International Green Accounting

By Donald Sutherland
April 1998

The Author is an Independent Consultant on corporate environmental performance and a member of the U.S.Technical Advisory Group to ISO14000 (the International Organization on Standardizationīs environmental management standard). → See also:

One size fits all has never been a popular concept for the standardization of financial reporting internationally, but the world is getting smaller and big businesses are pushing standard setting bodies to close the gap between nations.

This year a global environmental accounting standard is under consideration by the International Accounting Standards Committee (IASC), pitting the strict US Securities and Exchange Commissionīs (SEC) standards against IASCīs.

The release of new international accounting standards is expected in September and the emergence this Spring of the World Bank, United Nations, and International Federation of Accountants (IFAC) environmental guidance documents has added pressure to the IASC to come out with an environmental standard.

The Federation of European Accountants (FEE) have also requested the IASC to add stricter environmental accounting guidance procedures.

"We are aware of the output on the subject, and at the present time IASC has a very busy work program which we have agreed with IOSCO (the International Organization of Securities Commissions) to complete a core set of international accounting standards", says Sir Bryan Carsberg, Secretary-General of IASC.

"Many of our general standards have applicability to environmental issues, but we shall be giving consideration to whether or not we should amplify some of our standards in order to deal with environmental issues explicitly," says Sir Carsberg.

US multinationals already applying the SECīs accounting procedures and rules claim they are disclosing more financial information then their competitors traded on securities markets without environmental accounting standards.

"Itīs not fair that we are disclosing our environmental performance in financial detail while foreign corporations in other market donīt have to", said Warren Norrid, Director of External Affairs for Chrysler.

"They should be reporting on the same level as we do," he says.

US based corporations with extensive foreign holdings also complain of the duplicity of filing other countries accounting and audit rules in addition to SEC generally accepted accounting procedures (GAAP).

"The deepest and broadest equity market is in the United States, and it is a headache to do both separate national statutory audit rules and US GAAP,"  says Pete Bible, Chief Accounting Officer for General Motors.

The Asian financial crisis has highlighted the frailities of these separate national accounting/auditing standards and multinational corporations with extensive foreign assets are demanding stricter transparancy of (environmental) costs and liabilities.

"After the International Monetary Fundīs (IMF) bailout of Asia itīs really a matter of enforcement and for performance measurement GM uses US GAAP internationally", says Bible.

With the U.S. Fortune 1000 companies linked to over seventy percent of international trade, the SEC/FASB environmental accounting standards are creating a discrepancy in corporate environmental accounting for investors but international bodies are weary of using the US to set a global standard.
"Itīs not our practice to endorse the pronouncements of other bodies (ie.SEC) because our positions are drawn up in accordance with an international due process," says Sir Carsberg.

But, with no other national environmental accounting standard on the table other than the SECīs the IASC is inbetween a rock and hard place having to decide whether or not to follow the SECīs lead.

The European Commission chooses to wait till 1999 to release their recommendations on environmental accounting leaving the IASC to make the first move.

"Thereīs no pressure by accounting bodies to act with environmental codified procedures, and before international standards are set there needs to be a common agreement on how the environment is to be assessed by accountants", says Richard Regal, an IFAC spokesman.

US multinational corporations however are pressing for a uniform disclosure playing field for international accounting to equal SEC standards.
"They might not like to follow the American standards but they follow our investments", says Bible.
"I donīt know how Asia or the European Union will handle this issue, but for GM US (environmental) GAAP is the way to go."

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