Opportunities for deficient accountability through IFRS group accounting requirements

Large multi-national corporations commonly comprise many separate legal entities, which commonly also present a complexity of intragroup relationships. The related accounting requirements offered through the International Accounting Standards Board standards are equally complicated, resulting in financial statements for an artificial "group" which provide little transparency into the workings or risks of individual legal entities within that construct. This chapter utilizes various investigative mechanisms to question the utility of group accounting. Our approach includes empirical scrutiny of some recent large group annual reports, along with three deeper case studies of recent corporate failings and collapses. Our results suggest a range of common non-compliances and deficiencies in group-related accounting standards, which collectively reflect and enable evasion of effective accountability. Key deficiencies identified include allowing risks and critical transactions to be hidden within highly aggregated disclosures and allowing for limited disclosures of related party transactions and goodwill impairment. We call on accounting standard setters, regulators, academics and financial statement users to engage meaningfully with both the technical and political challenges reflected in these deficiencies.