June 2022

Accounting, Audit and Assurance Standards Oversight Councils announce Canadian Sustainability Standards Board

Jun 15, 2022

On June 15, 2022, as the pace of progress in sustainability disclosures continues to accelerate, the Accounting Standards Oversight Council (AcSOC) and Auditing and Assurance Standards Oversight Council (AASOC) mutually approved the formation of the Canadian Sustainability Standards Board (CSSB).

The recommendation to form the CSSB was put forth by the Independent Review Committee on Standard Setting in Canada (IRCSS), which is currently conducting a review of the governance and structure for establishing Canadian accounting, auditing, and assurance standards, as well as what might be needed for the future – such as sustainability standards.

The committee's review was initiated by AcSOC and AASOC in May 2021 and is set to culminate with a final recommendation report this summer.

To support the significant work effort to establish a new board, the oversight councils are forming an implementation committee to develop the necessary groundwork for the CSSB. This includes establishing the recruitment process for a chair and board members, defining governance and process-related considerations, and more. The aim is to have a fully operational CSSB by April 1, 2023.

Review the press release to learn more about what this means for Canada.

Canadian Consultation: Climate-related Disclosures Exposure Draft

Jun 01, 2022

Financial Reporting & Assurance Standards (FRAS) Canada is embarking on a consultation project to solicit feedback from Canadians on the International Sustainability Standards Board’s (ISSB) Exposure Draft IFRS S2 “Climate-related Disclosures.”

The objective of [Draft] IFRS S2 “Climate-related Disclosures” is to require an entity to disclose information about its exposure to significant climate-related risks and opportunities, enabling users of an entity’s general purpose financial reporting:

  1. to assess the effects of significant climate-related risks and opportunities on the entity’s enterprise value;
  2. to understand how the entity’s use of resources and corresponding inputs, activities, outputs, and outcomes support the entity’s response to and strategy for managing its significant climate-related risks and opportunities; and
  3. to evaluate the entity’s ability to adapt its planning, business model, and operations to significant climate-related risks and opportunities.

Review the exposure draft on FRAS Canada's website.

Chair of the Trustees speaks at IFRS Foundation Conference

Jun 23, 2022

Erkki Liikanen, Chair of the IFRS Foundation Trustees, spoke at the IFRS Foundation Conference, which is split into one sustainability day and one accounting day, about the IASB and the ISSB.

His speech was mainly devoted to drawing a parallel between establishing the International Accounting Standards Board (IASB) in 2001 and the International Sustainability Standards Board (ISSB) now.

He began by pointing out that when the IASB was established, there were significant challenges with financial accounting regarding transparency and comparability across borders. There were calls (not least by the G7) for internationally agreed accounting standards. There were also calls for the International Organization of Securities Commissions (IOSCO) to review the standards. IOSCO did so and also recommended that its members permitted the use of the international standards for companies listed on foreign stock exchanges. In the end, as Mr. Liikanen pointed out, the international accounting standards proved to be a great success. He summarized:

And we have seen the benefits of this throughout the economic system. It benefits investors because it provides the information they need to make informed capital allocation decisions. It helps companies because they have clarity on which rules to follow in preparing their financial statements. And, it supports regulators in achieving their objectives of facilitating capital flows.

Mr. Liikanen then turned to the creation of the ISSB. Again, he pointed out, the IFRS Foundation was responding to great demand — from investors, companies, IOSCO and jurisdictions. And again, IOSCO has agreed to review the standards to be issued by the ISSB. And the hope is that then IOSCO will once more encourage the adoption of the new IFRS Sustainability Disclosure Standards — to make them as much of a success as their accounting counterparts. Mr. Liikanen concluded:

IOSCO brings together the world’s securities regulators. It plays an incredibly important role in promoting international standards. [...] Endorsement by IOSCO would be a real catalyst for the uptake of IFRS Sustainability Disclosure Standards around the world.

Review the full text of the speech on the IFRS Foundation's website.

FASB pauses goodwill accounting project

Jun 16, 2022

The Financial Accounting Standards Board (FASB) decided to set aside a long-running project on goodwill accounting that would have required companies to amortize goodwill on a straight-line basis over 10 to 25 years, removing the project from its technical agenda and deprioritizing it for now.

The project was added to FASB’s technical agenda in 2018 with the goal of revisiting the subsequent accounting for goodwill and identifiable intangible assets broadly for all entities, including how to improve the decision usefulness of the information and rebalancing the cost-benefit factors.

According to a handout for a meeting Tuesday, FASB’s tentative decisions and leanings ahead of the meeting focused mainly on the details of the subsequent measurement of goodwill. The guidance would have required companies to amortize goodwill on a straight-line basis over a 10-year default period or over an estimated period, using an open list of factors to consider, limited to a 25-year cap. Reassessing the amortization period would be prohibited. Companies would test goodwill for impairment only upon a triggering event, and continue to test goodwill for impairment at the reporting unit level. During a meeting last month, FASB started discussing presentation alternatives for goodwill charges, but didn’t come to a consensus on an income statement presentation.

Review the article on Accounting Today's website.

Future collaboration between ISSB and GRI

Jun 23, 2022

In March 2022, the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI) announced a Memorandum of Unterstanding that aims at coordinating the work programmes and standard-setting activities of the two organizations. More detailed ideas of how this could be achieved have now been published.

These ideas are the outcome of a first meeting of technical representatives from both organizations where activities were discussed that could provide the necessary clarification and alignment. Among the initiatives discussed were:  

  • An agreed schedule of meetings and roadmap to advance technical aspects of the collaboration;
  • a mapping exercise to establish those requirements in the literature of both organizations that are equivalent;
  • the development of a methodology to cross-reference between the respective guidance;
  • an examination of future priorities; and
  • the development of a full articulation of the ways in which the respective standards are complementary or diverge.

Review a full outline of the planned collaboration on the IFRS Foundation's website.

Hyperinflationary economies - updated IPTF watch list available

Jun 22, 2022

IAS 29 "Financial Reporting in Hyperinflationary Economies" defines and provides general guidance for assessing whether a particular jurisdiction's economy is hyperinflationary. But the IASB does not identify specific jurisdictions. The International Practices Task Force (IPTF) of the Centre for Audit Quality (CAQ) monitors the status of "highly inflationary" countries. While it monitors the status of highly inflationary countries for the purposes of applying US GAAP, its criteria for identifying such countries are similar to those for identifying 'hyperinflationary economies' under IAS 29.

The IPTF's discussion document for the 25 May 2022 meeting is now available and states the following view of the Task Force:

Countries with three-year cumulative inflation rates exceeding 100%:

  • Argentina
  • Ethiopia
  • Iran
  • Lebanon
  • South Sudan
  • Sudan
  • Suriname
  • Turkey
  • Venezuela
  • Yemen
  • Zimbabwe

Countries with projected three-year cumulative inflation rates exceeding 100%:

There are no countries in this category for this period.

Countries where the three-year cumulative inflation rates had exceeded 100% in recent years:

There are no countries in this category for this period.

Countries with recent three-year cumulative inflation rates exceeding 100% after a spike in inflation in a discrete period:

There are no countries in this category for this period.

Countries with projected three-year cumulative inflation rates between 70% and 100% or with a significant (25% or more) increase in inflation during the current period

  • Angola
  • Haiti

The IPTF also notes that there may be additional countries with three-year cumulative inflation rates exceeding 100% or that should be monitored which are not included in the analysis as the necessary data is not available. Examples cited are Afghanistan, Syria, and Ukraine.

The full list, including exact numbers, detailed explanations of the calculation of the numbers, and observations of the Task Force is available on the CAQ website.

IASB Chair discusses the IASB work plan

Jun 24, 2022

At the IFRS Foundation Conference currently held in London, IASB Chair Andreas Barckow discussed the IASB’s decisions on its work plan as a result of the outcomes of the IASB's third agenda consultation and the rationale for these decisions.

Mr. Barckow grouped his arguments into five major messages the IASB received from its stakeholders:

  • Completing the IASB's current work plan. The IASB will prioritize completing projects currently on the agenda before beginning new ones. It expects to continue the deliberations on its current projects throughout 2022 and the majority (if not all) of 2023. Mr. Barckow described the projects on primary financial statements, goodwill and impairment, and rate-regulated activities as being "in an intense stage of decision-making".
  • Balancing the IASB's activities. Even though standard-setting is the core activity of the IASB, it also engages in supporting the consistent application of IFRSs, assisting the digital consumption of financial reports, and actively involving in stakeholder engagement around the world. The feedback received indicates that the balance of the IASB’s activities is about right, however, there were calls for increasing the efforts on digital reporting and on understandability and accessibility of the standards. Therefore, the IASB will provide for a modest increase in these two areas.
  • Two new research pipeline projects. The IASB considered the suggestions made by stakeholders and weighed them against the criteria set for adding new projects to its agenda and the likely time needed to complete its current projects. The IASB has decided to add a comprehensive review of its standard on intangible assets, IAS 38, and a project devoted to the statement of cash flows and related matters.
  • Climate-related risks as a maintenance pipeline project. As the IASB has already published educational guidance on how to consider climate-related risks in financial statements, this will not be a full-scale project in its own right. The IASB wants to investigate whether there are any shortcomings in today’s reporting in the financial statements by entities and, if so, whether these shortcomings are due to a deficiency in its literature. Interaction with the ISSB has also to be considered in this case. 
  • A limited reserve list of two further projects. The IASB has decided to create a reserve list of projects and add operating segments and pollutant pricing mechanisms to it. They will only be added to the work plan if additional capacity becomes available unexpectedly. If they are not activated, they will be included for consideration in the next agenda consultation.

Mr. Barckow concluded his remarks with short a short discussion of the connectivity between the IASB and the ISSB and where projects on the agenda of the two Boards may overlap.

Review the full transcript of his speech on the IFRS Foundation's website.


IASB completes post-implementation review of IFRS 10, 11, and 12

Jun 20, 2022

On June 20, 2022, the International Accounting Standards Board (IASB) completed its post-implementation review of IFRS 10 "Consolidated Financial Statements", IFRS 11 "Joint Arrangements" and IFRS 12 "Disclosure of Interests in Other Entities". The summary report published shows that the standards work as intended.

The objectives of a post-implementation review, according to the IASB's Due Process Handbook, are:

  • to review the important issues that had been identified as contentious during the development of the pronouncement
  • to consider any unexpected costs or implementation problems that have been encountered.

Although minor issues were identified during the review, none of them was considered to be of high or medium priority. The minor issued identified as low priority are:

  • subsidiaries that are investment entities;
  • transactions that change the relationship between an investor and an investee;
  • transactions that involve "corporate wrappers";
  • collaborative arrangements outside the scope of IFRS 11; and
  • additional disclosures about interests in other entities.

The IASB notes that these topics could be explored if they are judged to be of high priority in the next agenda consultation. The Board also encourages stakeholders to submit questions to the IFRS Interpretations Committee if they believe additional guidance is required in certain areas.

Review the press release and final report on the IASB’s website.

IFRS Foundation announces four inaugural ISSB members

Jun 08, 2022

On June 8, 2022, the Trustees of the IFRS Foundation announced the appointment of Richard Barker, Verity Chegar, Bing Leng, and Ndidi Nnoli-Edozien as ISSB Board members. Their appointments begin in July 2022 end are staggered, so that their term ends in September 2026 or June 2027.

Mr. Barker is currently deputy dean and professor of accounting at Saïd Business School, University of Oxford where he leads Oxford Saïd’s sustainable business initiatives. He chairs the expert panel of Accounting for Sustainability (A4S) and has previously served as a member of several committees and bodies focused on corporate reporting in the UK and Europe.

Ms. Chegar has 20 years of experience in sustainable investment and stewardship, portfolio management and investment research with both asset owner and asset manager perspectives. She is also currently serving as Co-Vice Chair of the SASB Standards Board, where she has been overseeing the development and maintenance of SASB’s industry-based standards since 2017.

Mr. Leng is currently a Director in the Accounting Regulatory Department of the Chinese Ministry of Finance, where he oversees sustainability reporting initiatives, and also serves as a member of the IASB IFRS Taxonomy Consultative Group.

Ms. Nnoli-Edozien has worked across multinational and indigenous companies, public institutions and civil society organizations, in Africa and Europe, to initiate sustainable development initiatives. In her last role, she served as the inaugural Group Chief Sustainability and Governance Officer of Dangote Industries Limited — one of Africa’s largest manufacturing businesses.

The press release on the IFRS Foundation's website also notes that appointments to bring the ISSB to quorum (eight members) will be announced shortly, with the aim of completing the inaugural appointments to the Board during the third quarter of 2022.

IFRS Foundation announces two additional ISSB members

Jun 24, 2022

On June 24, 2022, the Trustees of the IFRS Foundation announced the appointment of Jeffrey Hales and Michael Jantzi as ISSB Board members. Their appointments mean that the ISSB is now quorate.

Mr. Hales, who has been appointed to a part-time role, has served as Chair of the SASB Standards Board since 2018 and is also a professor of accounting at the University of Texas in Austin, US. He has previously served as an academic research fellow at the Financial Accounting Standards Board (FASB) and as a member of its Financial Accounting Standards Advisory Council. His first term expires on 30 June 2027.

Mr. Jantzi joins the ISSB from Morningstar, where he currently serves as Managing Director of ESG Strategy. He is the founder and former CEO of Sustainalytics, an ESG research and ratings firm that was subsequently acquired by Morningstar in 2020. He currently serves on the Board of Directors of the Value Reporting Foundation (VRF) and of the Principles for Responsible Investment. His first term expires on 30 September 2025.

In the next several weeks, the Trustees will complete the ISSB’s full membership with further appointments in July and the goal to reach the full complement of 14 members during the third quarter of 2022.

Review the press release on the IFRS Foundation website.

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