Reporting on Environmental Issues

At the World Congress of Accountants held last October in Paris, the IASC announced it was putting environmental issues on its long-term agenda. The Fdration des Experts Comptables Europens (FEE), an umbrella organization for the accounting profession in Europe, has made its position public by sending a memorandum to the IASC that examines international accounting standards (IASs) relevant to reporting for environmental issues. The FEE also suggests areas where the international committee should elaborate on existing recommendations.

Johan Piet, FEE chairman, said there was a widely held view that IASs "did not provide adequate guidance" on environmental issues. "We have encouraged the IASC to take a lead in demonstrating that its standards are sufficiently comprehensive," said Piet.

The FEE recommendations include the following:

  • IAS no. 1 on disclosure of accounting policies should require the separate disclosure of material environmental costs and liabilities.

  • When environmental costs are disclosed separately, the accounting policies should state what the costs represent and the accounting method used.

  • The IASC should establish an official definition of environmental costs and liabilities.

  • IAS no. 16 needs to clarify all of the criteria for capitalizing environmental property, plant and equipment expenses.

  • The proposed IAS standard on impairment of assets should address environmental factors.

The IASC is not expected to address reporting for environmental issues until it has completed its set of core IASs later this year.

A copy of the memorandum is available by calling the FEE in Brussels at 32-2-285-40-85.

IASC Tackles Benefits

Reporting for employee benefits, such as pension packages, varies from country to country. In its effort to harmonize reporting internationally, the IASC revised its requirements for reporting retirement benefits and, for the first time, published standards for compensated absences, bonus plans and deferred compensation.

IAS no. 19, Employee Benefits , requires companies to show clearly how employee benefits affect financial position and performance. The standard improves disclosures for defined benefit and other postemployment plans by requiring, among other things, an analysis of the costs of such benefits in the balance sheet and income statement, a reconciliation of changes in balance sheet amounts and a summary of main actuarial assumptions. Liabilities and costs of postemployment benefits must reflect market values.

IAS no. 19 also includes a requirement that companies determine the present value of defined benefit obligations and the fair value of any plan asset on a regular basis to avoid large discrepancies between the financial statement amounts and the amounts determined at the balance sheet date. Companies also are required to use defined benefit accounting for multiemployer plans that are defined benefit plans.

The standard takes effect on January 1, 1999; however, the IASC encourages companies to apply it earlier. Copies of IAS no. 19 are available for $25 by calling the IASC at 44-171-427-5927, ordering by e-mail at

New Interim Reporting Guidance

To help companies with the presentation and content of interim financial reports, the IASC issued its first standard on this topic. IAS no. 34, Interim Financial Reporting , takes effect January 1, 1999.

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The IASC encourages companies to issue more than one financial statement annually. For companies that choose to issue semiannual or quarterly reports, the standard defines the minimum content as including a condensed balance sheet, income and cash flow statements, changes in equity and selected explanatory notes. IAS no. 34 does not specify which companies must publish such reports or how frequently.

The explanatory notes to an interim report should update the annual report, disclosing changes in accounting policies, estimates, outstanding debt or equity, dividends and segment revenue. The update should also include information about subsidiary disposals or purchases, long-term investments, restructurings, discontinuing operations and changes in contingent liabilities and assets.

Copies of IAS no. 34 are available for $25 by calling the IASC at 44-171-427-5927, ordering by e-mail at or online at


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