The International Accounting Standards Board says it wants a discussion on
stewardship and accountability as an objective of financial reporting. And it is
certainly getting one, as support grows for stewardship to be identified as a
The IASB set up this row last autumn when, along with the US Financial
Accounting Standards Board, it suggested that a conceptual framework for
financial reporting should specify only one objective of financial reporting –
decision-usefulness. This would provide information that is useful to users in
making investment, credit and similar resource-allocation decisions. The IASB
and FASB said that this single concept encompassed the traditional objective of
“providing information useful in assessing management’s stewardship”.
A coalition of European standard setters has analysed the response to the
IASB/FASB discussion paper, Preliminary Views on an Improved Conceptual
Framework for Financial Reporting, to challenge the proposed downgrading of
stewardship and to examine whether a consensus exists on the meaning of
The analysis suggests that “most respondents [believe] the objective is about
assessing management’s competence and integrity, including the success of their
strategy in managing the business”. One objective of financial reporting is to
serve as a dialogue between management and shareholders, providing shareholders
with the information they need to make business decisions. Academics and small
investors view stewardship as being about governance.
The UK Accounting Standards Board says that without stewardship as an
objective “there is a danger in the future that information useful for
stewardship purposes may not be included in financial statements on the grounds
that it is not ‘decision-useful’ for resource allocation”.
Stewardship is linked to agency theory and is a broader notion than resource
allocation as it focuses on both past performance and how the entity is
positioned for the future. The coalition argues that retaining stewardship as a
separate objective would ensure there is “an appropriate emphasis on company
performance… and not just potential future cashflows”.
The disquiet among investors who value information on management performance
was supported by two IASB board members – including Sir David Tweedie himself.
The minority argued that while stewardship and decision-usefulness do not
necessarily conflict, they do carry a different emphasis – an emphasis which
many stakeholders think is worth retaining.
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