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FRC publishes findings on the quality of corporate reporting in 2018/2019

Oct 30, 2019

On October 30, 2019, the Financial Reporting Council (FRC) published its Annual Review of Corporate Reporting 2018/2019, which provides the FRC's assessment of corporate reporting in the UK based on evidence from a variety of sources, including the work of the FRC's own Corporate Reporting Review (CRR) team.

The report is structured around the FRC’s overall assessment of corporate reporting and in particular focuses on those areas which fall within the remit of the FRC’s reviews: the financial statements and the strategic report. It provides findings for the year, highlights where the FRC see room for improvement and sets out the FRC’s expectations for the coming reporting season.

Review the press release and full report on the FRC website. A summary is available on our Deloitte UK website.

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Disrupting diversity and inclusion: The promise of behavioural design

Oct 30, 2019

On October 30, 2019, the Conference Board of Canada released an article on how we need to recognize workplace diversity and inclusion for what it is: a wicked problem. It is difficult to solve, deeply interconnected with other complex social issues, and wrought with systemic and individual biases.

The glacial progress indicates that our current approaches are not working. In Canada, less than one-fifth of all leadership roles are held by women. And women’s representation on company boards is also still low, changing at 1–2 per cent every year—not fast enough to reach long-term targets. Other under-represented groups’ experiences can be even worse, from consistently lower wages for immigrant workers to a dismal employment rate for people with disabilities.

Review the full article on the Conference Board of Canada'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:

United States Image

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.

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Preventing audit extinction

Oct 24, 2019

On October 24, 2019, the Public Company Accounting Oversight Board (PCAOB) released a speech by J. Robert Brown, Jr., PCAOB Member, where he discusses how the audit has evolved to retain relevance in response to the interests of investors and other market forces.

In his speech, he also highlights on the types of information increasingly used by investors that are currently outside the audit, including alternative performance measures, or what I will call in this speech Non-GAAP financial measures, key performance indicators (KPIs), XBRL, and sustainability disclosure. Finally, it helps to start conversations among investors, audit firms, and other stakeholders about relevance and possible changes that will help prevent auditors from becoming the weavers of the 21st century.

Review the full speech on the PCAOB's website.

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Trends in cybersecurity breaches continue in 2019

Oct 24, 2019

On October 24, 2019, Audit Analytics released an article on how the number of organizations experiencing cyber-attacks has grown rapidly; over 120 cybersecurity incidents were disclosed in 2018 and 93 have been disclosed so far in 2019.

The proliferation of cyber breaches can be attributed to several factors, primarily that more companies are using more computer systems for more tasks.

Review the full article on Audit Analytics' 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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