Today, the International Accounting Standards Board (IASB) launched its ‘Investors in Financial Reporting’ programme with a Statement of Shared Beliefs. The Statement articulates the importance of high-quality transparent financial information and the pivotal role of investors, as the main users of financial statements, in contributing to the development of accounting standards.
As a responsible long-term investor, PGGM fully shares these beliefs and is therefore pleased to endorse the Statement, together with nine other institutional investors. At the same time, PGGM and IASB have agreed to start a formal dialogue on the further development of accounting standards.
Currently, PGGM manages approximately EUR 180 billion, diversified over many asset classes globally. In order to assess the creditworthiness of the companies we invest in and counterparties we trade with, high-quality financial information is crucial. We have a particular interest in the risks, risk management and risk culture of banks, with which we conduct business with on a daily basis. It is for this reason that PGGM decided to participate in the Enhanced Disclosure Task Force, established in 2012 by the Financial Stability Board to improve transparency in the financial sector.
Accounting standards have seen significant improvements globally in the period up to the crisis. Progress was made in improving the comparability of IFRS, which is principle based, and US GAAP, which is more rule based. Unfortunately, the crisis seems to have reduced the sense of urgency towards further convergence. Although some divergence between principle- and rule-based systems is unavoidable, significant differences reduce comparability of companies and financial institutions across jurisdictions. As a result, global investors like PGGM face unnecessary challenges in managing credit risk and diversifying internationally.
We are therefore very pleased having the opportunity to endorse the Statement. By endorsing the Statement, PGGM confirms:
• its commitment to improve financial reporting;
• its belief that high-quality financial reporting standards are a collective responsibility; and
• its belief that this debate is so fundamental to the efficient running of capital markets that it should be part of the day job of any responsible investor.
PGGM looks forward to co-operate with the IASB on the further development of accounting standards. Both organisations have agreed to commit resources at a senior level as well as analyst level to have a regular dialogue on current issues and possible changes in accounting standards. We hope the Statement and our joint commitment to dialogue will mark the start of a long and fruitful co-operation, in which other standard setters and investors will also participate, and that will further improve the quality of financial information for all.