LONDON, June 24, 2014 /CNW/ - One of the biggest economic challenges
facing governments and developers around the world is how to meet the
growing demand for infrastructure development.
It has been estimated that US $3.2 trillion will be needed each year for
the next fifteen years to fund infrastructure development.1 However, the shortfall in available funds is significant - estimated
at $500 billion annually. So governments and businesses share an
interest in identifying the causes and finding solutions to close this
funding gap. The B20 group2, which brings together business leaders from the G20 countries, asked
the six largest international accounting networks3 to come together to analyse the issue and develop practical
recommendations that would promote more long-term investment from
non-government sources in infrastructure.
A Panel of experts from the six largest international accounting
networks has now published a report focused on possible accounting and corporate reporting reforms that
could help attract increased private financing.
The Panel identified recommendations relating to the following three
using corporate reporting to achieve a longer-term focus;
continuing to improve financial reporting through ongoing accounting
standards development; and
encouraging improved alignment of regulatory risk calculations with the
actual risk profiles of infrastructure investments.
The Panel concludes that - for the most part - changes to accounting
principles would not increase the attractiveness of long-term
infrastructure investments, but supports the IASB's ongoing work to
improve financial reporting. In particular, the IASB should continue to
prioritise the issuance of a global standard on insurance contracts in
the near future - with the insurance industry being a potential major
investor in infrastructure. The IASB should also continue its
consideration of performance reporting as part of its Conceptual
Framework and Disclosure Initiative projects.
Historical financial information plays an important role in supporting
investor assessments of potential project outcomes, but it cannot
provide the complete picture on its own. In recognising this, the Panel recommends that the B20, along with the
G20, should actively promote corporate reporting innovations and
initiatives that provide investors with a longer-term and broader
perspective on shareholder value creation to complement the historical
financial performance and current financial position perspective
provided by financial statements. The Panel notes the particular relevance of integrated
reporting as an example in this respect.
In the report, the Panel acknowledges that other factors - such as the evaluation of
regulatory requirements, geographic and political stability or the
development of credit enhancement structures for project bonds - have a
more significant role to play in making investment in infrastructure
more attractive. However, the Panel believes that greater transparency
of project data and risks would help to capture potential capital, and
that certain improvements could therefore make corporate reporting more
conducive to infrastructure and other long-term investment.
More about the Panel
In light of the importance of infrastructure and other long-term
investment for the global economy, the B20 created an infrastructure
and investment taskforce, which developed actionable recommendations
for the G20. As a result of one of these recommendations, the six
largest international accounting networks formed a panel to analyse
existing accounting and corporate reporting practices, and suggest
improvements that would help the corporate reporting model provide a
broader perspective of business performance that is more conducive to
About KPMG International
1 Estimate by McKinsey and Standard & Poor's.
2 The Business 20 (B20), a group of leading representatives of business
communities from all G20 countries.
3 The 'Panel' comprises representatives from BDO, Deloitte, EY, Grant
Thornton, KPMG and PwC.
SOURCE: KPMG International
For further information:
KPMG Head of Global Communications
+44 207 694 2601