The four-year-old global effort to align global corporate accounting standards to enhanced transparency and sustainability principles has been called into question by the new head of the Securities and Exchange Commission (SEC) in the United States.
SEC chair Paul Atkins, in a speech at a Paris roundtable on global financial markets, warned the International Sustainability Standards Board (ISSB) is improperly pursuing “political and social agendas” that are “specious and speculative.”
Atkins urges the International Financial Reporting Standards (IFRS) programme to concentrate its resources on the mainstream work of the International Accounting Standards Board (IASB) to improve pure financial documentation.
The IFRS trustees “are now responsible for securing funding for both the IASB and the ISSB. This recent expansion of the IFRS Foundation’s remit cannot divert its focus from its long-standing core responsibility of funding the IASB,” Atkins said during the keynote at an Organisation for Economic Co-operation and Development event on 10th September
Formed in 2021, ISSB is developing baseline disclosure standards whereby financial market participants can assess sustainability generally and climate impacts in particular. Last year, the World Bank announced its endorsement of IFRS accounting standards and the effort to reward developing countries for adopting the framework to enable capital-raising.
“The IASB must promote high-quality accounting standards that are focused solely on driving reliable financial reporting and are not used as a backdoor to achieve political or social agendas,” the SEC chair complained. “I encourage the IFRS Foundation to meet its goal for ‘stable funding’ that prioritises the IASB and its focus on standards for financial accounting, rather than specious and speculative issues.”
Atkins, who took office at the SEC in April of this year, is an appointee of President Donald Trump. The Trump White House has attacked a multitude of corporate environmental, sustainability and governance (ESG) policies. Some participants view the Atkins speech as sending a signal to the global accounting community.
“This is kind of a shot across the bow on all those issues,” former SEC general counsel Dan Goelzer told Treasury Today in an interview. “It’s quite clear that the current administration of the SEC is not sympathetic to sustainability disclosure or climate disclosure.”
Atkins warns that the US government may end certain cooperation with the IFRS effort.
“If the IASB does not receive full, stable funding, then one of the underlying premises for the SEC’s elimination of the reconciliation requirement for foreign companies in 2007 may no longer be valid, and we may need to engage in a retrospective review of that decision,” Atkins vowed.
Goelzer, who was a member of the Sustainability Accounting Standards Board in 2017-22, said revisiting the idea of requiring overseas companies to align with generally accepted accounting principles (GAAP) may be welcomed by some, but certainly not all.
“The foreign companies will be very much opposed to reconciling their financial statements with GAAP, because it’s expensive,” Goelzer said.
In a note to Treasury Today, the IFRS Foundation said cooperation continues with US partners. The foundation is working through a two-year efficiency process that includes a “long-term funding strategy” to fulfil its mandates.
“The SEC is an important stakeholder, and we continue to maintain close dialogue with its leadership and staff,” the statement said. “The IASB and the ISSB operate and are funded independently – a key consideration when the ISSB was established – whilst their respective standards do not impose requirements on each other.”
Among the trustees of IFRS Foundation with US corporate ties are former longtime Procter & Gamble audit executive Ken Robinson and Rudolf Bless, who was Bank of America’s chief accounting officer from 2014 until this year. Newly appointed trustee Hans-Ulrich Engel was a financial executive at BASF in the US as well as at the company’s German headquarters.
