Review the effective dates for new standards on the AcSB's website.

In his speech, which also touched briefly on COVID-19 matters, Mr. Hoogervorst noted that the growing urgency of climate change has intensified interest in sustainability reporting in recent years. Exploring the relationship between financial reporting and non-financial reporting, he made the following points:

• None of the IFRSs even mentions ‘climate change’ or ‘sustainability’. Financial reporting merely seeks to neutrally describe economic reality as it is.
• However, that does not mean that there is a disconnect between IFRSs and sustainability issues and financial reporting based on current IFRSs can be more reflective of sustainability issues than many people realize.
• The principle-based approach of IFRSs means that many issues can be captured by the requirements, both in terms of recognition and measurement and disclosure. In fact, separate disclosures on the effects of climate change might already be required based on the materiality requirements.
• Sustainability reporting has important added value to the financial statements. However uncertain this information may be, it can very well be material to investors.
• Sustainability reporting may also serve to make a company aware of the financial consequences of such issues much earlier.
• There is hope that in the future financial reporting and sustainability reporting will come even closer together.

Mr. Hoogervorst also noted that, as a separate piece of work that is complimentary to the requirements in IFRSs and the IASB’s work on Management Commentary, the Trustees of the IFRS Foundation are currently considering sustainability reporting. They are in the process of preparing for their next five-yearly strategy review and a working group of Trustees has done research into sustainability reporting. Mr. Hoogervorst explained that the Trustees plan to build on that work by consulting on the topic more broadly shortly.

Review the full transcript of Mr. Hoogervorst's speech on the IASB's website.

This issue features:

• Spotlight — Covid-19-Related Rent Concessions
• Spotlight — Supply Chain Finance
• We need your views
• Stay up to date
• Resources for investors

Review the Investor Update newslet­ter on the IASB’s website.

IFAC calls for the IFRS Foundation to create an International Sustainability Standards Board (ISSB). This new Board could leverage the independence and success of IFRS governance to develop global standards and rationalize the current fragmented ecosystem. As with the IASB, clear support from global institutions like IOSCO and appropriate funding would be critical to success. Under the structure the IFAC envisions, the IASB would remain focused on financial reporting standards and coordinate with the ISSB to avoid overlaps and gaps.

Veronica Poole, Global IFRS Leader and Head of Corporate Reporting at Deloitte, said: “Transparent measurement and disclosure of sustainability performance is a fundamental part of effective business management and is essential for preserving trust in business as a force for good. IFAC’s vision is fully aligned with the joint vision of the leading standard-setters on how their current standards and frameworks could complement IFRS Standards and US GAAP, and serve as a natural starting point for progress towards a more coherent, comprehensive corporate reporting system.”

“We now have a unique opportunity to accelerate progress and house all the relevant standards under one roof as suggested by IFAC, to connect sustainability disclosure standards focused on enterprise value creation to financial GAAP. Integrated reporting together with the IASB’s work on Management Commentary can provide a framework for this connectivity. IOSCO has stated its commitment to bring about the system change for the capital markets and the IFRS Foundation trustees indicated that they are going to consult on introducing a sustainability focused standard-setter under the umbrella of the IFRS Foundation—the stars are lining up to bring about the fundamental shift in reporting that investors, business and society at large have been calling for.”

The ISSB itself would adopt a “building blocks” approach, working with and leveraging the expertise and disclosure requirements of leading initiatives, including CDP, CDSB, GRI, IIRC, and SASB. These building blocks would consist of:

• Requirements for material non-financial information focused on company performance, risk profile, economic decisions and enterprise value creation.
• Collaboration with respect to reporting requirements designed to address broader, material sustainable development and company impacts on economy, environment, and people. These requirements may ultimately be incorporated or endorsed into ISSB standards.
• Supplemental jurisdictional requirements to support local public accountability.

Financial and non-financial information would be connected through a common conceptual framework.

The IFAC notes that the time for a global solution is now — to answer the demand from investors, policymakers and other stakeholders for a reporting system that delivers consistent, comparable, reliable, and assurable information relevant to enterprise value creation, sustainable development and evolving expectations. A fragmented approach would perpetuate inefficiency, increased cost, and a lack of trust. Therefore, the IFAC argues, that important work that is currently underway should be continued, but with the aim of ultimately contributing to the emerging global system.

Review the Enhancing Corporate Reporting: The Way Forward on the IFAC's website.

After an introductory assessment of the current situation, which stresses the growing and urgent demand and the need for consistency in reporting and comparable information, the consultation paper sets out high-level options for the IFRS Foundation. These options are explained as maintaining the status quo, facilitating existing initiatives, or creating a Sustainability Standards Board (SSB) and becoming a standard-setter working with existing initiatives and building upon their work.

For establishing the possible new sustainability standards board the existing IFRS Foundation’s three-tier governance structure could be leveraged. The new board could operate alongside the International Accounting Standards Board (IASB) under the existing governance structure, build on existing developments and collaborate with other bodies and initiatives in sustainability, focusing initially on climate-related matters. However, the consultation paper sets out critical success factors for the creation of an SSB. These include:

• Achieving sufficient support from public authorities and market participants;
• working with regional initiatives to achieve global consistency and reduce complexity in the reporting landscape;
• achieving the appropriate level of funding; and
• ensuring the current mission of the IFRS Foundation is not compromised.

If respondents believe that the SSB could and should be established by the IFRS Foundation, the discussion paper suggests a ‘climate-first’ approach, proposes that the SSB would initially focus its efforts on the sustainability information most relevant to investors and other market participants and could consider how to broaden its scope as it proceeds with its work, and and discusses assurance aspects.

The consultation paper includes ten questions to respondents and encourages stakeholders to raise any other comment or relevant matters for the consideration of the Trustees. Comments on the consultation are requested by 31 December 2020.

Review the following additional information:

• Press release
• Consultation paper
• IFRS in Focus — Ground-breaking proposal from IFRS Foundation points to global standards for sustainability reporting

In addition, the CDP, Climate Disclosure Standards Board, Global Reporting Initiative, International Integrated Reporting Council and Sustainability Accounting Standards Board have issued an open letter to Erik Thedéen, Chair of the Sustainable Finance Task Force of the International Organization of Securities Commissions, on the need to work together to meet the needs of the capital markets. IFAC has issued a press release, applauding both, the IFRS Foundation consultation and the open letter.
 

Webinars were recently held on the Exposure Draft General Presentation and Disclosures in English, Japanese and Korean. Recordings of the live webinars are now available.

The English language recording posted on YouTube can be accessed through the press release on the IASB website.

While GRI, SASB, CDP and CDSB set the frameworks and standards for sustainability disclosure, including climate-related reporting, along with the TCFD recommendations, the IIRC provides the integrated reporting framework that connects sustainability disclosure to reporting on financial and other capitals.

These organizations have now declared their intent to provide:

• joint market guidance on how the frameworks and standards can be applied in a complementary and additive way;
• a joint vision of how these elements could complement financial generally accepted accounting principles (financial GAAP) and serve as a natural starting point for progress towards a more coherent, comprehensive corporate reporting system; and
• joint commitment to drive toward this goal, through an ongoing programme of deeper collaboration between them, and a stated willingness to engage closely with other interested stakeholders.

The “big picture” view of the relationship between the standards and frameworks, including their relationship to the IASB and FASB standards, foresees an approach to standard-setting that results in a globally agreed set of sustainability topics and related disclosure requirements under a rigorous and ongoing standard-setting due processes that will result in high-quality global standards.

The comprehensive corporate reporting system the paper envisions would then see three nested sets of reporting:

• Reporting on matters that reflect the organisation’s significant impacts on the economy, environment and people;
• reporting on the sub-set of sustainability topics that are material for enterprise value creation; and
• reporting that is already reflected in the financial accounts.

Reporting already reflected in the annual accounts would continue to be the remit of IASB and FASB and the subset of sustainability topics that are material for enterprise value creation would be covered by CDSB and SASB. Both sets would be connected by an overarching integrated reporting framework. GRI Standards would enable companies to report sustainability information that describes their significant impacts on the economy, environment, or people, and hence their contributions towards sustainable development and could also be used to describe impacts on the company. CDP would fill the crucial role of technology in reporting and enable access for all stakeholders to corporate performance on sustainability topics. The standards rsulting from this comprehensive reporting system would enable companies to collect information about performance on a given sustainability topic once but provide relevant information to different users through appropriate communication channels.

Review the joint press release and statement of intent.

Below is an analysis of all changes made to the work plan since our last analysis on August 28, 2020.

Standard-setting projects

• Management Commentary — the issuance of an exposure draft is now expected in the first quarter of 2021 (previously first half of 2021)
• Rate-regulated Activities — the issuance of an exposure draft is now expected in the first quarter of 2021 (previously fourth quarter of 2020)

Maintenance projects

• Deferred Tax Related to Assets and Liabilities Arising From a Single Transaction — a decision on the project directions is now expected in October 2020 (previously fourth quarter of 2020)
• Lease Liability in a Sale and Leaseback — the issuance of an exposure draft is now expected in November 2020 (previously fourth quarter of 2020)

Research projects

• Business Combinations under Common Control — a discussion paper is now expected in November 2020 (previously fourth quarter of 2020)
• Dynamic Risk Management — Core model outreach is now expected in October 2020 (previously fourth quarter of 2020)
• Pension Benefits That Depend on Asset Returns — A review of the research is now expected in November 2020 (previously fourth quarter of 2020)

The revised IASB work plan is available on the Board's website.