IPSASB considers guidance on accounting for natural resources

[ad_1]

The  International Public Sector Accounting Standards Board issued a consultation paper on natural resources on Monday to consider various issues relating to recognition, measurement and presentation of natural resources by public sector entities.

The move comes amid growing interest in the accounting profession in environmental, social and governance reporting. While much of it is in the private sector, with recent proposals from the Securities and Exchange Commission and the International Sustainability Standards Board for climate change disclosures by companies, governments are also grappling with how to account for sustainability of the operations and natural resources in general. Last week, the IPSASB issued a separate consultation paper on advancing public sector sustainability reporting that draws on some of the initial work of the recently formed ISSB (see story).

Natural resources, including sunlight, air, water and land, account for a significant proportion of the economic resources in many jurisdictions, the IPSASB noted, but governments often lack enough information on the monetary value of natural resources. As a result, they may grant rights to public resources without regard to financial and environmental sustainability, or intergenerational fairness.

hanalei-valley-fotolia-357.jpg

There’s currently no explicit International Public Sector Accounting Standard guidance on accounting for natural resources in their original state, and the IPSASB said it’s now working to address this gap. The initial phase focuses on the financial reporting of tangible, naturally occurring resources, such as subsoil resources, water and living resources, which are in their natural state. The new consultation paper is just the first output of the project, and assesses whether natural resources can be recognized as assets in general purpose financial statements or should be disclosed in broader financial reports.

“The issue of accounting for natural resources is important for the public sector in most jurisdictions,” said IPSASB Chair Ian Carruthers in a statement Monday. “The recognition and measurement of natural resources impacts not only on financial reporting, but also potentially for many governments on policy decisions and public financial management. This consultation paper is the IPSASB’s first step in developing guidance for this important area.”

Both the public and private sectors have been developing standards and guidance for accountants to follow in the ESG space.

“A lot of people are realizing how critical this is and how much people are caring about this, so I think it’s a good thing,” said Chris Roughton, a manager in the Business Technology Advisory Practice at the Top 100 accounting firm Baker Newman Noyes in Portsmouth, New Hampshire. “What’s hard with ESG is that it’s so broad and it can apply in so many different areas, and that’s why it can’t be a cookie cutter approach for every company, every organization, and every business. Even within the same industry, you may have one company that’s vertically integrated and has a lot of considerations in their emissions profile or what’s material to their social management or governance.”

Accounting firms are starting to get more involved in ESG services for clients. “Some of the larger accounting firms are offering assurance type services for some of their largest clients related to specific standards and frameworks,” said Roughton. “These are generally voluntary reports, but there can be value in auditing the financial statements to have an audit of their ESG standards. It’s important at the accounting firm level to have a clear understanding of the metrics in place just as you would for GAAP or any other auditing framework.”

The IPSASB is asking for comments on the consultation paper to be submitted by Oct. 17, 2022. The feedback will guide the IPSASB in determining what approach to take in developing an exposure draft on the topic, which will eventually shape a final standard related to natural resources.



[ad_2]

Source link