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European Commission publishes consultation on the revision of the Non-Financial Reporting Directive

Feb 20, 2020

On February 20, 2020, following the launch of the initiative "Revision of the Non-Financial Reporting Directive", the European Commission (EC) has now opened the consultation itself for public comment.

As reported earlier, Executive Vice President Valdis Dombrovskis of the EC announced in January 2020 that later this year he would present a renewed sustainable finance strategy, which would include a revision of the Non-Financial Reporting Directive (NFRD). The initiative to update the NFRD was launched earlier this month. Today, the EC launched the consultation itself by publishing a consultation document. 

In the introduction to the consultation, the EC makes the following statement:

  1. There is inadequate publicly available information on non-financial issues as:
    • a) reported non-financial information is not sufficiently comparable or reliable;
    • b) companies do not report all non-financial information that users think is necessary, and many companies report information that users do not think is relevant;
    • c) some companies do not report such information; and
    • d) it is hard to find non-financial information even when it is reported.
  2. Companies incur unnecessary and avoidable costs related to reporting non-financial information.

The consultation document itself contains 45 questions in eight categories:

    1. Quality and scope of non-financial information to be disclosed
    2. Standardisation
    3. Application of the principle of materiality
    4. Assurance
    5. Digitisation
    6. Structure and location of non-financial information
    7. Personal scope (which companies should disclose)
    8. Simplification and reduction of administrative burdens for companies

"Standardisation" contains questions about whether there should be common standards for EU companies, what the relation between financial information and non-financial information should be and which bodies/groups should be involved in setting these standards (if that should be the case).

The consultation document is available on the EC website (login required). Feedback is requested by May 14, 2020.

IIRC (International Integrated Reporting Committee) Image

IIRC calls for feedback in the context of the planned revision of its Framework

Feb 20, 2020

On February 20, 2020, the International Integrated Reporting Council (IIRC) launched a revision of the International <IR> Framework and is calling for market feedback on specific themes that will inform the nature and direction of the revision.

The IIRC has identified key themes around which it invites feedback, outlined in three topic papers on a) business model considerations, b) responsibility for an integrated report, and c) charting a path forward. The first two topic papers relate to the current <IR> Framework revision process. The third topic paper forges ahead with themes shaping the future of corporate reporting, including extended assurance and the role of technology. Feedback on this paper will inform the IIRC’s longer-term strategy.

Each topic paper separately invites market feedback via an online survey. Responses are requested by March 20, 2020. Please see the following additional information on the IIRC website:

Proposed amendments to the Framework will receive 90-day public exposure via a consultation draft, launching in May 2020. The revised Framework is due for release at the end of 2020.

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SEC and PCAOB issue joint statement on audit quality and coronavirus

Feb 19, 2020

On February 19, 2020, representatives from the Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB) issued a joint statement regarding their continued dialogue with audit firm representatives on audit quality in China and other emerging markets and the effects of the coronavirus on financial reporting, including the potential need for relief.

The joint statement emphasizes “(1) the need to consider potential disclosure of subsequent events in the notes to the financial statements . . . and (2) [the SEC’s] general policy to grant appropriate relief from filing deadlines in situations where, in light of circumstances beyond the control of the issuer, filings cannot be completed on time with appropriate review and attention.” In addition, issuers are encouraged to engage directly with the SEC staff on questions regarding potential subsequent-event disclosures or the need for relief from filing deadlines. The SEC staff will continue to monitor the situation, and the joint statement indicates that “[r]elief may be made available on a case-by-case or broader basis as circumstances merit.”

Review the joint statement on the SEC's website.

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IT Governance Checklist

Feb 19, 2020

On February 19, 2020, the Board Effect released a tool that helps with governing information technology. By taking things a step at a time, starting an IT governance checklist, and considering it a work in progress, your board will be well on its way to understanding how it can best tackle the difficult task of overseeing IT governance.

Every year we depend on technology to help us store and manage various types of data for various purposes. Along with that comes the responsibility for managing it appropriately and according to IT governance best practices, which is a relatively new issue for boards to address. The responsibility for overseeing the management of electronic processes falls to the board of directors. This is no small task due the large number of individuals and employees that need to access the organization’s data on a regular basis.

Review the checklist on the Board Effect's website.

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Alliance for Corporate Transparency launches research report on sustainability reporting

Feb 17, 2020

At a launch event on February 17, 2020 in Brussels, the Alliance for Corporate Transparency presented a report that analysed the information that companies disclosed on their environmental and societal risks and impacts following the requirements introduced by the EU Non-Financial Reporting Directive. The launch embedded the research into discussions around "The State of Corporate Sustainability Reporting in the EU".

The study assessed how 1000 European companies disclose sustainability and other non-financial information. Key findings of the study were:

  1. Less than 22% of the companies surveyed report climate-related key performance indicators in summarised statements, the rest of them publish them scattered around in different locations or not at all;
  2. only 20%-25% of companies describe risks specifically even though identifying them as relevant to the company in the first place;
  3. the TCFD criteria are not applied;
  4. outcomes are only reported in 4% of cases despite that fact that risks are identified and in some cases activities described;
  5. supply chain transparency is low with supply chain transparency in the apparel sector being the highest but still not exceeding 14%;
  6. only 6% of companies provide economic figures on sustainability activities;
  7. disclosures are immaterial.

There is not a major difference between different European regions, with the exception that companies from former Eastern Europe lag behind.

Generally, disclosures are not specific enough to enable understanding of a company’s position and future developments. Reports focus on presenting general policies and commitments, but not concrete targets, outcomes of policies with respect to these targets, and specific information on risks and impacts.

The following additional information is available on the Alliance for Corporate Transparency website:


Summary of the December 2019 ASAF meeting now available

Feb 14, 2020

On February 14, 2020, the International Accounting Standards Board (IASB) staff published a summary of the Accounting Standards Advisory Forum (ASAF) meeting held in London on December 17, 2019.

The topics covered during the meeting were the following (numbers in brackets are references to the corresponding paragraphs of the summary):

  • Agenda Consultation (1–11): The ASAF discussed potential financial reporting priorities for the Board to discuss in the request for information. As high-level recommendations ASAF members stated that the Board should communicate its resource capacity in the RFI, that the Board should prioritise post-implementation reviews and the completion of existing major projects, and should also prioritise the effects of technology and digital reporting on standard-setting.
  • Post-implementation review of IFRS 10, IFRS 11, and IFRS 12 (12–18): The ASAF was given an update on the feedback received from outreach in Phase 1 of the post-implementation review and commented on potential issues to be considered in the RFI.
  • Accounting for intangible assets (19–28): The KASB gave a presentation on its research project on exploring a way to complement financial statements with a separate statement that identifies core intangibles and presents their value.
  • IFRS 17 Insurance Contracts (29–35): The ASAF received an overview of the feedback on the exposure draft Amendments to IFRS 17 and was updated on the preliminary decisions of the Board at the November and December 2019 meetings.
  • Agenda planning (36–38) — The ASAF discussed the proposed agenda for its April 2020 meeting.

Review the full summary on the IASB's website.

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Coronavirus and political unrest: Determining compensation in uncertain times

Feb 13, 2020

On February 13, 2020, the National Association of Corporate Directors (NACD) released a blog on how US companies doing business in China are grappling with how to determine bonus payouts for 2019 and incentive plan goals for 2020 given the political unrest in Hong Kong and the recent coronavirus outbreak that began in the city of Wuhan.

Starting in summer 2019 and increasing in scale and violence over the course of the year, protests have disrupted businesses in and around Hong Kong, an important financial hub and consumer market. Additionally, over the last six weeks, the global spread of the coronavirus has had a significant and far-reaching economic impact. Given these extraordinary circumstances, Compensation Advisory Partners (CAP) has outlined approaches that compensation committees can take to determine 2019 executive bonuses and plan for 2020.

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

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Canadian securities regulators seek additional comment on proposed rule for Non-GAAP and other financial measures

Feb 13, 2020

On February 13, 2020, the Canadian Securities Administrators (CSA) published a second notice and request for comment on revisions to a proposed rule for Non-GAAP and Other Financial Measures (the proposed rule). The rule would establish disclosure requirements for issuers that disclose non-GAAP and other financial measures, which often lack standardized meanings, resulting in potentially misleading disclosure.

Following stakeholder consultation, the CSA has made substantive changes to the proposed rule that: 

  • Limit the application to certain issuers;
  • Exempt certain disclosures, financial measures and documents;
  • Narrow the scope of what is considered a non-GAAP financial measure; and
  • Reduce and simplify disclosures.

The proposed rule was originally published for comment on September 6, 2018 and would replace Staff Notice 52-306 (Revised) Non-GAAP Financial Measures. The CSA conducted 38 outreach sessions across seven Canadian cities and reviewed 42 comment letters from issuers, investors, accounting firms, standard setters, industry associations and law firms.

Proposed National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure (the Proposed Instrument) and a revised version of proposed Companion Policy 52-112 Non-GAAP and other Financial Measures Disclosure (the Proposed Companion Policy) are available on CSA members’ websites. Comments should be submitted in writing by May 13, 2020.

Review the press release and notice on the CSA's website.


IASB posts webinar on exposure draft on general presentation and disclosures

Feb 11, 2020

On February 11, 2020, the International Accounting Standards Board (the Board) posted a webinar on Exposure Draft, "General Presentation and Disclosures".

The webinar summarizes main proposals in the exposure draft, including subtotals in the statement of profit and loss, disaggregating information, and management performance measures.

Review the press release on the Board’s website.


AICPA issues statement on standards for accounting and review services on materiality

Feb 11, 2020

On February 11, 2020, the American Institute of Certified Public Accountants's (AICPA) Accounting and Review Services Committee issued Statement on Standards for Accounting and Review Services (SSARS) No. 25, "Materiality in a Review of Financial Statements and Adverse Conclusions".

SSARS 25 (1) contains an explicit requirement related to determining materiality, (2) allows for the expression of an adverse review conclusion when financial statements are materially and pervasively misstated, and (3) requires a statement regarding independence in the accountant’s review report. In addition, the SSARS converges AR-C Section 90, “Review of Financial Statements,” with International Standard for Review Engagements 2400 (revised), Engagements to Review Historical Financial Statements.

Review the SSARS and At a glance overview on the AICPA’s website.

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