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FRC Lab report discussing reporting on climate-related issues

Oct 31, 2019

In October 2019, the Financial Reporting Lab of the UK Financial Reporting Council (FRC) released a new report which reveals that companies are falling short of investors’ expectations for clearer reporting on climate-related issues. It notes that while reporting on climate change is an evolving practice, investor expectations are changing rapidly.

The report highlights the gap between current reporting and investor expectations as economies increasingly transition towards low carbon and climate resilient futures and calls on companies to bridge this gap. It provides practical guidance about where companies can improve their reporting. The report also outlines what investors want to understand, questions companies should ask themselves, recommended disclosures, and a range of examples of the developing practice of climate-related reporting.

Review the report Climate-related corporate reporting – Where to next? from the FRC's website.

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Paper on climate-related risk and financial statements

Oct 28, 2019

The Australian Accounting Standards Board (AASB) announced the availability of a paper "Climate-related Risk and Financial Statements: Implications for Regulators, Preparers, Auditors and Users".

The AASB recently published published the bulletin Climate-related and other emerging risks disclosures: assessing financial statement materiality using AASB Practice Statement 2, with AASB Practice Statement 2 being essentially the same as the IASB Practice Statement on Materiality. The paper now released provides an outline of the guidance in the practice statement and motivation behind the issuance of the bulletin on climate‐related risk disclosures, key takeaways and recommendations, and the AASB's suggestions on the type of evidence that would be useful for standard-setters.

Climate-related Risk and Financial Statements: Implications for Regulators, Preparers, Auditors and Users was published in the Australian Accounting Review and can be accessed free of charge in the Wiley Online Library.

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Background papers for the 36th annual ISAR meeting

Oct 28, 2019

The thirty-sixth session of the United Nations Conference on Trade and Development (UNCTAD) Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR) will be held in Geneva on October 30 - November 1, 2019. One of the main agenda items discussed during the session will be the practical implementation of core indicators for entity reporting and the contribution towards the attainment of the Sustainability Development Goals.

For this agenda item, background notes have been prepared by the UNCTAD secretariat to facilitate deliberations. The paper can be downloaded from the UNCTAD website:

Since the thirty-fifth session of ISAR, UNCTAD has completed and published the Guidance on Core Indicators for Entity Reporting on Contribution towards Implementation of the Sustainable Development Goals.

The core indicators contained in the current version of the Guidance are follows:

Economic area

  • Revenue
  • Value added
  • Net value added
  • Taxes and other payments to the Government
  • Green investment
  • Community investment
  • Total expenditures on research and development
  • Percentage of local procurement

Institutional area

  • Number of board meetings and attendance rate
  • Number and percentage of women board members
  • Board members by age and range
  • Number of meetings of audit committee and attendance rate
  • Compensation: total compensation per board member (both executive and non-executive directors)
  • Amount of fines paid or payable due to settlements
  • Average number of hours of training on anti-corruption issues, per year per employee

Social area

  • Proportion of women in managerial positions
  • Average hours of training per year per employee
  • Expenditure on employee training per year per employee
  • Employee wages and benefits as a proportion of revenue, by employment type and gender
  • Expenditures on employee health and safety as a proportion of revenue
  • Frequency/incident rates of occupational injuries
  • Percentage of employees covered by collective agreements

Environmental area

  • Water recycling and reuse
  • Water use efficiency
  • Water stress
  • Reduction of waste generation
  • Waste reused, remanufactured and recycled
  • Hazardous waste
  • Greenhouse gas emissions (scope 1)
  • Greenhouse gas emissions (scope 2)
  • Ozone-depleting substances and chemicals
  • Renewable energy
  • Energy efficiency

A review of the case studies provided evidence that environmental and social indicators were more difficult to report on than economic and institutional indicators.

General information on the session including a provisional agenda for the meeting is available here.

Further publication of interest in the context of the meeting are available on the UNCTAD website:

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It’s time to reassess ESG and sustainability reporting

Oct 28, 2019

On October 28, 2019, the National Association of Corporate Directors (NACD) posted a blog that discusses how nearly all S&P 500 companies provide some form of environmental, social, and governance (ESG) or sustainability reports today, but there are growing concerns by a range of stakeholders—investors, employees, customers, regulators, and activists—regarding the quality, comparability, and usefulness of these reports.

For a variety of reasons and based on analysis of several approaches to disclosure, expect increasing stakeholder demands are expected for more transparent and higher quality ESG reporting.

Read the full blog on the NACD's website.


Updated IASB work plan — Analysis (October 2019)

Oct 25, 2019

On October 25, 2019, the International Accounting Standards Board (the Board) updated its work plan following its October 2019 meeting.

Below is an analysis of all changes that were made to the work plan since our last analysis on October 1, 2019.

Stan­dard-set­ting projects

Main­te­nance projects

  • 2019 Comprehensive Review of the IFRS for SMEs Standard — the request for information is now expected in the first quarter of 2020 (previously fourth quarter of 2019)
  • Accounting Policies and Accounting Estimates — dis­cus­sions on the project direction happened in October 2019 (previously fourth quarter of 2019).
  • Onerous Contracts — Cost of Fulfilling a Contract (Amendments to IAS 37) — An IFRS amendment is expect in the first half of 2020.

Research projects

Other projects

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


Sixth IASB Research Forum

Oct 21, 2019

The International Accounting Standards Board (IASB) in conjunction wit the Journal of International Accounting Research (JIAR) will host its sixth research forum on October 28–29, 2019.

The paper Standard Precision and Aggressive Financial Reporting—The Influence of Incentive Horizon will be presented. Here's a copy of the abstract:

The extant literature on standard precision suggests that financial statement preparers are less likely to make aggressive financial reporting decisions under less precise, principles-based accounting standards as compared to under more precise, rules-based accounting standards. We extend this line of research by examining how the incentive horizon of financial statement preparers influences earnings management behavior. Consistent with prior literature, we find evidence that more precise standards lead to more income-increasing earnings management behavior than do less precise standards when the incentive horizon is short-term in nature. However, when the incentive horizon is long-term, more precise standards are associated with financial reporting decisions that reduce current income relative to less precise standards. Importantly, the findings demonstrate that the effects of standard precision are changed by the incentive time horizon, and the market implications of standard precision cannot be fully understood when precision is studied without considering the incentives of decision makers.

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ESG risks trickle into financial filings

Oct 21, 2019

On October 21, 2019, the NACD BoardTalk released a blog on how investors in 2019 have increasingly turned their attention to environmental, social, and governance (ESG) topics, and are demanding more information on how companies are thinking about the potential long-term risk and opportunities related to specific environmental and social factors.

As companies prepare for the 2020 proxy season and engage with shareholders, directors should understand the current state of ESG risk reporting in public filings.

Review the full blog on the NACD BoardTalk's website.

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The future of international standard setting

Oct 21, 2019

On October 21, 2019, the International Auditing and Assurance Standards Board (IAASB) published a speech by Tom Seidenstein IAASB Chair to the Institute of Chartered Accountants of England and Wales’s Audit Conference.

In his speech, Mr. Seidenstein expresses that he firmly believes that auditors must play a critical role in ensuring trust in markets. He worries that trust is eroding in these institutions and in the way the economy works. It is his belief that that the IAASB, in conjunction with their many stakeholders, can and must play a role in enhancing and possibly restoring trust where it has eroded.

Review the full speech on the IAASB's website.

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Focus on professional skepticism

Oct 18, 2019

On October 18, 2019, the International Auditing and Assurance Standards Board (IAASB) published its third update to stakeholders highlighting the IAASB’s efforts to appropriately reflect professional skepticism in its standards.

Review the update on the IAASB's website.

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FASB approves proposed effective date delays

Oct 16, 2019

On October 16, 2019, the Financial Accounting Standards Board (FASB) approved its August 2019 proposal to grant private companies, not-for-profit organizations, and certain small public companies various effective date delays on its credit losses (CECL), leases, and hedging standards.

At this meeting, the FASB discussed (1) the effective dates of its standards on credit losses, hedging, leases, and insurance for private companies, not-for-profit organizations, and small public companies and (2) multiple-layer hedging.

Effective-date considerations

The Board affirmed its decision to stagger effective dates for major standards and to amend the effective dates of its standards on credit losses, hedging, leases, and insurance to give implementation relief to certain types of entities. The Board directed its staff to draft a final Accounting Standards Update (ASU) for a vote by written ballot.

Review the press release and tentative Board decisions on the FASB’s website and Deloitte's related journal entry.

Hedging — last-of-layer method

The Board discussed multiple-layer and fair value hedge basis adjustment issues and directed its staff to draft a proposed ASU for external review.

Review the tentative Board decisions on the FASB’s website and Deloitte's related journal entry.

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