The reforms being considered by international accounting standard setters could give a significant boost to global efforts to better account for revenues from the extractive industries. Disclosure of revenues paid by oil, gas and mining companies for every country of operation is a fundamental step towards improving governance, reducing poverty, and combating corruption in the management of this important source of income for many of the world’s poorest countries.
The International Accounting Standards Board, which develops global accounting standards that are used in over 90 countries and that are followed by the majority of the world’s largest extractive companies , has initiated a process that will lead to the definition of new standards for the industry, in the form of what is called an International Financial Reporting Standard (IFRS).
In a report published today titled “Extracting Transparency: The need for an International Financial Reporting Standard for the Extractive Industries”, Publish What You Pay  NGO coalition members including CARE International UK, Global Witness, Open Society Institute, Save the Children UK and Transparency International UK put forward the case for why such standards should require upstream extractive industry operators to disclose revenue payments on a country-by-country basis . The disclosure of this information will allow small and large shareholders including analysts and institutional investors, as well as other stakeholders, including governments and citizens, to know how much a company is earning and paying to governments in the different countries where it operates.
“The scandals in energy companies like Enron, over reserve declarations by Shell, and numerous bribery allegations about payments by oil companies in countries like Equatorial Guinea have raised the expectations of business to report more transparently to investors,” said Vanessa Herringshaw of Save the Children UK. “The extractive sector is under enormous scrutiny right now and shareholders are demanding greater accountability from corporations in order to protect their long-term financial interests.”
The report suggests that country-by-country reporting on commercial performance, taxes and other benefits paid to governments, and reserves is essential information for making useful decisions about companies engaged in the extractive sector. At present, such information is not available, as current standards only require the disclosure of information on, for example, a regional or continental basis in most cases.
Other organisations, including several of the world’s largest accounting firms, have long debated and even supported the need for a single set of accounting standards for this global sector. Developing these standards will take a number of year years. However, “it is critical that these standards incorporate clear requirements for transparency of payments to all governments in order to ensure that users of financial statements and others interested in the management of this vital sector have all the information required to fully evaluate risks and the performance of the companies in which they invest. That is why are engaging with a relatively dry topic like International Accounting Standards”, said Hugo Sintes of CARE International UK.
The report includes a questionnaire that interested readers are encouraged fill out to share their observations on the ideas and proposals put forward by PWYP . By launching a consultative process on the proposed IFRS for the extractive sector, PWYP members hope to instigate a debate on what information such standards should require to improve accounting procedures for the extractive sector worldwide. The full report and questionnaire can be downloaded from www.publishwhatyoupay.org/ifrs
Henry Parham, International Coordinator, Publish What You Pay: +44 77 6026 8959, email@example.com
Vanessa Herringshaw, Head of Economic Policy, Save the Children UK: +44 77 7618 4368
Gavin Hayman, Oil Campaign, Global Witness: +44 20 7561 6361 / +44 78 4305 8756
Richard Murphy, Director, Tax Research Limited (report co-author):+44 77 7552 1797
 All quoted companies in Europe and many quoted companies in other continents do already follow these standards. U.S. based companies follow a different set of standards called Generally Accepted Accounting Principles (GAAP), but there is a process seeking convergence between the two sets of standards in progress.
 Publish What You Pay (PWYP) is an international campaign aiming to increase transparency over the payment, receipt and management of oil, gas and mining revenues in developing countries. PWYP is supported by a worldwide coalition of over 280 anti-corruption, development and human rights NGOs from over 50 countries. The NGO coalition believes that revenue transparency is an essential condition for alleviating poverty, promoting just development, improving corporate social responsibility, and reducing corruption in many resource-rich developing countries. PWYP calls for stock market and international accounting rules to require oil, gas and mining companies to disclose their net payments to governments. See www.publishwhatyoupay.org
 “Upstream” extractive industry companies are involved in exploration and production of oil, gas and minerals. “Downstream” extractive activities refer to the refinement, transportation and marketing of such resources.
 The report and the questionnaire can be downloaded from: www.publishwhatyoupay.org/ifrs. The responses should be sent by e-mail to Hugo Sintes, Private Sector Programme Officer at CARE International UK: firstname.lastname@example.org or by other means as indicated in the report. Deadline is 31 November 2005. Any further enquiries on PWYP’s work on IFRS should also be directed to Hugo (tel: +44 20 7934 9334)