Research and several literatures show that in the 20th century, accountants were seen as the trustees of financial truth. However, a series of devastating corporate scandals eroded public trust and exposed deep flaws in the profession’s ethics.
From the Enron collapse in 2001, which wiped out $74 billion in shareholder value and led to the downfall of Arthur Andersen, to WorldCom’s $11 billion fraud in 2002, the early 2000s marked a turning point in public perception. The Lehman Brothers bankruptcy in 2008, fuelled by deceptive accounting practices, triggered a global financial crisis.
Meanwhile, in Nigeria, scandals such as the Cadbury Nigeria financial misstatements between 2003 and 2006 and the Tingo Group fraud in 2023, where the company made a false claim that its Nigerian subsidiary held $461 million in cash but had only $50, caused massive economic damage but also eroded the credibility of the accounting profession.
As the world shifts attention to sustainability and demands greater transparency in both financial and sustainability reporting, accountants are being offered a rare opportunity, a second chance to restore trust and redefine their role as stewards of integrity in an ever-dynamic and rapidly changing world.
In June 2023, the IFRS Foundation, through the International Sustainability Board (ISSB), issued IFRS Sustainability Disclosure Standards, a global framework that harmonises sustainability reporting across the world. So far, the board has issued two disclosure standards: IFRS S1 – General requirements for disclosure of sustainability-related financial information and IFRS 2 – Climate-related disclosure.
IFRS S1 set out the basis for reporting sustainability-related financial information. Some of the key highlights of these disclosure standards are the provision of an explicit source of guidance for identifying sustainability-related risks and opportunities compared to the hitherto position where companies choose to report sustainability disclosure topics that suit their purpose and intent and the disclosure of sustainability -Related information is to be embedded within the general-purpose financial report of companies, except local regulations or other requirements, such as pronouncements from the Financial Reporting Council of Nigeria or similar bodies, suggest otherwise. The time frame for reporting sustainability-related information should coincide with the entity’s related financial statements and comparative information for the earliest prior period is to be disclosed alongside any reporting period. The latter and the previous may not apply in this first year of adoption.
Others are disclosures on the level of judgements exercised in identifying disclosure topics, sustainability risks and opportunities, and their source of guidance. Also, disclosures of the amount disclosed are subject to a high level of uncertainties, and the source of measurement uncertainties includes assumptions, approximations, and judgement in measuring those amounts.
The ISSB anchored the disclosure standards of IFRS S1 and S2 on four main pillars of governance, strategy, risk management, and metrics and targets. This set the tone for subsequent disclosure standards that will be issued in the future.
The governance pillar focuses on a governance body, either a board committee or related body with appropriate depth of skills and competence, charged with the responsibilities to monitor, manage, and oversee sustainability-related risks and opportunities in the company. These responsibilities are cascaded to the management. The strategy pillar focuses on the entity’s strategy for managing sustainability-related risks and opportunities, specifying the time horizons (short, medium, or long term) for those risks and opportunities, their effect on the business model, value chain, financial position, performance, and cash flows, how it intends to respond to them, and its level of resilience to adjust to uncertainties.
The risk management pillar focuses on processes to identify, assess, prioritise, and monitor sustainability-related risks and opportunities, including whether and how those processes are integrated into and inform the entity’s overall risk management process. Lastly, the metrics and targets pillar entails metrics to measure and monitor sustainability risks and opportunities, such as industry metrics, cross-industry metrics, metrics specific to the entity, and metrics specified by local regulations or other requirements.
While the Financial Reporting Council of Nigeria has outlined a roadmap to ensure timely compliance with the IFRS Sustainability Disclosure Standards beginning with early adoption in December 2023, followed by voluntary adoption between 2024 and 2027, mandatory adoption for Public Interest Entities (PIEs) by 2028, and Small and Medium-sized Enterprises (SMEs) by 2030, further direction and regulatory guidance will be essential. Especially for areas requiring localised interpretation and implementation and as government entities remain under consideration within the broader adoption framework.
Meanwhile, Nigeria has not experienced a corporate scandal severe enough to destabilise its economy, a situation not unique to Nigeria. This suggests that there remains a measure of trust and integrity within the accounting profession, which continues to serve as a guardian of financial transparency. As we move forward into the era of sustainability reporting, only time will reveal whether accountants worldwide can be trusted to faithfully and accurately report on sustainability.
Oluwatobi Abisoye; Chartered Accountant & Corporate Reporting Specialist
