Disclosing Government Payments
Publisher: Ernst & Young
Date: 2013
It is estimated that more than 3.5 billion people live in countries with extensive oil, natural gas and mineral resources. With good governance that fosters sustainable development free from corruption, these natural resources can add greatly to the quality of life for the people of such countries. Proper development can foster broad economic growth beyond the natural resources and go a long way to reducing or eliminating poverty and the social problems that it creates. Further, there is a broad view that greater transparency in the natural resource extractive industries will support proper development. Essentially, companies disclose that which they pay to governments to verify that which governments say they receive from companies.
Consequently, three major efforts have emerged to require of government payments. The first was the Extractive Industries Transparency Initiative (EITI), which is a set of reporting standards published by a coalition of companies, governments and non-governmental organizations (NGOs). EITI was followed by legislation enacted in the United States under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), which requires certain disclosures by natural resource extractive companies that are subject to the reporting requirements of the US Securities and Exchange Commission (SEC). Finally, the European Union (EU) recently approved a rule requiring the disclosure of payments made to governments by both listed and large, non-listed natural resource extractive companies. The following is a brief summary of the three initiatives, along with a high-level, side-by-side comparison of the reporting requirements from each set of rules.