Robb on Cooperation

Towards relevant financial reporting

Posted by Alan Robb on 29 September 2009 | 0 Comments

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I was greatly heartened by the 17 March 2009 email from the International Cooperative Alliance’s international accounting standards working group secretariat, which our Executive Director circulated.

It advised of the outcome of a discussion at the 16 March 2009 U.S. Financial Accounting Standards Board (FASB) meeting: at last it appears that the accounting standard setters have recognised that cooperative member shares are equity and not liabilities.

True, the approach has yet to be confirmed and adopted by the International Accounting Standards Board (IASB) and FASB, but a paper from the IASB staff also adopts a similar position, so there is every indication that the views of the standard setters on both sides of the Atlantic are converging.

The standard setters’ claim of ‘sector neutral standards’ has been dealt a major blow – although they will be reluctant to admit it.

The cooperative sector around the world has made it plain that accounting standards prepared for investor-owned companies are not automatically applicable to other entities.

There are differences between investor-owned companies and cooperatives just as there are differences between investor-owned companies and public sector entities such as councils, universities, churches, public libraries and art galleries.

Equally, there are differences between assets which are traded and assets which are held in collections as taonga, or treasures.

The idea of a market value for the latter is inappropriate and irrelevant.

The accounting profession has done little to enhance the role of financial reports by its insistence that standards designed for the very small number of companies listed on the stock exchanges of the world should be equally applicable to other entities.

The cooperative and mutual sector around the world has persisted in its opposition to these illogical and inappropriate moves.

Full marks locally to Alliance Group, Ballance Agri-Nutrients, Fonterra and Foodstuffs whose staff were involved in lobbying the local standard setters and the IASB in London.

Lessons

There are two lessons to be learned from this:

● The most obvious is that by working together cooperatives have demonstrated that opposition and inertia can be overcome.

● The second lesson is that there is a real need for an accounting standard or statement on recommended practice which recognises the cooperative difference.

It is not just the difference between equity and liabilities which is important in cooperatives.

Performance measures and distributions to members are equally important and significantly different from investor-owned companies.

The Centre of Excellence in Accounting and Reporting for Cooperatives at Saint Mary’s University, Canada, is engaged in developing a statement of recommended practice for cooperatives.

Further information about this project is found in the current issue of Cooperatives News.

I encourage all members of the Association to support this project; the IASB and the FASB are slowly becoming aware of the cooperative difference but more progress needs to be made.●

– from the April/May 2009 Cooperatives News