制定可持续发展标准 SHAPING SUSTAINABILITY STANDARD SETTING -ICAEW

CORPORATEREPORTINGFACULTY

SHAPINGSUSTAINABILITYSTANDARDSETTING

Whatlessonscansustainabilitystandard-setterslearnfromtheexperienceofaccountingstandard-setters?

®

CONTENTS

FOREWORD1

1.SUMMARYOFKEYFINDINGS2

2.PURPOSEOFTHISREPORT5

3.UNDERSTANDINGTHECONTEXTFORSUSTAINABILITYSTANDARDSETTING6

3.1Ahistoricalfocusonfinancialperformance6

3.2Anincreasedfocusonnon-financialinformation7

3.3Sustainabilityreporting7

4.KEYSTANDARD-SETTINGLESSONS9

4.1Clarityofpurposeandintendedaudience9

4.2Strategicplananddetailedroadmap11

4.3Conceptualframework12

4.4Effectivedueprocess14

4.5Independenceandappropriateexpertise17

4.6Stakeholderengagementandpoliticalpressures19

4.7Avoidingdisclosureoverload22

4.8Interoperability23

4.9Prioritisingimplementation26

4.10Assuranceandenforcement28

5.NEXTSTEPS29

APPENDIX:PROJECTPARTICIPANTS30

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SHAPINGSUSTAINABILITYSTANDARDSETTING

1

FOREWORD

Forthepast20years,ICAEWhasplayeda

leadingroleinsustainability,workingcloselywithgovernments,regulators,standard-settersand

agenciessuchastheUnitedNations(UN).OneofthekeythemesinICAEW’scurrent10-year

strategyis‘helpingtoachievetheUN’sSustainableDevelopmentGoals(SDGs)’.ICAEWiscommittedtomakingaleadingcontributiontotheachievementofSDGsaddressingpoverty,protectionoftheplanet

andthepromotionofpeaceandprosperityby2030.

Inthiscontext,thefast-movingworldofsustainability

reportingisincreasinglyimportant.Thisis

especiallytrueoftheprogressmadesince2021

bytheInternationalSustainabilityStandardsBoard(ISSB),withitspromiseofasuiteofinternational

sustainabilitydisclosurestandardsandaless

fragmentedglobalreportinglandscape.Withso

muchchangehappeningatpace,manystakeholderswespoketoinlate2023agreedthatitwasimportanttotakeastepbacktoreflectonwhathasbeen

achievedinthisarea,andwhatmightbedonebetter.

Theoutcomeofextensivediscussionswith

stakeholderssincethenisthisreportonsustainability

standardsetting.Itexploresthelessonsthat

sustainabilitystandard-setterscanlearnfromthe

experienceoftheiraccountingcounterparts,drawingonICAEW’sconsiderableexperienceininternationalaccountingstandardsetting.Thisdatesbackasfaras1973,whenICAEWhostedtheinauguralmeetingof

theInternationalAccountingStandardsCommittee(IASC),theInternationalAccountingStandards

Board’spredecessor,inLondon.

Thisreportisaconsideredcontributiontothemuchwiderdebateaboutthechallengesweallface

aroundsustainability.Ihopeitwillbeofinterestto

awiderangeoforganisationsandindividualswith

aninterestinthedevelopmentandfuturesuccessofsustainabilityreporting.

AlanVallance

ICAEWChiefExecutive

2

1.SUMMARYOFKEYFINDINGS

Thisreportanalysesthekeyfeaturesofaccountingstandardsettingandconsidersthechallenges

facedbysustainabilitystandard-setters.Drawingonthisanalysis,itmakesrecommendationsand

observations,whicharesummarisedbelow.Thesefindingsshouldbereadinconjunctionwiththe

contextualinformationinsection2ofthereport,andthedetailedanalysisinsection4.Thissectionhighlights10corestandard-settingareasthatwethinkshouldbegivenparticularfocus,together

withourdetailedrecommendations.

1

CLARITYOFPURPOSEANDINTENDEDAUDIENCE

Someofthedebatearoundsustainabilityreporting

stemsfromthelackofconsensusaboutwhat

sustainabilityreportingisandwhoitisfor.Whilethismaybeinevitabletosomeextent,matters

arenothelpedbysustainabilitystandard-setters’contrastingapproachesandviewsonsome

fundamentalissues,suchastheapproachto

materiality.Thiscanbeconfusingforbusinessesandotherstakeholders.

Clarityofpurposemayhavebeenachievedby

individualstandard-setters,butislostwhenthe

broadsustainabilitystandard-settinglandscapeis

considered.WerecommendthattheroleofISSB

standardsisclearlyarticulatedandagreed,relativetothoseoftheGlobalReportingInitiative(GRI),

EuropeanFinancialReportingAdvisoryGroup

(EFRAG)andothers,soastodefinetherelationshipbetweenthedifferentsetsofstandards.

2

STRATEGICPLANANDDETAILEDROADMAP

Whilesuccessfulaccountingstandard-setterswillalwayshavealong-termplan,theymust

alsobehighlyagilewhenunexpectedor

urgentissuesarise.Long-termplanningallowsstandard-setterstoprioritiseprojectsand

allocateresourcesproperly.

WestronglyrecommendthattheISSBpublishes

aclearanddetailedroadmapsettingoutthe

stepsthatneedtobetakenforittoachieve

itscoreobjectives.Thisalsoincludeshow

individualprojectsfitintoitslonger-termplanandthewayinwhichtheISSB’sworkrelatestotheoverallstrategy,missionandobjectivesoftheInternationalFinancialReportingStandards(IFRS)Foundation.Presentingthebigger

pictureisessential,particularlyforgovernmentsandregulatorsconsideringendorsement

andadoptionofthestandards.Theyneedto

understandthebiggerpictureinthecontextoftheirownlegislativeprioritiesandopportunities.

3CONCEPTUALFRAMEWORK

Toaconsiderableextent,theaccounting

standard-settingmodelprovidesatemplate

forsustainabilitystandardsetting.Oneofthe

moresignificantfeaturesoftheInternational

AccountingStandardsBoard’s(IASB’s)standardsettingisitsConceptualFramework–high-level,overarchingprinciplescoveringkeyaspectsoffinancialreporting.

SHAPINGSUSTAINABILITYSTANDARDSETTING

3

TheISSBusedtheIASB’sConceptualFrameworkwhenitdevelopeditsfirsttwostandards,which

wesupportasaninterimstep.However,this

frameworkwascreatedforadifferentpurposeandcontainsrelativelylimitedguidanceondevelopingdisclosurerequirements,whichmakesitoflimitedusetosustainabilitystandard-setters.While

perhapsnotanimmediatepriority,aconceptualframeworkdesignedforsustainabilitystandard

settingshouldfeatureprominentlyintheplansoftheISSBandotherrelevantstandard-setters.

4EFFECTIVEDUEPROCESS

Rigorousdueprocessisavitalpartofstandard

setting,anditisimportantthattheISSBandEFRAGfollowedspecificanddefineddueprocesssteps

whenproducingtheirinitialstandards.Concernshavebeenraisedwithusaboutaspectsofearlydueprocess,includingcommunicationand

transparencyaroundactionstaken.Theseconcernshaveledtoaperceptionofshortcomingsinthat

dueprocessamongsomestakeholdersthat,ifrepeated,couldundermineconfidenceinthestandard-settingprocessovertime.

Qualityisparamount.Establishedpracticesmay

needtobeflexedinthefaceoftimepressures,butsacrificingthemwithoutverycarefulconsiderationwouldbecounterproductive.Astimepressures

abate,sustainabilitystandard-settersshould

considerasteadierpaceofactivity.Theyshould

alsoconsiderwhetherexistingdueprocesssteps,suchasthepost-implementationreview(PIR)stage,needgreaterfocusandenhancementgiventhe

relativeyouthofsustainabilityreportingstandardsgenerally.

5

INDEPENDENCEAND

APPROPRIATEEXPERTISE

ThemainqualificationsforIASBmembershipare

professionalcompetenceandpracticalexperience.Itisalsoimportantthatstandard-settersare

independent,unbiasedandhavenoconflictsof

interest.Evenwhensupportinggovernmentpolicies,theyshouldbefreefrompoliticalinfluence.

TheISSB’sboardincludespeopleofhighcalibre,

withawiderangeofrelevantskillsandexperience.

Someflexibilityintheselectioncriteriaappliedmaybeneededtoensurethatthisremainsthecase.Thiscouldbeachieved,forexample,byplacingless

emphasisongeographiccoveragetoensurethat

therecontinuestobeanappropriatelevelofsubjectmatterexpertiseorstakeholderrepresentationwithinthegroup,alongsidesufficientdiversity.

6

STAKEHOLDERENGAGEMENTANDPOLITICALPRESSURES

Accountingstandard-setterstypicallythinkof

stakeholdersaspreparers,usersandauditorsof

financialstatements.Thesegroupscanencompassawiderangeofindividualsandorganisations,

includinginvestors,regulators,governments,analystsandacademics.However,thereisanevenwider

rangeofstakeholderswithaninterestinsustainabilityreportingand,increasingly,itisalsothesubjectof

muchpoliticaldebate.

Arguably,stakeholderengagementshouldlook

ratherdifferentwhencomparingtheISSB’sand

EFRAG’soutreachactivities.ComparedwithEFRAG,theISSBhasanarrowerprimaryuserinmind.

Nonetheless,effectiveengagementwiththiswiderstakeholdergroup,toensureadequateawareness

oftheirviewsandconcerns,isimportantiftheISSB’sstandardsaretoberegardedastrulylegitimate.

4

7AVOIDINGDISCLOSUREOVERLOAD

Sustainabilitystandardscomewithasignificant

volumeofdisclosurerequirements.Inevitably,

questionshavebeenraisedaboutwhetherthisisjustanotherexampleofoverloadingtheannualreport

withinformationthatwillbecostlytoproduceand

ofquestionablebenefittomoststakeholders.Thisisparticularlyrelevantforsustainabilitystandard-settersfocusedontheneedsofawideusergroup,suchasEFRAGorGRI.

Cost-benefitconsiderationsareacrucialelementofdevelopingreportingstandardsandshouldnotbeanafterthought.Sustainabilityreportingmustnot

becomejustanotherbox-tickingexercisewherethefocusisoncomplianceratherthancommunication.Thiswouldbringlittlebenefittoinvestorsand

otherstakeholders–ortothebusinessitself–as

itwouldresultinboilerplatetextthatisoflittleornointeresttoanyone.Itisthereforeimportantthat

anyadditionaldisclosurerequirementsadequately

explainwhatinformationstakeholdersneedandhowtheywilluseit.

8INTEROPERABILITY

Interoperabilityisarguablythebiggestchallenge

forsustainabilitystandardsetting.WhiletheISSB

hasbeenworkingonitsstandards,theEUandtheUShavebeendevelopingtheirownrequirements,makingthepathwaytoaglobalbaselinelessclear.Thiscreateschallengesforcompanieswithlistingsondifferentcapitalmarkets.Itraisestheprospectofindividualcompanieshavingtoreportundertwoormoredifferentframeworks.

EFRAGandtheISSBhavebeenworkingtogether

toimprovetheinteroperabilityoftheirrespective

climate-relateddisclosurestandards,resultingin

somedegreeofalignment.However,noteveryoneissooptimisticabouttheinteroperabilityofthe

twosetsofstandards.Interoperabilityisaworthy

goal,butitshouldonlybeseenasasteppingstonetowardsgreaterconvergenceovertime,alongsideasuitableequivalenceregime.Agoodfoundationwouldbeformajorsustainabilitystandard-setters

tocommittominimisingdifferencesbetweentheirstandardsasastartingpointwhendeveloping

theirown.

9PRIORITISINGIMPLEMENTATION

LiketheIASB,theISSBdoesnothavethepowertorequirejurisdictionstoadoptitsstandards.ForEFRAG,adoptionisnotanissueasitsstandardshavebeenincorporatedintoEUlegislation.

However,EFRAGandtheISSBbothfacesimilar

pressurefromstakeholderstoproduceadditionalstandardsswiftly.Workingonnewstandards

inevitablytakespreciousresourcesawayfromimplementationactivities.

TheISSBshouldmaketheadoptionandsuccessfulimplementationofthesestandardsitshighest

priority,asdoingsoiskeytoensuringthewholeproject’scontinuedsuccessandcredibility.

Sustainabilitystandard-settersshouldtakecare

whenproducingimplementationguidancethat

coverscross-cuttingthemesapplicableinanother

body’sstandardstoensuresuchguidancedoesnotconflictwithothersandcreateconfusionratherthanaddingclarity.

10ASSURANCEANDENFORCEMENT

Likefinancialreporting,acriticalaspectofgoodsustainabilityreportingisrobustassurance

andenforcement.Withoutthese,therewillbe

nocertaintythatinformationreportedwillbe

reliableorcomparable.Similarly,likeaccountingstandard-setters,sustainabilitystandard-setters

mustproducestandardsthatareofsufficient

qualityandclaritytoallowforeffectiveassuranceandenforcement.

5

22.PURPOSEOFTHISREPORT

ThecreationoftheISSBwithintheIFRSFoundationin

2021wasoneofthemostsignificantdevelopmentsinglobalcorporatereportinginageneration.It

laidthegroundworkforthedevelopmentofasuiteofinternationalsustainabilitydisclosurestandardsandalessfragmentedreportinglandscape.Italsoprovidedopportunitiesforcloseralignmentof

financialandnon-financialreporting.

Developmentselsewhere,inparticulartheEuropeanCommission’sadoptionoftheEuropeanSustainabilityReportingStandards(ESRS),havealsoprogressed

quickly,especiallywhencomparedtotherelativelysedatepaceofaccountingstandardsettingtowhichwehadbecomeaccustomedinrecentyears.

Withsomuchchangehappeningatsomepace–andwithsomuchatstake–manystakeholderswespoketoagreedthatitwasimportanttotakeastepbacktoreflectonwhathasbeenachieved,andwhatmight

bedonebetter.

Thisreportisnotanacademicstudyandshouldnotbeinterpretedassuch.Itreflectsviewsweheard

fromstakeholdersataroundtableeventheldin

LondoninSeptember2023andaseriesofone-on-oneinterviewswithstandard-setters,policymakers,academicsandothers,conductedbetween

SeptemberandNovember2023.Naturally,the

viewsnotedinthereportdonotnecessarilyreflecttheviewsofalloftheprojectparticipants.Whereappropriate,wehaveofferedviewsofourown,

whichbroadlyalignwithpositionswehavetakeninpreviouspolicyresponses.SomereferencestorelevantICAEWpolicyresponsesareincluded.

•toreflectonthefeaturesofgoodaccountingstandardsetting;and

•todiscusswhetherthereareimportantlessonsthatsustainabilitystandard-setterscanlearn

fromtheexperienceoftheiraccountingcounterparts.

THEAIMOFTHISREPORTIS:

WereferfrequentlytotheworkoftheIASBinthe

report.Wedothisbecauseitisabodywithover

twodecadesofinternationalstandard-setting

experience.Itlistenedandlearnedand,overtime,hasbecomehighlyregardedontheglobalstage

duetoitsreputationforgovernance,dueprocess

andquality.Itsstandardsarewidelyappliedaroundtheworld.Weacknowledgethatmany–butnotall–ofthepointswehavehighlightedinrelationtoIASBgovernance,oversight,processesandprocedures

applytootheraccounting(andauditing)standard-setters,andthattheIASBitselfdrewonearlier

experienceofstandardsettingintheUS.Wealso

acknowledgetheGRI’scontributiontosustainabilitystandardsetting,whichhasbeenconsideredduringthedevelopmentofthisreport.

Manyofthesuggestionswemakearerelevantto

anystandard-settingbody.However,inmanycaseswehavedirectedoursuggestionstowardspotentialimprovementsattheISSB.Wedothisnotbecause

wethinktheyareapoorstandard-setterbutbecause:

•weareastrongsupporteroftheISSB’swork

andseetheboardascriticaltothefutureof

sustainabilitystandardsetting.Wewanttodoallwecantoensureitssuccess.

•manyofthelessonswehaveidentifiedareless

applicableorrelevantforstandard-settersworkingundertherestrictionsofpoliticalremits.

•thereportprimarilytakesaninternational/globalperspectiveratherthanajurisdictionalone.

Theprimaryaudienceforthisreportisorganisationsorindividualsdirectlyorindirectlyinvolvedinthe

workofglobalstandard-settingbodies.Inparticular,giventheimportanceweattachtothesuccessof

theISSB,weaddresstheIFRSFoundation.The

reportshouldalsobeofinteresttostandard-settersgenerally,otherpolicymakers,andthosewithan

interestinthedevelopmentandfuturesuccessofsustainabilityreporting.

6

3.UNDERSTANDINGTHECONTEXTFORSUSTAINABILITYSTANDARDSETTING

3.1AHISTORICALFOCUSONFINANCIALPERFORMANCE

Theannualreporthaslongbeenthecornerstoneofcorporatereporting.Itiswidelyregardedasakeyformofcommunicationbetweenbusinesses,investorsandothercapitalmarketparticipants.

However,corporatereportingiscontinually

evolvinginresponsetochanginginformation

needsandthedemandsofanever-wideningrangeofstakeholdersandusers.Thedynamicnatureof

themodernbusinessandregulatoryenvironmentmeansthattheannualreportsoftoday’slarge,

listedcompaniesarealmostunrecognisablewhencomparedtothoseof20yearsago.

Historically,theannualreportwasfocusedon

howabusinesswasperformingfromafinancial

perspective.Accordingly,regulatorsand

standard-settersdirectedtheireffortstothe

creationofaframeworkofhigh-quality,widelyacceptedaccountingstandards.

Formanyyears,eachcountryhaditsowngenerallyacceptedaccountingprinciples

(GAAP).Thismadeitdifficultforusersoffinancial

statementstomakecomparisonsbetween

companiesreportingunderdifferentregimes.

Moreover,acompany’sperformancewhen

measuredunderoneregimeratherthananother

couldbeverydifferent.Thisbegantochange

withtheformationoftheInternationalAccountingStandardsCommittee(IASC).

FIGURE1:IFRSACCOUNTINGSTANDARDS—ABRIEFHISTORY

IOSCOENDORSEDTHEIASC’SSTANDARDS

givingtheIASCboth

compellingmandate.AccountingStandards.

1973

2001

politicallegitimacyanda

EUROPEANUNIONMANDATEDIFRS

alandmarkdecision

torequireEuropean

companieswithsecurities

listedonEU-regulated

2024

marketstouseIFRS

2000

2005

IASCWASFORMEDIASCBECAME147JURISDICTIONS

withtheaimof

THEIASB

AROUNDTHE

harmonising

havingcreateda

WORLDUSEIFRS

accountingpractices

comprehensive,robust

15oftheG20countries

aroundtheworld.

andinfluentialsetof

standards.

haveadoptedIFRS

AccountingStandards

forallormost

companiesintheir

capitalmarkets.

7

3.2ANINCREASEDFOCUS

ONNON-FINANCIALINFORMATION

Inrecentyears,therehasbeenincreasinginvestor

demandformoreinformationthanthatprovided

tomeettherequirementsofaccountingstandards.

Otherstakeholders,whoseneedswouldnottypicallybemetbytraditionalfinancialreporting,havealso

beenseekingadditionalinformation.Asaresult,the

annualreportstartedtoincludemorenon-financial

information.Thisinformationissometimesreferredtoasnarrativereporting.

Non-financialinformationisabroadterm,whichincludesdetailsofthecompany’sapproachto

businessrisksandopportunities,andtobroadersocietalandethicalissues.Italsocaptures

managementdiscussionandanalysisandcorporategovernancedisclosures.Thepurposeofproviding

thisinformationisnotalwaysclearandvariesconsiderablydependingonwhoyouspeakto–anissuewewillreturntolaterinthisreport.

Onecommonaimisfornon-financialinformation

toincreasetransparency.Thisinturnshouldenableinvestorsandotherstakeholderstohaveabetter

understanding–andthereforemoreconfidence–aboutanentity’sriskmanagement,governance,strategy,performanceandprospects.

Theapproachtonon-financialreportingvaries,withgovernmentsandregulatorsintroducingnewlocalrequirementsinresponsetoavarietyofstakeholderdemandsand/orforpoliticalpurposes.Eachnew

requirementtypicallyleadstoanincreaseinthesizeandcomplexityofannualreports,resultinginconcernsaboutclutterandinformationoverload.

Aconsequenceofaddingnewrequirementsin

suchapiecemealwayisthatannualreportscanlackcoherenceandtheconnectivitythatinvestorsneed.

3.3

SUSTAINABILITYREPORTING

Muchofthediscussionaroundnon-financial

informationrelatestosustainabilityrisksand

opportunities,especiallyclimate-relatedissues.

Sustainabilityreportingalsocoverswider

environmentalconsiderationssuchasbiodiversity,aswellassocialresponsibilityandgovernance.

Inrecentyears,agrowingbodyofregulations,

standardsandguidancehasemergedinrelationto

sustainabilityreporting,withanoverallaimofhelping

companiestocommunicatepertinentinformationaboutsustainabilitymattersinacoherentand

meaningfulway.

CreatedwiththebackingoftheG7,theG20,the

InternationalOrganisationofSecuritiesCommissions(IOSCO),theFinancialStabilityBoardandothers,

theISSBislookingtobuildontheworkofexistingreportinginitiativestodevelopahigh-quality,

comprehensiveglobalbaselineofsustainability

disclosuresfocusedontheneedsofinvestorsandthefinancialmarkets.

ThefirsttwoIFRSSustainabilityDisclosureStandards,IFRSS1GeneralRequirementsforDisclosureof

Sustainability-relatedFinancialInformationandIFRSS2Climate-relatedDisclosures,incorporateandbuildontheworkofthebodiesdepictedinfigure2.The

ISSBisalsoworkingwiththeGRI,whosewidelyusedstandardsareaimedatbroaderstakeholders,to

ensurethatthetwosetsofstandardsarecompatibleandinterconnected.

Elsewhere,theEU’sESRSwereadoptedbythe

EuropeanCommissioninJuly2023.IntheUS,there

havebeensomeimportantinitiativesatstatelevel.InMarch2024,theSecuritiesandExchangeCommission(SEC)finaliseditsrulestoenhanceandstandardise

climate-relateddisclosures.

8

FIGURE2:EVOLUTIONOFTHEINTERNATIONALSUSTAINABILITYSTANDARD-SETTINGLANDSCAPE

GRI

GlobalReportingInitiative

Sustainability

Accounting

StandardsBoard

PRE2021

Withsustainabilityfactors

becomingamainstreampart

ofinvestmentdecision-making,itbecameapparentthatthis

TCFD

TaskForceon

Climate-related

Financial

Disclosures

SASB

CDSB

ClimateDisclosureStandardsBoard

IIRC

International

Integrated

ReportingCouncil

ISSB

InternationalSustainabilityStandardsBoard

VRF

ValueReportingFoundation

fragmentedlandscapeoflargelyvoluntaryrequirementswas

notfitforpurpose.Acommon

globalapproachwasneededifmeaningfulcomparisonsweretobemade.

2021TO2022

In2021,muchprogresswasmade,withtheVRFformedasamergeroftheIIRCandthe

SASBinJuneandtheISSB<

subsequentlylaunchedatthe>

COP26summitinGlasgowinNovember.During2022,theCDSB,followedbytheVRF,

werebothconsolidatedinto

theIFRSFoundation.

POST2022

TheISSBstandardsarebased

ontherecommendationsoftheTCFD,whichwasdisbandedin2023followingthefinalisationofthefirsttwoISSBstandards.TheISSBworkstogetherwith

theGRIunderacollaboration

agreement.

ISSB

InternationalSustainabilityStandardsBoard

GRI

<>GlobalReporting

Initiative

TCFD

Disbanded

9

44.KEYSTANDARD-SETTINGLESSONS

4.1

CLARITYOFPURPOSEANDINTENDED

AUDIENCE

KEYFEATURESOFEFFECTIVE

ACCOUNTINGSTANDARDSETTING

TheIASB’sConceptualFrameworkexplains

thattheobjectiveofgeneralpurposefinancial

reportingisto“providefinancialinformationaboutthereportingentitythatisusefultoexistingand

potentialinvestors,lendersandothercreditorsinmakingdecisionsrelatingtoprovidingresourcestotheentity”.Whileotherparties–including

governments,regulators,ratingagencies,customers,employeesandmembersofthepublic–mayfind

generalpurposefinancialreportsuseful,theyare

notconsideredtheprimaryusersofsuchreports.

Seekingtoaddresstheneedsandinterestsofalltheotherusersrisksaddingmoreandmoreinformationtotheannualreporttothepointwhereitobscures

whatisimportanttoitsprimaryusers.

TheIASB’sConceptualFrameworkalsoclearly

definesmateriality,explainingthatinformationis

materialif“omitting,misstating,orobscuringit

couldreasonablybeexpectedtoinfluencedecisionsthattheprimaryusersofgeneralpurposefinancial

reportsmakeonthebasisofthosereports”.

TheseIASBdefinitionsarecritical.Theymakeitclearwhofinancialreportingisforandhowentitiesshouldassesswhatinformationshouldandshouldnotbe

includedintheirfinancialstatements.Assuch,theypromotetheobjectivethatfinancialstatements

arefocusedontheprimaryusers’decisionsabout

providingresourcestotheentityandarenot

crowdedwithinformationnotmaterialtotheminmakingthosedecisions.

Effectivestandardsettingmustseekabalance

betweenrelevan