IFRS%20Enforcement%20and%20Governance

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IFRS Enforcement and Governance

• Leo Goldschmidt
• Director of ECGI
• (European Corporate Governance Institute)
• www.ecgi.org
• OECD - Russian Corporate Moscow
• Governance Roundtable 11 November 2004

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Enforcement

• Broad and narrow definitions
• Prevention and then identification /correction
  of errors /omissions
• Investigation of non compliance and its causes
• Disciplining and sanctioning malfunction and
  fraud

3
Levels of enforcement of IFRS

• Internal
• Self enforcement (preparers)
• Audit (internal)
• Oversight / Assessment /Approval (audit
  committee / board / AGM)
• External
• Audit
• Oversight / Assessment /Sanction (official /
  market/ press)

4
Primacy of Company

• 1st level of responsibility
• Other levels failsafe
• Companies must have mechanisms in place to
  exercise that responsibility
• Corporate Governance

5
Corporate Governance

• Set of principles, structures, mechanisms
• To ensure
• Companies are properly run
• Based on
• Integrity
• Fairness
• Accountability / transparency

6
IFRS related CorporateGovernance
(1)

• Structures and mechanisms
• Systems, infrastructure
• organised, resourced departments
• Accounting
• Control
• Internal audit

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IFRS related Corporate Governance (2)

• Structures and mechanisms
• Managerial and oversight organs
• aware, responsible and active
• Management
• Audit committee
• Board
• AGM

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IFRS related Corporate Governance (3)

• Structures and mechanisms
• Procedures / Responsibilty decision making,
  assessment, sign off
• Authority powers, reporting lines

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IFRS related Corporate Governance (4)

• Conflicts of interest
• Where possible avoid and minimise
• Where they subsist manage foster independence

10
IFRS related Corporate Governance (5)

• Tools Examples
• Separation of functions
• Incompatibilities criteria
• Definition of reporting lines / Chinese walls
• Disclosure (substance, process)
• Whistle-blowing procedures

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Other levels of enforcement

• Same principles

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Conclusions

• Governance issues Nothing new same principles
• IFRS related Governance is relevant
• both internally and externally to the company
• both as framework and in concrete applications
• Primary aim of enforcement to prevent, detect
  and correct errors in corporate financial
  reporting
• Primary responsibility for IFRS implementation
  and compliance lies with the company
• Corporate governance is not only relevant to
  IFRS, it is essential