The Institute of Chartered Accountants of Sri Lanka (CA) has launched the “Guideline on Non-Financial Reporting”.
The guideline is intended as the precursor to a formal standard that governs non-financial disclosures in annual reports. The guidelines, although currently voluntary, are expected to be standardized by the Securities and Exchange Commission (SEC) in due course.
The chairman of the task force to develop non-financial reporting practices in Sri Lanka, Nuwan Withanage, noted that currently, even internationally, there are no mandatory standards for reporting non-financial information.
Withanage noted that companies could, either by omission or through the use of favorable standards, paint a misleading picture of their operations. Withanage hoped that the current directive would initially help create a convention widely followed by Sri Lankan businesses, which would then become standardized.
Withanage was speaking on June 22 at the CA building during the official launch of the directive. Withanage noted that CA will place the new guidelines as part of the scoring criteria for future annual report awards. He said this, along with the use of “insurance partners”, would act as a catalyst to bring comparable information into publicly available capital markets documents. The guidelines draw on specific international guidelines such as the Global Reporting Initiative, the Task Force on Climate-Related Financial Disclosures, the Sustainability Accounting Standards Board, and the Climate Disclosure Standards Board, among others, to provide guidance to companies Sri Lankans.
Withanage said: “Going forward, statements will be meaningful. This is the path to normalization. He noted that in the future, it would not be uncommon for the SEC to mandate disclosure of items such as water use in commonly accepted and comparable measures in capital markets.
SEC Chairman Viraj Dayaratne noted that the world is increasingly turning to the triple bottom line. He added that reducing systemic risk in capital markets involves a thorough examination of an entity’s environmental, social and governance attributes. He noted that sustainability in modern times extends beyond issues surrounding the environment and now also includes issues of social equity.
CA Sri Lanka Chairman Sanjaya Bandara noted that annual reports are the foundation upon which many companies build their reputation in the wider community. He noted that by improving the quality of non-financial reporting, they facilitated considerable investment in the country.
The new standard is based on the principle of the “Core and More” approach. Small businesses are also able to follow the guidelines, with larger entities able to provide more in-depth facts to their stakeholders.
At this stage of the initiative, the guidelines are both voluntary and designed to help companies provide important information to their stakeholders. The guidelines are available for purchase on CA’s website or at their physical locations. (DP)