OECD backs reporting calls

Posted on 2 Feb 2010 by The Manufacturer

Multinational companies may soon have to declare their finances country-by-country after the Organisation for Economic Co-operation and Development declared its support for such a scheme.

Companies will have to declare what their earnings, revenues and taxes are in each individual country they operate in if the International Accounting Standards Boards (IASB) answers calls like the OECD’s.

The OECD, essentially a giant international trade organisation representing the 30 richest nations from around the world, says it will publish guidelines on country-by-country reporting perhaps as early as this year in a bid to pressure the IASB into introducing mandatory obligations. The OECD’s initial recommendations will not be binding.

The development – which The Guardian says is backed by the UK government – could potentially see the governments of developing nations obtain a much larger share of the fruits of their respective industries. The newspaper points to the Zambian government which, it says, receives just 0.6 per cent in royalties from its £200bn copper industry. That amounts to just £12m.

Howard Wheeldon, TM blogger and senior strategist at BGC Brokers says if there is any resistance from multinational companies it will be because the companies don’t see how such benefits will come to fruition but the bureaucracy of it will entail significant time and cost commitments.

“I think companies will be asking the OECD to illustrate who will gain value from the system and what how much that value is,” said Howard. “Businesses are understandably hesitant to accept extra outlay and red tape if there are no real benefits to anyone.”