reinsurance recoverable” within Topic 825, Financial Instruments, and Topic 944, Financial Services—Insurance, because that is a more commonly used term in the industry. Topics 825 and 944 use the terms “reinsurance receivable” and “reinsurance recoverable”
Corrects the guidance in Subtopic 360-20, Property, Plant, and Equipment Real Estate Sales, to include the final decision of the FASB Emerging Issues Task Force that loans insured under the Federal Housing Administration and the Veterans Administration do not have to be fully insured by those programs to recognize profit using the full accrual method. Clarifies the difference between an “approach” and a “technique” related to Topic 820, Fair Value Measurement. The amendment also would require an entity to disclose when there has been a change in either or both a valuation “approach” and/or a valuation “technique”. Aligns implementation guidance in paragraph
860-20-55-41 with its corresponding guidance in paragraph 860-20-25-11 in Subtopic 860-20, Transfers and Servicing Sales of Financial Assets. It also clarifies the considerations that should be included in an analysis to determine whether a transferor once again has effective control over transferred financial assets. Most of the amendments would not require transition guidance and would become effective once the FASB issues the final Accounting Standards Update. For two of those proposed amendments, the FASB is proposing prospective application with cumulative-effect adjustments to equity as of the beginning of the annual period in which the guidance takes effect. The other proposed change, which would amend Topic 820, could involve adjustments to fair value. Therefore, the board is proposing a prospective-only application. The amendments would apply to all reporting entities that use the affected accounting guidance. Comments on the proposal are due by July 5. Instructions on how to submit comments can be found in the exposure draft. Source: Accounting Web – By Jason Bramwell
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IPSASB publishes the applicability of IPSAS Carruthers. “As this approach is drawn from The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities it enhances the consistency and understandability of the IPSASB’s literature”.
The International Public Sector Accounting Standards Board (IPSASB) has published The Applicability of IPSASs and a revised Preface to International Public Sector Accounting Standards (Preface), which change how the IPSASB communicates the type of public sector entities that it considers when developing an IPSAS or Recommended Practice Guideline (RPG). Until now, IPSASs and RPGs have included a definition of a Government Business Enterprise (GBE) and a statement that GBEs apply International Financial Reporting Standards. The definition of a GBE has proved ambiguous in places and difficult for preparers to interpret. The main amendments: •
Provide the characteristics of public sector entities for which IPSAS are
designed in the revised Preface; •
eplace the term “GBEs” with the term R “commercial public sector entities”;
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elete the definition of a GBE in D IPSAS 1, Presentation of Financial Statements; and
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mend the scope section of each IPSAS A and RPG by removing the paragraph that states that these pronouncements do not apply to GBEs.
These amendments address constituents’ concerns about the application of IPSASs to public sector entities and different interpretations of the GBE definition. “This principles-based approach communicates more transparently the types of public sector entities that the IPSASB considers when developing IPSASs and RPGs”, said IPSASB Chair Ian
“These changes also acknowledge the role that regulators have in determining which accounting standards should be applied by different entities in their jurisdictions”, Mr. Carruthers added. To support constituents’ understanding of these amendments, a marked-up and a clean version of the Preface have been made available on the IPSASB website. The IPSASB encourages IFAC member organizations, associates, and regional accountancy organizations to promote the availability of these documents to their members and employees. About the IPSASB The IPSASB develops accounting standards and guidance for use by public sector entities. It receives support (both direct financial and inkind) from the Government Accounting Standards Board, the Asian Development Bank, the Chartered Professional Accountants of Canada, the South African Accounting Standards Board, the New Zealand External Reporting Board, and the governments of Canada, New Zealand, and
Fantasy math is helping companies spin losses into profits the subject is accounting. But the gulf between reality and make-believe in these companies’ operations is so wide that it raises critical questions about whether investors truly understand the businesses they own.
Switzerland. About the Public Interest Committee The governance and standard-setting activities of the IPSASB are overseen by the Public Interest Committee (PIC), to ensure that they follow due process and reflect the public interest. The PIC is comprised of individuals with expertise in public sector or financial reporting, and professional engagement in organizations that have an interest in promoting high-quality and internationally comparable financial information.
Among 380 companies that were in existence both last year and in 2009, the study showed, non-GAAP net income was up 6.6 percent in 2015 compared with the previous year.
About IFAC IFAC is the global organization for the accountancy profession, dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. It is comprised of more than 175 members and associates in more than 130 countries and jurisdictions, representing almost 3 million accountants in public practice, education, government service, industry, and commerce. The ‘International Public Sector Accounting Standards Board’, ‘International Public Sector Accounting Standards,’ ‘Recommended Practice Guidelines’, ‘International Federation of Accountants’, ‘IPSASB’, ‘IPSAS’, ‘RPG’, ‘IFAC’, the IPSASB logo, and IFAC logo are trademarks of IFAC, or registered trademarks and service marks of IFAC in the US and other countries.
Source: IFAC (International Federation of Accountants)
Companies, if granted the leeway, will surely present their financial results in the best possible light. And of course they will try to persuade investors that the calculations they prefer, in which certain costs are excluded, best represent the reality in their operations. Call it accentuating accounting-style.
the
positive,
What’s surprising, though, is how willing regulators have been to allow the proliferation of phony-baloney financial reports and how keenly investors have embraced them. As a result, major public companies reporting results that are not based on generally accepted accounting
principles, or GAAP, has grown from a modest problem into a mammoth one. According to a recent study in The Analyst’s Accounting Observer, 90 percent of companies in the Standard & Poor’s 500-stock index reported nonGAAP results last year, up from 72 percent in 2009. Regulations still require corporations to report their financial results under accounting rules. But companies often steer investors instead to massaged calculations that produce a better outcome. I know, I know eyes glaze over when
Under generally accepted accounting principles, net income at the same 380 companies in 2015 actually declined almost 11 percent from 2014. Another striking fact: Thirty companies in the study generated losses under accounting rules in 2015 but magically produced profits when they did the math their own way. Most were in the energy sector, which has been devastated by plummeting oil prices, but health care companies and information technology businesses were also in this group. How can a company turn losses into profits? By excluding some of its costs of doing business. Among the more common expenses that companies remove from their calculations are restructuring and acquisition costs, stock-based
compensation and impaired assets.
write-downs
of
Creativity abounds in today’s freewheeling accounting world. And the study found that almost 10 percent of the companies in the S. & P. 500 that used made-up figures took out expenses that fell into a category known as “other”. These include expenses for a data breach (Home Depot), dividends on preferred stock (Frontier Communications) and severance (H&R Block). But these are actual costs, notes Jack T. Ciesielski, publisher of The Analyst’s Accounting Observer. “Selectively ignoring facts can lead to investor carelessness in evaluating a company’s performance and lead to sloppy investment decisions”, he wrote. More important, he added, when investors ignore costs related to acquisitions or stock-based compensation, they are “giving managers a free pass on their effectiveness in managing all shareholder resources”. It puzzles some accounting experts that the Securities and Exchange Commission has not been more aggressive about reining in this practice. Lynn E. Turner was the chief accountant
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Why financial literacy will not save America’s finances
Fantasy math is helping companies spin losses into profits of the S.E.C. during the late 1990s, a period when pro forma figures really started to bloom. New rules were put in place to combat the practice, he said in an interview, but the agency isn’t enforcing them. For example, Mr. Turner said, some companies appear to be violating the requirement that they present their nonGAAP numbers no more prominently in their filings than figures that follow accounting rules. “They just need to go do an enforcement case”, Mr. Turner said of the S.E.C. “They are almost creating a culture where it’s better to beg forgiveness than to ask for permission, and that’s always really bad”. As it happens, the commission is in the midst of reviewing its corporate disclosure requirements and considering ways to improve its rules “for the benefit of both companies and investors”.
This would seem to be a great opportunity to tackle the problem of fake figures. But such work does not appear to rank high on the S.E.C.’s agenda. Kara M. Stein, an S.E.C. commissioner, expressed concern about this in a public statement on April 13. Among the questions the S.E.C. was not asking, she said: “Should there be changes to our rules to address abuses in the presentation of supplemental non-GAAP disclosure, which may be misleading to investors?” With the presidential election looming, Mr. Ciesielski said it was unlikely that any meaningful rule changes on these types of disclosures would emerge anytime soon. That means investors will remain in the dark when companies don’t disclose the specifics on what they are deducting from their earnings or cash flow calculations. Consider restructuring costs, the most common expense excluded by companies
from their results nowadays. “Why shouldn’t companies say, ‘This is a restructuring program that is going to take us four years to complete, and here are the numbers”, Mr. Ciesielski said in an interview. “Restructuring programs cost cash. Why not face up to it and be real about what you’re forecasting? If everybody did that consistently, that would be a dose of reality”. Mr. Turner, the former S.E.C. chief accountant, agreed. What investors need, he said, is a clearer picture of all items both costs and revenues that companies consider unusual or nonrecurring in their operations. These details should appear in a footnote to the financial statements, he said. “We need to require the disclosure of both the good and the bad”, Mr. Turner said. “If you have a large nonrecurring revenue item, you need to disclose that as well as a nonrecurring expense. Then
you should require auditors to have some audit liability for these items”. Of course, some of the fantasy figures highlighted by companies are worse than others. Excluding the impairment of an asset, Mr. Ciesielski said, is “not the worst crime being committed. But when you’re backing out litigation expenses that go on every quarter, that’s a low-quality kind of adjustment, and those are pretty abhorrent”. The bottom line for investors, according to Mr. Ciesielski and Mr. Turner, is to ignore the allure of the make-believe. Realworld numbers may be less heartening, but they are also less likely to generate those ugly surprises that can come from accentuating the positive. Source: The New York Times – By Gretchen Morgenson
From taking out loans to pay for higher education to investing for retirement, Americans are shouldering enormous levels of personal financial responsibility—more so than ever before. At the same time, financial products have both proliferated and become much more complex. Americans now face an Alphabet (and Numbers) soup of saving and investment options (401(k)s, 529s) and a head spinning array of credit options (credit cards, mortgages, homeequity loans). While Americans are not expected to manage their own legal cases or medical conditions, they are expected to manage their own finances. To be sure, the rise of the independent and empowered consumer rests on the belief that they have the requisite knowledge to be up to the task. But is it reasonable in such a system to expect people to succeed? Economists examining financial literacy would say no. According to their research, the vast majority of Americans lack basic levels of financial literacy. For example, a survey of Americans over the age of 50 that asked three basic questions about compound interest, inflation, and risk diversification found that only a third answered all three questions correctly. And a more extensive
survey of financial literacy among highschool students found that young people aren’t any more informed. Forty-four percent of U.S. students surveyed had scores that placed them at the lowest levels of financial literacy. Worse still is that levels of financial literacy are lower among the less educated, minorities, and women. Almost 65 percent of Americans with graduate degrees possess basic financial knowledge and skills, compared to just 19 percent of high-school grads. African Americans and Hispanics score lower than do whites on surveys measuring knowledge about financial concepts like debt. And analysis done in the U.S. and Europe has consistently found that women are significantly less likely to answer financial-literacy questions correctly than men. The costs of financial illiteracy are high. For example, research on credit-card debt found that those with lower levels of debt literacy were more likely to do things that resulted in higher fees and charges like going over the credit limit or only making the minimum payment. One study estimates that up to one-third of the fees and charges paid by those with lower debt literacy is due to a lack of knowledge. Overall, financial mistakes tend to be more
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Tips for managing your small business finances
Audit needs to be more predictive, says FRC ICAS research common among those with less education and income. Financial institutions often target such unsophisticated consumers with their less-than-straightforward and often very expensive financial products. A recent study found that misconduct by financial advisers is concentrated in firms located in counties with low levels of education and elderly populations. By contrast, being financially savvy has clear payoffs. Those with higher levels of financial literacy are more likely to plan for retirement, make better investment decisions, refinance mortgages at the optimal time, and manage credit-card debt better. They are also more likely to sidestep common pitfalls like borrowing against 401(k) accounts. So who is financially literate? Disproportionately, they are white males from college-educated families whose parents had stocks and retirement
savings. Phillip Cartwright, the CEO of a biotech start up, underscores the high levels of financial literacy among white men at the top. Talking to me about how he manages his finances he said, “I talked to different financial advisors. But I went to business school, I worked in finance for five years. So I went to meet with some (advisors) and I thought ‘Maybe these people know something?’ I couldn’t find anybody who knew a lot more than I did”. The George Washington University economics professor Anna Maria Lusardi has done pioneering research on financial literacy. Her studies have documented the gaps in financial knowledge among different demographic groups. “What the data on financial literacy shows is that financial knowledge is unequally distributed”, says Lusardi. “Those with the least knowledge are also the most vulnerable groups in economic terms. As a result, the lack of financial literacy
exacerbates economic inequality”. Lusardi’s own analysis has estimated that more than one-third of wealth inequality could be accounted for by disparities in financial knowledge. Lusardi directs the Global Finance Literacy Excellence Center that focuses on raising the level of financial knowledge through financial-literacy education. “Finance has entered the lives of every family in a much more significant way than in the past. We now have a lot more responsibility for managing our money. Everyone needs to know the ABCs of finance”, notes Lusardi. But how much can financial education do to even out the playing field and enable all Americans to better navigate a complex and fast changing global economy? Finance expert and author Helaine Olen is skeptical. “Which is easier?” Olen asked,
“Educating and changing the financial practices of 300 million Americans or changing the financial frameworks surrounding them? The vast majority of Americans think that their financial advisor has a fiduciary responsibility to act in their best interest. As of right now, that’s not true. Instead of educating people about this, why not just make it a legal duty that financial professionals act on the behalf of consumers”.
When starting or growing a small business there are a number of things to consider, not the least of which is managing your business’s finances in addition to your own. The world of business finance is vastly larger than that of personal finance and can be a bit overwhelming at first. Getting a loan, paying your taxes, and taking out insurance are all different when it comes to your small business as you’ll learn from these helpful tips.
Lusardi agrees that increasing financial literacy alone is not enough. “Some things are better addressed through regulation”, says Lusardi. “If there are things that are clearly negative for consumers, then they don’t need to exist. But changing the financial framework is also not enough”, she says. “Financial literacy is an essential skill for thriving in today’s economy”.
Accessing capital
Source: The Atlantic – By Marianne Cooper
The biggest key to managing your business finances is ensuring that you have the proper working capital. Trying to cut corners and get by without proper funding could stifle your business’s growth and could even cause it to fail. While no one likes taking on debt, the capital that a small business loan could inject into your company could not only save your business but help it thrive. Ever since the banking crisis of 2008 large banks have cut back significantly on the number of small business loans they approve. While they have made strides over the years they are still far less likely to lend than other sources. According to Biz2Credit in March 2016 only 23 % of small business loans applications submitted to big banks were approved.
Meanwhile 48.7 % of applications were approved by smaller banks although that figure has been trending downward over the past 12 months. Luckily today there are more lending options for entrepreneurs than ever before. Several alternative lenders have set up shop on the Internet in order to assist small businesses with getting the capital they so desperately need. In fact, in March 2016, alternative lenders were found to approve 60.7 % of small business loan applications submitted. There are many facets to the “alternative lending” field but one of the largest is known as Peer to Peer (P2P). Just before the crisis of 2008 hit, companies like Prosper and Lending Club launched marketplaces that sought to link up borrowers with investors willing to fund their loans. Lending Club in particular has seen incredible expansion, reaching over $16 billion in loans facilitated and being listed on the New York Stock Exchange (ticker symbol ‘LC’). Currently Prosper allows entrepreneurs to borrow up to $35,000 for their businesses while Lending Club offers up to $300,000. Paying taxes One big difference between managing
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Wall street lowers rate projections, widening gap with fed view
Tips for managing your small business finances your personal finances and managing your business’s is that companies must pay taxes quarterly instead of on the traditional April 15th deadline each year. Businesses are also required to pay estimated taxes and could be penalized if their estimates cause them to underpay. So how can you determine what you’ll need to pay? According to the IRS, entrepreneurs are required to pay quarterly taxes if they expect to owe more than $1,000 in taxes for the year. Additionally, if your estimated taxes come up more than $1,000 short for the year, you will receive what called an “underpayment penalty”. The good news is that, if this is your first year with an underpayment penalty, it can be waived. Obviously it can be difficult to know what you’ll owe during your first year in business
(which is why the IRS allows you one waived penalty). After that year, a good rule of thumb is to pay 110% of whatever you owed the previous year. However keep in mind that if your business grows significantly in that time you will need to reassess your tax estimates in order to avoid future penalties.
all entrepreneurs will need is liability insurance. These policies vary but can include everything from customers getting injured on your property to libel if you’re a freelance writer. Several insurance agencies offer some form of this insurance and can help you figure out what policy is best for you.
Taking out insurance policies
Of course, if your business purchases any type of vehicle be it company cars, promotional vehicles, or even a food truck those will all need to be properly insured. If you have employees, you will also need to worry about things such as worker’s compensation and covering employee health insurance. Thanks to today’s digital world, there is even data breach insurance available. While some insurance may not be necessary for your business, be sure to seriously contemplate each type of coverage and determine if it’s
An unfortunate side effect of starting a business is that it opens you up to all kinds of liabilities. Because of this there are many types of insurance you may need to keep your company and yourself financially safe. The insurance(s) you’ll need may depend on the type of business you have and could change overtime as your business grows. The most common insurance that nearly
worth investing in a policy. Conclusion While fundamentally similar, personal finances and business finances have some major differences that new entrepreneurs should be aware of. Even more experienced business owners should pay close attention to their finances and make adjustments as necessary. Along with some hard work and a little luck, properly managing your business’ s finances will help ensure your personal finance prosperity as well. Source: Business 2 Community – By Jonathan Dyer
Economists extended their deviation from the Federal Reserve in forecasting the path of U.S. policy tightening as they lowered predictions for how high the central bank will be able to lift interest rates. Analysts responding to a Bloomberg survey cut their expectations for the Fed’s peak policy rate at the end of this tightening cycle, known as the terminal rate, to a median of 2.5 percent, from 2.875 percent in February and 3.375 percent in July. That compares with the Fed’s median forecast of a 3.25 percent terminal rate, which it revised in March from 3.5 percent in December and 3.75 percent in June.
The cuts reflect growing doubts about the Fed’s ability to tighten monetary policy amid uneven economic growth and below-target inflation, and as global central banks continue easing. Futures traders have pared bets on the Fed’s policy path and now assign coin-flip odds to a rate increase in 2016, down from a 93 percent probability assigned at the start of the year. Officials in March lowered their forecasts for 2016 increases to two from four. “The main thing is you can’t get the rate much higher by the fourth quarter of 2017, and I think something will have happened by then that will lead to two successive quarters of contraction”, said
Hugh Johnson, chairman of Hugh Johnson Advisors LLC in Albany, New York, and one of 41 survey respondents. “This is already one of the longest recoveries in the post-war period, and recoveries just don’t last that long”. The yield on the Treasury 10-year note fell two basis points, or 0.02 percentage point, to 1.76 percent at 2:01 p.m. New York time, the lowest on an intraday basis since April 20, according to Bloomberg Bond Trader data. It declined 10 basis points in the previous two days. The price of the 1.625 percent note due in February 2026 was 98 25/32. Sixteen respondents pushed back predictions for when the Fed will reach its terminal rate, including seven by at least a year. The fourth quarter of 2018 remained the most popular date among respondents to the survey, which was
conducted May 3-4. Johnson pared his terminal rate forecast to 1.875 percent from 3.75 percent in the February survey. He moved up the projected terminal rate timeline to the fourth quarter of 2017 from the second quarter of 2018. Futures traders expect the Fed’s effective rate to be about 0.51 percent by yearend. That’s close to the midpoint between the current effective overnight rate of 0.37 percent and the 0.625 percent level where it may stand if the central bank raises its target range by a quarterpoint again after liftoff from near zero in December. Traders see a 10 percent chance the Fed will raise rates at its next meeting in June. Source: Bloomberg Markets Ronalds / Catarina Saraiva
–
By
Eliza
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Maintaining a utility’s security and reputational risk is vitally important Building a utility’s reputation may take years, but it can be damaged or destroyed very quickly from a security event. Reputational risk is regarded as the greatest threat to a company’s market value and standing in the community. Building and maintaining a solid reputation is important for all types of organizations and it is especially important for utilities. With cyber and physical security being major topics for political conversation and subject to considerable media magnification after an event, it could be argued that protecting an energy company’s reputation is the most significant risk management challenge that boards of director face today. Reputational risk is regarded as the greatest threat to a company’s market value and standing in the community. The reputation of a utility is built over time and determined, in large part, by how well several core commitments are met, including delivering reliable, safe, and least cost power to customers while meeting and exceeding the financial (cost and revenue) expectations of a variety of stakeholders. Today, stakeholder perceptions around emerging strategic factors, such as physical and cybersecurity, are increasingly
impacting a utilities’ reputation. Recent data breaches affecting major retailers, financial institutions, and other high-profile companies, vividly illustrate the realities that organizations of all types face risks that can suddenly propel them into global headlines, creating complex enterprisewide risk events that threaten reputation and brand. Traditionally, a utility’s reputation is judged based off of a few public interactions. Operationally speaking, reputation is impacted by: Unplanned and/or extended outages. Questions surrounding storm restoration and other asset outages and the subsequent public examination. Aging infrastructure Risks of asset operational failure and the associated cost of asset replacement and ongoing asset safety. The public may see a utility’s justification for a “rate hike” and be annoyed at the request. Regulatory and political forces Focused and engaged groups that provide key approvals (compliance) or boisterous
Maintaining a utility’s security and reputational risk is vitally important disapproval for utility operations. Life safety Life safety risks involves personal injury or death. Today, with security being a major reliability focal point at the North American Electric Reliability Corporation (NERC) and the Federal Energy Regulatory Commission (FERC), utilities cannot afford to highlight themselves and be the subject of a NERC Critical Infrastructure Protection (CIP) investigation or see their case played out in the court of public (or industry) opinion.
Recent grid security events highlight the need to include security as a data point in a company’s risk evaluation. As we have seen from the Pacific Gas and Electric (PG&E) Metcalf substation shooting on April 16, 2013, we must add infrastructure and personnel security to the list above. PG&E, to their deserved credit, was openly transparent from the start and cooperated with law enforcement and federal officials, however, this event thrusted them into both local and national media stories. Years have now passed and we can see that
this event was the genesis for a new NERC physical security standard and renewed interest in protecting critical substations. It’s difficult to predict the next major attack, or the enemy’s future methods, but we must start to realize that these events will likely adversely impact reputational risk on a utility and the sector at-large. Building a utility’s reputation may take years, but it certainly can be damaged or even destroyed very quickly. Boards of director and senior management are responsible for measuring and monitoring reputational risk and therefore must remain vigilant and active in providing the
safeguards to prevent loss of reputation. Assessing and managing the risk effectively and properly are one of the keys to a utility’s continued viability and success. So, as utilities battle unplanned outages, aging infrastructure, compliance, and life safety, security must be part of the dialogue and business continuity conversation going forward. Source: CSO – By Brian Harrell
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Cyber risk: are businesses aware of internal threats? How many of us have used the same device for both work and personal social media interaction, often simultaneously? Employees using personal devices, whether at work or outside of the workplace, are at risk of downloading dodgy attachments, opening infected websites or clicking on a pop-up with a virus. When those devices are connected to work laptops or PCs on Monday morning, the company’s network is then at risk to whatever might have been ‘acquired’ over the weekend.
There are threats “out there” and they are real, but perhaps too much emphasis is placed on the randomness of the attacks or how newsworthy the target is or the skill of the faceless attackers. For most businesses in this country and the c-suite executives that manage them, the biggest threat is from the all too mundane human fallibility. No one is exempt from being a risk magnet, from the most experienced CEO to the new starter internal risk often far outweighs external risk and is more preventable.
Right at the heart of this internal risk is the practice of ‘bring your own device’ (BYOD). Increasingly flexible workforces want to use personal devices – typically laptops, tablets and smartphones – to enable them to work as and when they want and where they want. There are some obvious advantages to this approach in terms of cost savings and employee satisfaction, but it’s not all good news. Humans, being what they are, don’t typically think in neat boxes when it comes to their online presence.
Not good if that means confidential company data is hacked and published as a consequence or the website is shut down for hours while frustrated customers can’t purchase the company’s products. Employees will likely have their own social media apps on their devices along with their own personal email settings both containing personal data. Most smartphones make it very easy for an individual to switch between a personal email and a business email account fairly quickly, increasing the chances of sending confidential business information to people in their personal address book and vice versa. The embarrassment of emailing a client late
at night could be the least of your worries. What happens if the device is lost or stolen? The device will not only have stored all the employees’ precious personal data but also, most likely, business secrets of various kinds. If it was strictly a corporate device the obvious solution would be to wipe it clean. This fix is not so simple with an employee’s device as this throws up the potential ethical dilemma of encroaching on the employee’s privacy rights time consuming and awkward to resolve. Where there is a security breach or negative press on social media, this can have an immediate, direct and potentially devastating effect on the company and its stakeholders. It is not just the direct financial losses that affect the company but also, and sometimes more importantly, loss to its reputation. Recent studies show that analysts are using a company’s reputation as a metric to value it. The increasingly prominent risk associated with BYOD is a serious threat to that value and once it’s gone it might be too late. Source: PR Week – By Andrew Day
Taking on “management review controls” In a speech at the end of 2015 to the AICPA National Conference on Current SEC and PCAOB Developments, SEC Chair Mary Jo White emphasized that “it is hard to think of an area more important than ICFR [internal control over financial reporting] to our shared mission of providing highquality financial information that investors can rely on”. For those of you who would like to gain some insight into suggested ways to improve ICFR, as well as some of the nuts and bolts involved, CFO.com has an interesting article written by a Deloitte partner about one type of internal control, “management review controls” (MRCs), that delves into some detail. According to the article, PCAOB requirements are now causing auditors “to require a level of precision and specificity for management review controls beyond prior years. Auditors are also reviewing far more documentation than they use[d] to. At the same time, there is a lack of clarity on what exactly is sufficient in management review controls and how precise they need to be”. What is an MRC? According to the article, MRCs are an “essential aspect of effective internal control” that involve management reviews of the reasonableness of estimates and other financial information. These reviews typically involve an assessment of
recorded amounts in light of the reviewers’ expectations, judgment, knowledge and experience, as well as related reports and underlying documents. MRCs are different from regular “transaction” controls: they tend to look at the forest, not the trees. First, the author observes, they aim at a higher level, focusing on aggregated results rather than individual transactions. Moreover, unlike transaction controls, which are structured as “yes/no” controls, MRCs are more complex, uncertain and subjective, requiring “knowledgeable and experienced reviewers who have an understanding of the business at a level of detail that enables them to identify issues for follow-up. What’s more, MRC reviewers often rely on data from other sources, not data they personally create or have direct control over”. The author identifies the following as examples of MRCs:
• • • •
Any review of analyses involving an estimate or judgment, such as a litigation reserve or the percentage of completion for long-term construction projects; Reviews of financial results for components of a group; Comparisons of budget to actual; and Reviews of impairment analyses.
Because MRCs are subjective in nature, the author maintains that the description of the control process should be as prescriptive as possible, taking into account the specific personnel responsible for performance of the review, the level of review precision necessary to satisfy materiality criteria, the way to effectively determine if the data being used is reasonably accurate and complete, the necessary depth of knowledge of the management reviewer of the business area being reviewed and the nature of the review process, which must be well defined and documented. Risk assessments can be key in designing MRCs. For example, to the extent that the topic has a high risk of material misstatement, the MRCs should have a higher level of precision and more focus on the accuracy and completeness of the supporting data used. The author has identified a number of problem areas common to MRCs, including inadequate definitions, questionable quality and reliability of supporting data, reviewers who do not have sufficient knowledge and experience to make informed judgment calls about the business area they are reviewing, reviews that are imprecise because they are not conducted at a level of detail sufficient to identify potential issues, and personal
bias, which is inevitable to some extent but may be mitigated by having a diverse team of reviewers with different perspectives and personal motivations. For example, personal bias may be manifested by “over emphasis on confirming information and under emphasis on disconfirming information. In other words, a reviewer can tend to see what the reviewer wants to see”. In light of the controversy over the level of supporting detail that auditors and the PCAOB inspectors may now require when evaluating MRCs, the author provides some excellent examples, in his view as an auditor, of the optimal level of documentation. To illustrate, I’ve copied two of his examples below, but there are more included in the article linked above. The example indicates the control as described, the problems with the description and how it can be improved. “Sample of a control overview Typical description:
•
The CFO reviews the impairment analysis for appropriateness. Monthly, the controller prepares an undiscounted cash flow analysis, which is then reviewed and approved
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Companies lag on forecasting critical risks
Taking on “management review controls” by the CFO. The CFO reviews the various schedules and signs off on the control package.
•
Problems with the typical description:
• • •
Insufficient control description (does not describe what the CFO does); unnecessary process description. Inconsistent references to the inputs (e.g., impairment analysis, undiscounted cash flow analysis, schedules, control package). Lack of cross-references to where the information used in the control has been appropriately addressed.
Improved description:
•
Inputs: undiscounted Cash Flow Analysis (UCFA), including supporting schedules.
•
Specific monthly review activities: CFO (1) discusses the current and forecasted business environment with the CEO, the COO, and the vice president of operations; (2) reviews each of the assumptions and support within the UCFA with a particular focus on the weighting assigned to each outcome; (3) challenges any assumptions or weights that may have a significant impact on the conclusion. Outputs: any questions are sent to the controller to be addressed and resolved to the satisfaction of the CFO, at which point the CFO signs off on the UCFA”.
“Sample description of reviewer competence Typical description:
•
The description of the competence of the reviewer addresses the reviewer’s education, certification, and tenure.
Problems with the typical description:
•
It assumes the competence of the reviewer is “implied” due to his or her position and experience within the entity.
Improved description:
•
In addition to considering the reviewer’s education, certification, and tenure, the description of the competence of the reviewer addresses the reviewer’s: (1) knowledge of the specific subject matter and the activities he or she is involved in to maintain and update that knowledge, and (2) basis for being able to develop
•
an independent expectation (similar to substantive analytical procedures), which would then allow him or her to be able to identify an error in the financial information being reviewed. Consider and document observations based on prior interactions with the reviewer with respect to the subject matter”.
Source: VeritasOnline.com.mx – Por Jesús González Arellano - México
Echoes of the controversy surrounding the introduction of fair-value accounting in the wake of the 2008 financial crisis have begun to crop up in corporate risk management, a new survey issued at the annual Risk and Insurance Management Society Conference here suggests. Similar to how historical-cost accounting was found wanting as a way to assess the financial risks lurking in current and future market conditions, basing forecasting of corporate operational risks on insurance claims histories (as they are based now), will be of little help in capturing fastchanging exposures like cyber risk, the thinking goes. And like advocates of the fair-value revolution in financial reporting, insurance brokers and some risk managers want to drive a sea-change in corporate risk assessment by using a new way of doping out future perils. In the latter case, it’s predictive analytics, including such things as stochastic modeling and game theory. One of the questions asked in the report, which is based on more than 700 responses to an online survey and a series of focus groups of “leading risk executives” and C-suite officials conducted by Marsh, the big insurance broker, and RIMS in January
and February, was “Which risk management techniques does your organization use to assess/model emerging risks?” The answer given by the most respondents, including 60 % of the risk managers and 43% of the C-suite was “claim-based reviews”, while 45 % and 30 % use analyses “developed by third parties”, and 38 % and 19 % use analytics. “The wide use of claims-based reviews … may indicate that companies are not quite assessing and modeling critical risks”, according to the report. “The overwhelming use of claims-based reviews suggests that organizations are relying on studying past incidents to predict how emerging risks will behave”, At the same time, boards are asking more and more of risk management departments, including “everything from leading enterprise risk management to providing better risk quantification and analysis”, according to the report. That’s creating a need for risk managers to intensify their ability to forecast previously unforeseen risks and consequently to change from “the analytics of a retrospective to a prospective view”, Brian Elowe, Marsh’s U.S. client executive leader
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Companies lag on forecasting critical risks and co-author of the report, told CFO at the RIMS conference. Relying solely on reviews is “a fully modeling risks, he telling where the (from).
insurance-claim-based retrospective” way of said. It’s not good at next issue is coming
A more prospective way for risk managers to proceed is to look at “leading indicators”, such as observing that “organizations that do X,Y, and Z tend to have less (risk) exposures than organizations who don’t”, Elowe added, and then to “build algorithms” to aid in their companies’ quantitative analysis of future risks. Elowe also suggested that corporate risk
management need not be driven by nearterm insurance industry complacency on such difficult to quantify, but potentially global-scale risks like climate change. His firm’s clients have shown a greater tendency to look at risk from the finance perspective of overall capital application, and are “tired” of insurance-productoriented approaches “coming at them through the lens of the insurance industry”. The Marsh/RIMS report notes that while such risks as “climate change, water crises, and large-scale involuntary migrations” are highlighted in the World Economic Forum’s 2016 report on global risk, they “tend not to appear on many organizations’ radar screens”.
Nevertheless, “respondents who consider these areas may be giving their organizations a chance for a competitive advantage and to plan more effectively”, according to the report. The report’s authors note, for instance, that one of the respondents, an unidentified vice president of risk management at a health care organization, said a recent incident had spurred him to think more about water supplies. “It’s something that I never really saw on the horizon. Now it’s going to be an exercise to say how are we going to address this as a company rather than letting each individual facility or operation try to figure out what they’re doing”, the risk manager reportedly said.
Marsh’s Elowe says that a way of gauging the significance of potential water scarcity and other looming, but hard-to-forecast risk requires risk managers to specify the potential impact of the problem on their companies. For instance, a manufacturer might calculate that a 10 % loss of water availability in a certain region might curtail production 12 %. “It boils down to business metrics”, he says.
BMW is the world’s most sustainable corporation. This is according to the Global 100 Most Sustainable Corporations in the World index released by Corporate Knights at this year’s World Economic Forum. Last year’s most sustainable corporation, Biogen, was ranked 30th this year. These companies have clearly performed well on a rigorous set of environmental and social criteria, but are they sustainable? We don’t actually know.
Source: CFO – By David M. Katz
The Global 100 ranks large, publiclytraded companies that pass a number of screening criteria on the basis of 12 key performance indicators (KPIs). The KPIs address issues such as energy, carbon, water, and waste productivity; innovation capacity; safety performance; leadership diversity; and a link of pay to clean capitalism; among others. Corporations are ranked against their global industry peers. The Global 100 has been developed through a thoughtful process with admirable transparency. It has made an important contribution in helping raise the profile of corporate sustainability assessment. However, it does not allow us to distinguish sustainable corporations from ones that are unsustainable. The creators of the Global 100 explicitly acknowledge that “determining which
incremental improvements on such a measure. Productivity alone, however, is not sustainability. Sustainability is fundamentally about whether nature and society can support the activity indefinitely. Therefore, to assess whether a level of carbon emissions is sustainable or not, we must consider the ability of the planet to absorb those emissions. We simply don’t know if incremental, productivity-oriented improvements may be deemed sustainable or not without that reference point.
companies are ‘sustainable’ and which are not is a challenging enterprise”. There is still no common understanding of what corporate sustainability performance entails. Difficulties in defining corporate sustainability, determining analytical boundaries, collecting data, and accommodating the needs of different industries are some of the challenges of measuring performance in this area. The Global 100 has made clear choices in each
of these areas. What is largely missing are linkages to the broader economic, environmental, and social context in which business activity takes place. A key performance indicator such as carbon productivity, for example, is important. Reducing the amount of greenhouse gas (GHG) emissions relative to revenue is a commendable goal and there is value in making
To determine if a corporation is sustainable or not we need to address three key questions, including how to decide what should be measured, what the appropriate reference points should be, and how resources and responsibilities should be allocated to different corporations. Each of these questions is difficult to address because they involve normative judgments. There is no one correct formulation, but they must all be answered with the broader sustainability context in mind. This is a foundation of measuring corporate sustainability. Determining what should be measured is challenging because of the broad scope of corporate sustainability. For environmental issues, the Planetary Boundaries concept
Sostenibilidad Without a definition of corporate sustainability, how to measure performance? provides an example of a science-based reference point for key environmental thresholds. This could provide a starting point for identifying environmental performance indicators. For social issues, science-based reference points are in an earlier stage of development. The new UN Sustainable Development Goals offer one potential starting point from a public policy perspective. Further tailoring would be required, however, since no corporation could be expected to contribute to all 17 goals and 169 targets. That said, there will inevitably be debate on what environmental and social KPIs should be used to assess sustainability. Selecting a reference point for some issues is easier than others. Carbon emissions
are a global issue and there is widespread agreement on the need to limit the rise in global mean temperature to less than 2°C, relative to pre-industrial levels. Over 120 companies have committed to taking action on climate change through the Science Based Targets initiative. Other environmental issues, however, may not be as straightforward. Determining a sustainable level of water usage, for example, would need to be done with reference to the capacity of regional watersheds. Additionally, sciencebased reference points for social issues are, in many cases, difficult to identify since expectations are generally more normative in nature. Even if agreed upon KPIs and reference
points can be established, there is a need to determine what these mean at the corporate level. If, for example, it is agreed that global greenhouse gas emissions must be limited in order prevent a mean temperature rise of 2°C, what is the permissible level of emissions for any one corporation? Existing proposals include allocations based on the corporation’s contribution to GDP or the size of its workforce. These are innovative approaches that provide a needed starting point, but they strongly favor existing large corporations. Assigning resources and responsibilities to individual corporations is a difficult challenge.
The Global 100 provides interesting, transparent, relative comparisons between corporations on a set of clearly defined KPIs. It is a commendable effort. However, it does not tell us if companies are operating within environmental limits or if they are making positive contributions to the things society values most. These are the issues that fundamentally underlie whether a corporation is sustainable or not. Future work in this area should focus on identifying key performance indicators with clear science- or public policybased targets for global and regional sustainability and on how these may be translated to the corporate level.
Are any of the corporations in the Global 100 sustainable? We can’t be sure.
Source: LSE Business Review – By Cory Searcy
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Why sustainability should be embedded in HR But for organizations to succeed in this new global context, current and future leaders will need a host of new skills and competencies and organizational incentives will need to align with strategic sustainability priorities. HR professionals can influence and enable this strategic shift. Values-based companies
There’s an urgent challenge for human resources leaders: Ensuring their organizations anticipate and prepare for the inevitable effects of sustainability mega-forces. As globalization, shifting demographics and competition for the world’s depleting resources compel transformational change, companies will need enlightened and sustainability-savvy leadership to thrive in this brave new world. HR has a significant role to play to align talent with these emerging realities. Sustainability mega-forces will affect the ability of organizations to succeed
and thrive over the coming decades. The global population is expected to balloon from seven to nine billion people by 2050, forcing companies to reinvent themselves in order to secure access to resources and the social license to operate and grow. Just as concerning, the income inequality gap continues to widen, further threatening social cohesion. Adaptive organizations that anticipate, plan for, and help alleviate these trends will build resilience and competitive advantage while contributing to a more viable society.
Employees increasingly prefer to work for organizations that reflect their values. Millennials want to build careers with organizations that are making a positive difference. Mid-to-late career professionals, on the other hand, may contemplate leaving their organizations to fulfill a desire to contribute to the greater good. So how can we evolve HR’s role within organizations to attract and retain these employees? Corporate social responsibility (CSR) is strongly correlated with high employee engagement and thus organizational productivity and innovation. Companies with strong CSR and sustainability programs enjoy higher morale and loyalty. HR professionals occupy the key desk to help foster good internal CSR results
Why sustainability should be embedded in HR and build it into the employee value proposition. Sustainability central to HR portfolio The business discipline of sustainability and corporate social responsibility has only really emerged over the past two decades. Originally, CSR was a philanthropic, compliance or operational issue, but given the new business context and rising expectations from investors, customers, government and employees, CSR is increasingly a strategic issue for companies. For the 21st-century organization, social and environmental trends present both global risks and opportunities, which affect operations as well as suppliers and customers. Social and environmental issues are now, more than ever, executive and boardroom issues. As such, CSR considerations are central to the HR portfolio. Tools to help There are many resources to help HR managers become proficient in embedding CSR into the employee lifecycle and experience (see list of resources at the end of this article). If done correctly, HR
can support an organization to become future-fit, helping to embed social and environmental factors into:
• • • • • • • • •
Corporate purpose, vision, mission, values and strategy. Employee code of conduct. Workforce planning and recruitment. Orientation, training and competency development. Compensation management.
and
performance
Change management and corporate culture. Employee engagement.
involvement
and
Employee communications. Celebrating success.
These steps are inextricably linked to HR’s
core competencies, including the ability to increase the attractiveness of the employer to desirable potential employees; to create a workforce plan by identifying future talent needs to support the organization’s goals and objectives; and to identify organizational learning priorities aligned with the business strategy. CSR critical to succession planning Not far from this issue lies the matter of CEO succession planning. With CEO turnover at about 16 per cent and retirements a top driver of CEO renewal in 2014, according to outplacement consulting firm Challenger, Gray & Christmas and given the relationship between effective sustainability performance and firm success boards and their HR advisors must ensure they have adequately included sustainability and CSR factors in their succession plans and search criteria.
There are six critical CSR requirements for CEO succession planning and recruitment:
• • • • • •
“Values” role model. Externally aware. CSR strategist and change manager. Collaborates with stakeholders. Catalyst and advocate. Develops responsible leaders.
As CEOs set the tone at the top, getting this right will be essential for CSR and sustainability progress at any organization. Motivating sustainability-conscious behavior HR managers will also need to play a lead role advising on sustainable pay metrics and bonus-able goals. Organizations have a long way to go getting the right
incentives in place. While many companies include social and environmental factors in executive compensation plans, most are compliance-focused and backwards looking, and few have actual targets. HR managers can play a stronger role building organizational insights in this area and aligning incentive compensation with strategic sustainability objectives. A value-added HR professional will support the organization to anticipate and manage these profound labor market and societal shifts to foster business and social success. HR managers must find ways to bring CSR and sustainability into scope when sourcing and optimizing talent. This helps achieve organizational outcomes to realize CSR’s power as a top driver of employee engagement and retention. Source: Sustainable Brands – By Coro Strandberg
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Transparency drives sustainability Companies are facing more demand by regulators, investors and customers to be transparent in their environmental, social and corporate governance. Business leaders can no longer be complacent and be satisfied simply with financial performances. There are several motivations for companies to make sustainability a business priority. In some instances, it is a fundamental part of a company’s business model. In others, companies are driven by economic imperatives, or are reacting to adverse events that have already affected the firm negatively, such as allegations of child labor or toxic spills. But whatever an organization’s disposition towards sustainability may be, there is a growing demand coming from several quarters for companies to be more transparent in their environmental, social, and corporate governance - known as ESG - practices. Business leaders can no longer be complacent and rely on financial performance alone – ESG metrics are increasingly being factored into any evaluation of companies. Investors, regulators, and customers alike are increasingly demanding more transparency from firms. The regulatory imperative In Europe in September 2014, the Council of
Transparency drives sustainability the European Union amended their company reporting requirements to improve the transparency of certain large companies on social and environmental matters. EU Member States will transpose the rules into national legislation by December 2016 so that large public interest enterprises with more than 500 employees will report on ESG matters.
borders with its control of capital.
company’s success: their customers.
In the US alone, between 2012 and 2014, the number of money managers and institutional investors who identified ESG factors in investment decisions grew by 3.4 times to represent a total of over US$4.8 trillion in assets under management.
In the United States, companies have seen more modest regulatory demands on reporting. The Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 gave authority to the Securities and Exchange Commission (SEC) to implement rules for increased disclosure from publically traded companies. However, few rules have actually been issued.
While professional investors have been expanding their tools and strategies around ESG, retail investors are gaining new capabilities as well.
In the business-to-business (B2B) space, firms will increasingly demand ESG disclosures from their suppliers and partners to satisfy their overall sustainability strategy. For example, Nike assesses their suppliers on sustainability factors in addition to the normal factors like cost, quality, and on-time delivery.
In Asia, a region with a historically weak record on ESG transparency, many stock exchanges are revamping their ESG disclosure rules to meet growing global demand for better transparency of risk. Hong Kong, Singapore and Taiwan are in the process of introducing new reporting rules on listed companies to provide greater insight into their ESG practices.
Also in the US, companies like Motif Investing provide easy-to-use consumer investment tools with access to thematic investment options that include ESG-related themes. For instance, investors can choose from “ValuesBased Motifs” such as “Cleantech Everywhere” and “Income Inequality”. Aspiration whose tagline reads “Investing. With a Conscience” has partnered with the Sierra Club to expand their sustainable investment options in companies that reduce carbon emissions, embrace renewable energy, or are reducing their dependence on fossil fuels.
The investor imperative
The customer imperative
While regulatory efforts can be compelling motivations within certain jurisdictions, investors have a global influence that spans
But perhaps the biggest motivation for companies to change their ESG behavior will come from the ultimate arbitrator of a
One thing is for sure: with greater transparency driven by regulatory and market forces, organizations will increasingly be held accountable for their ESG-related behavior. In the business-to-consumer (B2C) space, this is more challenging as consumers often do not consider ESG factors; and if they do, it is limited, taking the forms of hashtag activism on social media or online petitions. Change seems to be afoot, however. According to a Nielson global online study published in December 2015, 66 per cent of global respondents say they’re willing to pay more for products and services that come from companies that are committed to positive social and environmental impact, up from 55 per cent in 2014, and 50 per cent in 2013. As commerce around the world has been shifting significantly to online and mobile experiences, consumers will increasingly get a chance to impose their ESG-related
preferences and choose products and companies for more than just their prices. The journey As the sustainable practices of firms are brought under scrutiny, the need for consistent and comparable disclosure has become an urgent imperative. Some of the major providers of sustainability reporting include the Global Reporting Initiative’s Sustainability Reporting Standards, the OECD Guidelines for Multinational Enterprises, the United Nations Global Compact’s Communication on Progress, and the ISO 26000 International Standard for social responsibility. As companies consider the frameworks that would be most applicable to them, the frameworks themselves are evolving to meet the needs of firms and their stakeholders, as well as enable reporting parity between standards. The GRI, for instance, continues to refine their reporting standards. In April 2016, the organization announced revisions to their framework. According to Eric Hespenheide, Chair of the Global Sustainability Standards Board, the proposed changes “are evolving into a new set of modular, interrelated GRI
Standards to enable reporting organizations to make a greater contribution to sustainable development and meet emerging stakeholder needs by enhancing the quality, comparability and accessibility of sustainability information”. The full ecological and social impact of a firm is a complex problem to address. But the good news is: information technology is improving the firms’ and their stakeholders’ ability to identify, measure, track, and compare impact. While it’s fair to say that disclosure alone does not necessarily mean a firm is living up to its full sustainability potential, nonetheless, transparency can drive competition for capital and sales. One thing is for sure: with greater transparency driven by regulatory and market forces, organizations will increasingly be held accountable for their ESG-related behavior.
Source: Eco-Business – By Steve Harbick
Sustainability the key to long-term corporate health The world we live in is undergoing extraordinary change, the like of which has never been seen before.
backed by the United Nations put the cost to the global economy of the damage done to the natural world by humans at between $2tn-$4.5tn a year.
Driving this transformation is an unprecedented explosion in the human population, accompanied by a remarkable surge in economic growth and wealth creation. The consequences for the natural world that supports us all are both serious and, in some cases, potentially irreversible. Indeed, the numbers, many of which are outlined below, are as alarming as they are revealing. On the one side we have what academics refer to as the Great Acceleration - for example, a massive upswing in demand for food and water, energy use, greenhouse gas emissions, fertilizer consumption and ocean acidification. On the other, a plundering of Earth’s finite natural resources and a destruction of its natural habitats from deforestation and soil degradation to collapsing fish stocks and species extinction that cannot be sustained.
But there is a growing realization that these largely unintended consequences of our species’ success cannot be left unchecked, for the very simple reason that they will ultimately impact severely on our ability to prosper. Action is needed, and it falls to business, along with society at large and the political establishment, to drive this change. Rapid change And change is already afoot. A growing number of businesses, both big and small, new economy and old, are embracing the sustainable agenda. If nothing else, the economic cost of inaction is simply too great. Indeed, a recent study
core [activity], but they are now realizing [these issues] are central to their ability to function as a growing business”. Trailblazers such as consumer goods giant Unilever and retailer Kingfisher were driven by visionary bosses, in this case Paul Polman and Ian Cheshire, who believed embracing sustainability was not just the right thing to do but was in the best long-term interests of the company. Reducing costs is an obvious start, such as implementing energy efficiencies. Many have gone a step further, with established giants such BMW, Coca-Cola, Goldman Sachs, Google, H&M, Ikea, Nike and Walmart among many others that have committed to 100 % renewable energy.
And these costs will increasingly fall to companies, and of course their customers, as they are forced to pay to protect or replace the natural resources upon which their business depends. As Polly Courtice, director of Cambridge University’s Institute for Sustainability Leadership, says: “For a long time companies separated out sustainability issues from their
Sustainability the key to long-term corporate health repurposed once their natural life comes to an end.
Equally, relying on finite and dwindling resources that will inevitably become more expensive is no recipe for long-term success. Identifying these risks in the supply chain early is key to securing the long-term sustainability of the business itself.
The financial community is also waking up to the sustainable agenda, with an increasing number of fund managers and pension funds engaging with companies to highlight the risks of inaction.
Some companies, such as sportswear group Puma and its owner Kering, are pioneering so-called environmental profit and loss accounting, where the business’s environmental impact is costed precisely throughout its entire supply chain.
The stranded assets campaign, which identifies the dangers of over-valuing fossil fuel reserves that will have to stay in the ground if dangerous climate change is to be avoided, has been particularly successful, with more than 500 global institutions so far divesting almost $3.5tn from energy companies around the world.
Increasing regulation is also forcing change, as governments use instruments such as pollution taxes and a meaningful carbon price, which is inevitable given the need to cut emissions from fossil fuels, to help achieve ambitious climate-change targets.
In this way, more and more companies are finding that sustainability can be a key driver of revenue growth.
But it’s not just about avoiding business risks, it’s about embracing opportunity the benefits of enhancing brand reputation in a world where consumers are becoming increasingly environmentally aware may be harder to quantify, but are no less rewarding long term.
Indeed, many are engaging increasingly with both the sharing economy, where swapping, renting and sharing replace ownership of goods and services, and the so-called circular economy, where one company’s waste is another’s resource and where products are designed to be
“Most companies are still focused on the relatively short term, on the next quarter’s numbers”, says David Symons, director of consultancy WSP Parsons Brinckerhoff. As long as company boards focus on short-term profit and shareholder returns, the longer-term demands of a more sustainable business will suffer. And despite widespread change in public attitudes, consumer inertia remains an issue, as value understandably remains a key priority in times of economic stress. This is why, argues Ms. Courtice, the burden of driving change falls largely on the corporate sector. “Companies have to lead... they can make decisions quickly that the political system can’t”, she says. The long-term health of their businesses, and the health of the planet that ultimately sustains us all, depends upon it.
‘Short-termism’ There remain, however, obstacles to change.
significant
“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.”