IFAC has developed this Model Guide based on Good Governance: A Code for the Voluntary and Community Sector (The Code), created by the Code Steering Group, comprised of the Association for Chief Executive Officers (ACEVO), the Charity Trustee Networks (CTN), the Institute of Chartered Secretaries and Administrators (ICSA), and the National Council for Voluntary Organisations (NCVO), and supported by the Charity Commission for England and Wales. The Model Guide has been specifically developed to assist PAOs in

The International Federation of Accountants (IFAC), the global organization for the accountancy profession with 172 members and associates in 129 countries, today applauded the release of the proposed International Integrated Reporting Framework by the International Integrated Reporting Council (IIRC). The Framework is expected to be a critical tool for businesses as they create integrated reports and drive integrated thinking in their organizations.

Integrated reporting is the next step in the evolution of corporate reporting and communications, helping organizations to communicate a clear and candid picture of their performance to investors.

“The accountancy profession plays a vital facilitating role in bringing integrated reporting to more organizations, and the Framework will help guide organizations and professional accountants in this process,” said IFAC President Warren Allen, who is also a member of the IIRC Council. “Feedback from individual accountants and the profession on the proposed Framework is critical.”

IFAC has been a proactive participant in the development of the Framework, and is a co-founder of the IIRC. In addition to Mr. Allen serving on the IIRC Council, Ian Ball, former IFAC CEO and current principal advisor, chairs the IIRC Working Group. IFAC also has a staff member who has been seconded to the IIRC on a full-time basis.

The IIRC is asking all stakeholders to provide feedback on the International Integrated Reporting Framework during its public consultation period, which closes July 15, 2013. The Framework has been released in English but will also be available soon in additional languages.

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 172 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

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Presentation given to the Federation of Accounting Professionals in Thailand during a seminar on the IFAC Statements of Membership Obligations (SMOs). The presentation includes information what the SMOs are, their importance, the November 2012 revisions, and what organizations need to understand and do to apply the SMOs.

Szymon Radziszewicz, IFAC Senior Technical Manager, recently held a seminar with the Philippine Institute of Certified Public Accountants (PICPA) on how the approach to building and strengthening professional accountancy organizations is changing as the global landscape changes. The presentation featured the relevant economic and global changes since the global financial crisis began and how regulation of the accountancy profession has shifted. IFAC’s strategic global position and policies are also detailed.

Attendees at the seminar included top officials of the Philippine Securities and Exchange Commission and the Board of Accountancy and representatives of the top firms, the small- and medium-sized practices community, and the Philippine government.

Welcome to IFAC's Small and Medium Practices (SMP) Committee eNews.

In This Issue:

SUSTAINABILITY 

1. Sustainability: Challenges and Opportunities for SMPs and SMEs
2. Updated Good Practice Checklist Features Environmental Management

STANDARDS AND REGULATION

3. Closing Soon: IAASB Consults on Audit Quality Framework
4. SMP Committee Contributes to Standard Setters’ Key Projects and Strategic Planning
5. IFRS for SMEs Update

RESOURCES AND EVENTS

6. Registration Closing Soon: 2013 IFAC SMP Forum
7. World Congress of Accountants 2014 to be Held in Rome; Sponsorship Opportunities Available

SUSTAINABILITY

1. Sustainability: Challenges and Opportunities for SMPs and SMEs

Small- and medium-sized entities (SMEs) might think that sustainability is only relevant to large companies. Maybe they think they cannot afford to be sustainable, that measuring and managing environmental performance amounts to a costly and unnecessary burden. Moreover their accountants, both those employed by the business (accountants in business) and those providing services to the business (accountants in practice), will tell you it is a hard sell getting SMEs to embrace sustainability. However, SMEs that integrate sustainability into their core business strategy can benefit from lower costs, reduced risk, and new opportunities. And their accountants, typically operating in SMPs, can play a key role in their journey.

SMEs and the Benefits of Sustainability

SMEs are crucially important to the health and stability of the global economy: they account for over 95% of all businesses and for the majority of private sector gross domestic product (GDP), wealth and employment creation, and social and environmental impacts. Meanwhile, there is immense pressure on the natural environment and a recognition that finite resources are fast depleting. Today, SMEs are increasingly being faced with pressure to measure and manage their impact on the environment. They are an integral part of the supply chain where there is a growing demand for sustainability management both from customers and suppliers, especially for those SMEs seeking to secure contracts with governments or larger companies. SMEs also need to ensure they have access to the resources they need to be able to continue offer their products and services in the future.

That said, many SMEs may still feel they can delay addressing sustainability issues. Our global SMP poll indicates there are other more urgent issues preoccupying businesses, including economic concerns and keeping up with new standards, prompting sustainability to slide down their list of priorities. This may explain why few SMPs are presently offering sustainability services. But in the longer term, the sustainability issue is here to stay.

The good news is that there is growing evidence that sustainability initiatives, such as those to reduce an SME’s carbon footprint, can also help improve their bottom line.

2. Updated Good Practice Checklist Features Environmental Management

The second edition of the Good Practice Checklist for Small Business is now available. This multi-part checklist features a new standalone section on environmental management. Other sections cover financial and strategic management tasks and regulatory requirements, among others. The checklist is meant primarily for SMPs as a marketing or diagnostic tool to help them determine the advice a small business client may need, and also to help them in managing their own businesses. Six translations of the checklist have either been completed or are in progress.

STANDARDS AND REGULATION

3. Closing Soon: IAASB Audit Quality Framework Consultation

The comment period for the International Auditing and Assurance Standards Board (IAASB)’s Consultation Paper, A Framework for Audit Quality, will close on May 15, 2013. Through the proposed framework, the IAASB aims to raise awareness of the key elements of audit quality, encourage stakeholders to explore ways to improve audit quality, and facilitate greater dialogue on the topic. The SMP Committee plans to submit a comment letter and encourages individual SMPs to comment as well. 

4. SMP Committee Contributes to Standard Setters’ Key Projects and Strategic Planning

IAASB

The SMP Committee provided comments to the International Auditing and Assurance Standards Board (IAASB) on its auditor reporting project prior to their February meeting. See the IAASB February Meeting Page for the agenda papers, highlights, and podcast. In advance of the IAASB April Meeting, the committee will provide further comments on this project as well as the IAASB’s work addressing disclosures, International Standard on Auditing (ISA) implementation monitoring, and International Standard on Assurance Engagements (ISAE) 3000.

The IAASB is seeking comments, insights, and views from all stakeholders to help shape its future direction for 2015 and beyond via the Strategic Review Survey. Responses to the survey will inform the development of a formal Consultation Paper to be issued in late 3013. The SMP Committee plans to submit a response and encourages individual SMPs to comment as well.

IESBA

In early March, the committee responded to the International Ethics Standards Board for Accountants (IESBA)’s online survey, which was conducted as part of the IESBA’s strategic review to develop its strategy and work plan for the period 2014-2016. The survey has now closed and the IESBA will consider the survey responses in upcoming meetings.

5. IFRS for SMEs Update

In 2012, the International Accounting Standards Board (IASB) issued a Request for Information (RFI) to begin its comprehensive review of the International Financial Reporting Standard for Small- and Medium-Sized Entities (IFRS for SMEs). The objective of the RFI was to publicly consult on whether amendments are required to the standard. Last month, the IASB began to discuss issues relating to the scope of the standard, including whether or not the standard should be used by publicly accountable entities. See the IASB’s March Meeting Page to access the agenda papers and audio recording. See a summary of decisions in the March IASB Update.

EVENTS

6. Registration Closing Soon: 2013 IFAC SMP Forum

The 2013 IFAC SMP Forum will be held in Kampala, Uganda, on June 5, 2013, and jointly hosted with the Institute of Certified Public Accountants of Uganda (ICPAU) and the Pan African Federation of Accountants (PAFA). Each IFAC member organization may send up to ten delegates, who should be those responsible for SMP/small- and medium-sized entity (SME) affairs at their organization. Registration forms have been sent to IFAC member organizations. If you are an individual member of an IFAC member organization and wish to attend, please register your interest with your organization as soon as possible, as the deadline for registration is April 30, 2013. More information will be posted as it becomes available.

7. World Congress of Accountants 2014 to be Held in Rome; Sponsorship Opportunities Available

The next World Congress of Accountants (WCOA) will be hosted by the Consiglio Nazionale dei Dottori Commercialisti e degli Esperti Contabili (CNDCEC) in Rome, Italy, in 2014. Themed 2020 Vision: Learning from the Past, Building the Future, the 2014 WCOA will be held November 10-13 at the Auditorium Parco della Musica. More than 4,000 professionals from all over the world will convene at this can’t-miss IFAC event, held every four years. WCOA 2014 will look back to explore the evolution of the accountancy profession and forward to showcase the innovations that will set the tone for the future.

The WCOA also affords an unparalleled opportunity for organizations and firms to share their projects and visions with the world by taking advantage of one of our carefully crafted sponsorship packages. There are numerous options so you’ll be able to select the one that best suits your organization’s unique strategy and goals.

Small- and medium-sized entities (SMEs) might think that sustainability is only relevant to large companies. Maybe they think they cannot afford to be sustainable, that measuring and managing environmental performance amounts to a costly and unnecessary burden. Moreover their accountants, both those employed by the business (accountants in business) and those providing services to the business (accountants in practice), will tell you it is a hard sell getting SMEs to embrace sustainability. However, SMEs that integrate sustainability into their core business strategy can benefit from lower costs, reduced risk, and new opportunities. And their accountants, typically operating in small- and medium-sized practices (SMPs), can play a key role in their journey.

SMEs and the Benefits of Sustainability

SMEs are crucially important to the health and stability of the global economy: they account for over 95% of all businesses and for the majority of private sector gross domestic product (GDP), wealth and employment creation, and social and environmental impacts. Meanwhile, there is immense pressure on the natural environment and a recognition that finite resources are fast depleting. Today, SMEs are increasingly being faced with pressure to measure and manage their impact on the environment. They are an integral part of the supply chain where there is a growing demand for sustainability management both from customers and suppliers, especially for those SMEs seeking to secure contracts with governments or larger companies. SMEs also need to ensure they have access to the resources they need to be able to continue offer their products and services in the future.

That said, many SMEs may still feel they can delay addressing sustainability issues. Our global SMP poll indicates there are other more urgent issues preoccupying businesses, including economic concerns and keeping up with new standards, prompting sustainability to slide down their list of priorities. This may explain why few SMPs are presently offering sustainability services. But in the longer term, the sustainability issue is here to stay.

The good news is that there is growing evidence that sustainability initiatives, such as those to reduce an SME’s carbon footprint, can also help improve their bottom line. SMEs of all shapes and sizes—for profits and not-for-profits, public or private, across all industrial sectors—stand to yield significant benefits from adopting sustainable business practices. The initial cost of integrating sustainability into the core business strategy, and reporting on it, can be more than offset by cost savings, reduced risk, positive brand association, and the ability to meet consumer, investor, and supplier demand for environmentally conscientious products and services. In this way, the initial cost is more an investment.

Opportunities for SMPs

Accountants working in SMEs can help their employers at each step of the way, from advising on the costs/benefits of behavioral changes aimed at reducing waste, to investment in new equipment and alternate sources of energy, to developing a comprehensive environmental management system (EMS). However, many SMEs lack the capability to this without outside help. They will likely seek the help of someone they trust, their accounting firm, a demand that can generate new revenue opportunities for SMPs. But first SMEs need to know that they can expect assistance of this nature from their accountants.

Given that SMEs are keen to realize the financial benefits of adopting more sustainable practices, a starting point for SMPs might be to offer to help their clients implement the plan-do-check-act method for the control and continuous improvement of processes and products. This advisory service could include improving business opportunities and creating efficiencies, identifying the risks to cash flow that social, economic, and environmental change will present, and ensuring that clients or employers take advantage of the cost reductions, minimize any cost increases, and maximize the potential revenue by adopting business strategies that identify and address those sustainability issues that are most relevant to their particular business circumstances. In addition, SMPs might wish to encourage their SME clients or employers to have an EnviroReady Report, an engagement based on ISRS 4400 that confirms that the business has an environmental management system (EMS) in place that meets the requirements in ISO 14001:2004.

Some accountants might also help SMEs do some form of sustainability reporting, such as the Global Reporting Initiative’s Level C. They could employ a step-by-step approach of making a public commitment to take action, assessing the business’s impact, setting targets for reducing impact, acting to reduce impact, and publishing the business’s policies and actions. Some SMPs are already helping their clients to develop metrics and the systems needed to capture and report on the metrics. If reporting is deemed valuable, SMPs could progressively do more, culminating in getting some form of assurance on what the client/employer reports, perhaps using the IAASB’s ISAE 3000 series of engagement standards, such as ISAE 3410 for greenhouse gas emissions.

Initial Steps in Offering a Sustainability Service

An ACCA report suggests that SMPs take the following steps to ensure they have the prerequisite expertise to offer a sustainability service:

1. Build partnerships—SMPs should establish collaboration with local environmental sustainability experts in order to gain local access to credible knowledge.

2. Gain experience—This begins in the SMP’s own business. Practitioners should review the environmental sustainability of their own business and then use that valuable experience to have rounded, relevant conversations, based on genuine experience, with their clients.

3. Seek information—Practitioners should familiarize themselves with information sources that they could recommend to others or use to broaden their own knowledge.

4. Formalize commitment—Where appropriate, practitioners should formalize their commitment to offering environmental sustainability advice through marketing and awareness raising in newsletters, their documentation, and website.

Ultimately, offering a sustainability service can help SMPs both add value to the services they offer and help their clients/employers improve the way they run their businesses. Applying the same principles to the practice itself can help accountants improve the way they run their own businesses as well. Does your practice offer a sustainability service? If so, we’d love to hear about it. Please describe your experience and any advice you would give.

Investors and other stakeholders want to know what makes companies tick; at the same time, regulators are increasingly requiring companies to report clearly on their business models. In response, the Chartered Institute of Management Accountants (CIMA), the International Federation of Accountants (IFAC), and PwC, at the request of the International Integrated Reporting Council (IIRC), today released a background paper, Business Model, which highlights the business model as being at the heart of integrated reporting.

Currently, there is wide variation in how organizations define their business models and approach to disclosure. This highlights the need for a clear, universally applicable, international definition of a business model. The proposed definition and discussion in the paper aim to bridge the varied interpretations by highlighting common areas and ensuring a consistent application across industries and sectors.

The background paper found that, in a complex financial climate that has seen investors demand greater transparency, reporting on business models is currently inconsistent, incomparable, and incomplete because of a lack of consistent guidance.

Charles Tilley, chief executive of CIMA said:

“Corporate reporting plays an essential role in the effective functioning of the market economy. Corporate reports have become more complex yet provide less insight to investors on how value is created or destroyed. Integrated reporting will involve a change in mind-set for many organizations as they think about how to better communicate strategy, performance, and prospects. High-quality business model reporting is critical to helping investors better understand performance in terms of the impact external factors have on an organization, and how organizations create value that is sustainable over time.”

Mark O’Sullivan, director, PwC, commented:

“A previous review of narrative reporting practices which are summarized in this background paper shows that very few companies clearly articulate their business model—what they do, what they rely on, and what sets them apart from the competitors. PwC research found that 77% of the FTSE 350 mention business models in their accounts, but only 40% provide insightful detail about those models. And only 8% integrate business model reporting with strategy and business risks.

“This information is critical if investors are going to form a view of how they create and sustain value. The pace of technological change and growing complexity of business relationships will only increase the demand for insights into strategy and business models. It will also challenge the relevance, reliability, and timeliness of the information businesses use to back up reporting of their performance and prospects.”

Ian Ball, IFAC principal advisor and chair of the IIRC Working Group, commented:

“An understanding of the business model is at the center of integrated reporting. Being able to communicate effectively on an organization’s capitals, business activities, products and services, and the outcomes they generate is essential if a company is to communicate how it creates value over time. The concept of the business model is also critical to understanding other areas of integrated reporting, such as the concepts of materiality and capitals.”

The paper comes in advance of the IIRC’s International Integrated Reporting Framework due to be released for comment on April 16, 2013.

In addition to providing the background and the context to how business model reporting should be undertaken in an integrated report, the background paper suggests content for business model reporting to be presented in the proposed framework.

About CIMA
The Chartered Institute of Management Accountants, founded in 1919, is the world’s leading and largest professional body of Management Accountants, with over 203,000 members and students operating in 173 countries, working at the heart of business. CIMA members and students work in industry, commerce, the public sector and not-for-profit organizations. CIMA works closely with employers and sponsors leading-edge research, constantly updating its qualification, professional experience requirements and continuing professional development to ensure it remains the employers’ choice when recruiting financially-trained business leaders.

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 173 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.

About PwC
PwC firms provide industry-focused assurance, tax and advisory services to enhance value for their clients. More than 161,000 people in 154 countries in firms across the PwC network share their thinking, experience and solutions to develop fresh perspectives and practical advice. See pwc.com for more information.

Additional insights into reporting–including business models–can be found at:

PwC paper on Business models
http://www.pwc.co.uk/reporting-assurance/publications/business-models-back-to-basics.jhtml

PwC research on reporting–including business models
http://www.pwc.co.uk/audit-assurance/publications/trust-through-transparency.jhtml

Contact:
Laura Wilker
Head of Communications, IFAC
+1-212-471-8707
laurawilker@ifac.org

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Investors and other stakeholders want to know what makes companies tick; at the same time, regulators are increasingly requiring companies to report clearly on their business models. In response, IFAC, with the Chartered Institute of Management Accountants (CIMA) and PwC, and at the request of the International Integrated Reporting Council (IIRC), have released this background paper, which highlights the business model as being at the heart of integrated reporting.

Presentation given by Yacoob Suttar, chair, Institute of Chartered Accountants of Pakistan (ICAP)'s Professional Accountants in Business Committee during ICAP's CFO Conference 2013, CFO: Meeting Future Challenges!

IFAC recognizes the importance of high-quality auditing and acts to promote and enhance audit quality around the globe, including supporting the development, adoption, and implementation of high-quality, internationally accepted auditing and quality control standards, promoting the need for global regulatory convergence, and supporting the development of strong professional accountancy organizations and accountancy firms.