Strengthening international bonds: IFAC takes aim at standard setting and developing nations.

CMA Management occasionally highlights the individual work of CMAs who support improved governance and accounting practices internationally. Of course, these individuals don't do this alone. Many organizations are involved in creating better governance models and support networks for nations in need.

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For instance, the International Federation of Accountants (IFAC) is involving its member bodies in efforts to improve accounting practices in developing nations. At the conclusion of a two-day board meeting in Cape Town, South Africa, in March, the board agreed to launch new initiatives to meet the needs of these countries.

Architecture and advice

This particular decision was made after considering the conclusions of a two-day inaugural IFAC consultative conference held in Prague, Czech Republic, on March 10-11. The conference was a unique event at which more than 125 representatives of IFAC member bodies, other professional and accounting associations and development and funding agencies focused on, among other issues, establishing an international response to meet the needs of developing nations. Developing nations in Eastern Europe and Africa were well represented at the conference. The recommendations that emerged from the conference included the following:

* Developing a country-specific approach to supporting developing nations, helping both those countries where there is no established profession and those that have only begun to build the professional, financial and regulatory architecture necessary to support economic growth.

* Continuing to reinforce the need for International Financial Reporting Standards (IFRS) that can be effectively implemented for developing nations.

* Establishing a process whereby accountancy institutes in more developed countries can serve as mentors to those in less developed countries.

* Creating a blueprint that clearly delineates the steps involved in establishing a viable and high quality accountancy profession.

Adding to these discussions by the board were South African Finance Minister Trevor Manuel and NEPAD (the New Partnership for Africa's Development) Chairman Reuel Khoza, who discussed how IFAC can best contribute to the economic development of African countries and of developing nations in general. Finance Minister Trevor Manuel discussed the Commission for Africa Report and identified three important areas within IFAC's work program:

* Developing Nations -- Emphasizing the need to augment this activity, including identifying incentives for skilled workers to remain in developing countries.

* Small and Medium Practices -- Emphasizing the importance of diversity of the profession, including the need to have more medium-sized practices.

* International Financial Reporting Standards (IFRS) -- Emphasizing the issues of complexity and relevance to organizations of all sizes.

Manuel encouraged IFAC to help build accountancy capacity in African countries and to assist individuals in these countries in developing the skills necessary to provide high quality accountancy services, which he views as vital to economic growth. He also called on IFAC to encourage diversity in the profession by actively supporting small and medium-sized enterprises (SMEs).

Knowledge transfer

"IFAC's goal is to have a trusted investment climate in every country," noted IFAC president Graham Ward. "This can only be accomplished by making a long-term commitment to developing nations and creating a strong accountancy profession in them, by working in partnership with our member institutes and other relevant organizations, such as international development and funding agencies. We are committed to strengthening these relationships and through them, taking the necessary actions."

As a member of IFAC, CMA Canada will do its part to support these initiatives. "We may not have one-on-one relationships with particular countries as part of this initiative--that will be at the discretion of IFAC," notes Steve Vieweg, president and CEO of CMA Canada. "However, our Management Accounting Guidelines (MAGs) are a valuable, well-recognized resource in the accounting community, and we have been asked to make that material available to developing countries."

The initial knowledge-sharing plan would involve the creation of an online library with a portal that allows institutes or professionals in developing countries to gain access to MAGs free of charge. Access would be limited to guidelines that are at least three years old.

"For individuals and organizations in the developed world, the fee we request for access to MAGs is relatively small, but for developing countries, it can be a significant burden," says Vieweg.

The SME challenge

At both the Prague conference and the South Africa board meeting, the accounting needs of SMEs was also a hot topic. As our article on the changing Canadian accounting standards landscape notes, SMEs here and abroad are struggling with the implications of the International Financial Reporting Standards coming into force. Generally, what they're feeling is frustration.

The auditing needs of a large multi-national company and those of a 30-person company are clearly quite divergent, and yet international standards are attempting to apply the same formula to these very different market players.

"At the Prague conference, Canada's review engagement process was suggested as a very viable option for SMEs," says Vieweg. "But, in further discussion, this option was discounted in favour of the one standard. Admittedly, the Canadian model for SMEs is not as comprehensive, but it does offer a certain level of assurance--a level that appears to be a win-win for companies of that size and investors alike."

It may take some time before consensus is reached on this particular issue. The critical goal is to encourage investor confidence and stability, and IFAC member bodies will continue to discuss how much assurance is enough among smaller companies.