News

IESBA (International Ethics Standards Board for Accountants) (lt gray) Image

IESBA Meeting Highlights: December 2021 Meetings

Apr 07, 2022

In April 2022, the International Ethics Standards Board for Accountants (IESBA) released the highlights summary of its hybrid meetings held on March 14-16, 2022.

The Agenda items in­cluded:

  • Emerging Issues and Outreach Committee (EIOC)
  • Rollout of Revised Public Interest Entity (PIE) Definition
  • IESBA-IFAC Collaboration in Relation to Adoption and Implementation of the Code
  • Benchmarking International Independence Standards
  • IESBA Strategy and Work Plan Survey
  • Tax Planning & Related Services
  • Technology Fact Finding and Thought Leadership
  • Next Meeting

Re­view the high­lights sum­mary and pod­cast on the IESBA's web­site.

IAASB - Assurance Image

IAASB Modernizes Its Standard for Group Audits in Support of Audit Quality

Apr 07, 2022

On April 7, 2022, the International Auditing and Assurance Standards Board (IAASB) released International Standard on Auditing (ISA) 600 (Revised). The revised standard addresses special considerations that apply to audits of group financial statements (group audits). Group audits are often more complex and challenging than single-entity audits because a group may have many entities or business units across multiple jurisdictions, and component auditors may be involved. The revised standard becomes effective for audits of group financial statements for periods beginning on or after December 15, 2023.

ISA 600 (Revised) includes a robust risk-based approach to planning and performing a group audit. The approach focuses the group auditor’s attention and work effort on identifying and assessing the risks of material misstatement of the group financial statements and designing and performing further audit procedures to respond to those assessed risks. It also recognizes that component auditors can be, and often are, involved in all phases of the group audit. The standard furthermore promotes a clear, proactive and scalable approach for group audits that can be applied to today’s evolving group audit structures.

The IAASB also developed a Basis for Conclusions and factsheet to support the implementation.

Review the press release on the IAASB's website.

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IFRS - CPA Canada Image

ISSB presence in Montreal announced

Apr 06, 2022

On April 6, 2022, the IFRS Foundation and Chartered Professional Accountants of Canada (CPA Canada) announced an agreement to establish the Montreal centre of the International Sustainability Standards Board (ISSB). While the main seat of the International Sustainability Standards Board (ISSB) will be in Frankfurt, the IFRS Foundation aims for a global footprint by establishing regional hubs in all regions. A memorandum of understanding has now been signed that establishes the Montreal presence of the ISSB.

The Montreal centre will host key functions on behalf of the ISSB, including the coordination of activity across the Americas. The five-year agreement states that Montreal will host significant standard-setting responsibilities and associated functions, including a share of board meetings, leadership and resources.

Review the press release on the IFRS Foundation's website.

CPAB - Assurance Image

CPAB Regulatory Oversight Report: 2021 Annual Inspections Results

Apr 05, 2022

The Canadian Public Accountability Board’s (CPAB) Regulatory Oversight Report on its 2021 annual inspections features common findings and highlights several audit quality matters that impact audit committees, regulators and investors.

CPAB's 2021 findings show mixed inspection results with inconsistent audit performance among the 11 annually inspected audit firms. Key findings at the annually inspected firms include:

  • Two of the four largest firms met the target of no more than 10 per cent of files inspected with significant findings.
  • The findings rate at the other annually inspected firms in 2021 is substantially above CPAB’s target.
  • Four firms had significant findings in more than 50 per cent of files inspected and three firms had significant findings in more than 25 per cent of files inspected.
  • Investigations at two annually inspected audit firms resulted in the imposition of requirements and/or sanctions including public censure.

Overall, their reviews point to disappointing deficiencies in the areas of professional skepticism, sufficient audit evidence and forward-looking estimates. They expect a continued high level of enforcement and other regulatory intervention in 2022.

Review the report on the CPAB's website.

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IFAC Releases New Implementation Tool for Auditors

Apr 05, 2022

On April 5, 2022, the International Federation of Accountants (IFAC) today released a new resource, Auditing Accounting Estimates: ISA 540 (Revised) Implementation Tool. It will help auditors implement the International Auditing and Assurance Standards Board’s International Standard on Auditing 540 (Revised), Auditing Accounting Estimates and Related Disclosures by providing an overview of steps practitioners could take and related considerations.

For entities of all types and sizes, management has to make accounting estimates, which have estimation uncertainty and may also be complex. Making these estimates involves selecting and applying a method using assumptions and data, which requires judgment. The nature, timing and extent of the audit procedures required will vary in relation to the estimation uncertainty and the assessment of the related risks of material misstatement.  

This implementation tool contains “what”, “why” and “how” suggestions. These are not all-encompassing and more or different considerations may apply depending on the circumstances of the engagement. The implementation tool also works in conjunction with the IAASB’s previously published ISA 540 (Revised) flowcharts showing the requirements flow. The choice of specific procedures an auditor decides to perform to meet the requirements of ISA 540 (Revised) and other relevant ISAs is a matter of professional judgement. This implementation tool does not replace the need to read ISA 540 (Revised), including its application and other explanatory material.

Review the press release and resource on the IFAC's website.

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ISSB Image

IOSCO to begin review of draft ISSB standards

Mar 31, 2022

On March 31, 2022, in a statement welcoming the publication of the two draft ISSB standards on general requirements of sustainability reporting and on climate-related disclosures, the International Organization of Securities Commissions (IOSCO) outlines its plans for reviewing the draft standards, with a view to informing its potential endorsement of the final standards.

The statement notes that IOSCO’s endorsement of the final standards once these are issued by the ISSB would be a landmark in sustainable finance as it would support IOSCO members as they consider how to adopt, apply or be informed by the ISSB standards as the baseline for their own sustainable reporting requirements. Next steps IOSCO will take will be reviewing the draft standards and follow subsequent developments at the ISSB so that the potential endorsement of the final standards can follow quickly. The statement points out:

IOSCO has set up the structures needed to review the draft standards proposed by the ISSB and will continue to engage closely and constructively with the standards board throughout its review process. IOSCO is seeking to finalise its endorsement process shortly after the ISSB finalizes the standards.

Review the full statement on the IOSCO's website.

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ISSB exposure draft of climate-related disclosures

Mar 31, 2022

On March 31, 2022, the Chair and Vice-Chair of the International Sustainability Standards Board (ISSB) have published the exposure draft "Climate-related Disclosures" that builds on the TRWG prototype of the same name. The resulting standard would be the first thematic standard of the ISSB. Comments on the proposal are requested by July 29, 2022.

 

Background

In November 2021, the IFRS Foundation announced the creation of its new International Sustainability Standards Board (ISSB) tasked with developing a comprehensive global baseline of high-quality sustainability disclosure standards to meet investors’ information needs.

In order to facilitate a running start of the ISSB, a Technical Readiness Working Group (TRWG) had been created in March 2021. Concomitantly with the announcement of the formation of the ISSB, the TRWG published a Climate-related disclosures prototype.

In an additional meeting in March 2022, the Due Process Oversight Committee (DPOC) confirmed that it does not object to the ISSB Chair and Vice-Chair publishing the exposure draft Climate-Related Disclosures that builds on the TRWG prototype before the ISSB is quorate.

The proposed standard on climate related disclosures published today is accompanied by an exposure draft of a standard covering general requirements for sustainability-related disclosures.

 

Key proposals

The main proposals in ED/2022/S2 Climate-related Disclosures generally reflect the proposals in the prototype and are structured around the four TCFD pillars of governance, strategy, risk management, and metrics and targets. Some changes were made to improve specificity and clarity with some added disclosure requirements. One noticeable change regards the internationalization of metrics that referred to specific jurisdictions. The proposals cover the following aspects of climate-related disclosures:

  • Objective: The proposed objective of the standard is to require an entity to disclose information about its exposure to climate-related risks and opportunities that would enable users of an entity’s general purpose financial reporting to assess the effects of significant climate-related risks and opportunities on the entity’s enterprise value, to understand how the entity’s use of resources support the entity’s response to significant climate-related risks and opportunities, and to evaluate the entity’s ability to adapt to significant climate-related risks and opportunities.
  • Scope: The standard would apply to climate-related risks that the entity is exposed to, including physical risks and transitional risks, and to climate-related opportunities available to the entity.
  • Governance: Under the proposed standard, an entity would disclose information that enables users of general purpose financial reporting to understand the governance processes, controls and procedures used to monitor and manage climate-related risks and opportunities. This would include information about the governance body or bodies with oversight of climate-related risks and opportunities, and a description of management’s role regarding climate-related risks and opportunities.
  • Strategy: An entity would disclose information that enables users of general purpose financial reporting to understand the strategy for addressing climate-related risks and opportunities. This would include information about:
    • the significant climate-related risks and opportunities that it reasonably expects could affect its business model, strategy and cash flows, its access to finance and its cost of capital,
    • the effects of them on its business model, value chain, strategy and decision-making, financial position, financial performance and cash flows, and
    • the climate resilience of its strategy to significant physical risks and significant transition risks.
  • Risk management: An entity would disclose information that enables users of general purpose financial reporting to understand how climate-related risks are identified, assessed, and managed. This would include information about:
    • the process, or processes, used to identify climate-related risks and opportunities, and climate-related risks for risk management purposes,
    • the process, or processes, used to identify, assess and prioritise climate-related opportunities;
    • the process, or processes, it uses to monitor and manage the climate-related risks, and 
    • the extent to which and how the climate-related risk identification, assessment and management process, or processes, are integrated into the entity’s overall risk management process and the entity’s overall management process.
  • Metrics and targets: An entity would disclose information that enables users of general purpose financial reporting to understand the entity’s performance in measuring, monitoring and managing climate-related risks and opportunities. This would include information about cross-industry metric categories, industry-based metrics other metrics used by the board or management to measure progress towards its targets, and targets set by the entity to mitigate or adapt to climate-related risks or maximize climate-related opportunities so that users of general purpose financial reporting can understand how the entity assesses its performance and its progress towards the targets it has set.

The deadline for submitting comments on these proposals is July 29, 2022.

The ISSB has also developed a survey to support stakeholders in responding to the proposals in the exposure draft as an alternative or in addition to a comment letter.

 

Transition and effective date

The standard would be applied prospectively. Comparative information would not be required to be disclosed in the first period in which an entity applies the proposed standard.

The Board intends to decide on the effective date after exposure. Earlier application would be permitted.

 

Additional information

Review the following additional information on the IFRS Foundation website and on IAS Plus:

The press release also notes that the ISSB's proposals will be presented in two live webinars on April 28 at 9am and 5pm BST.

In addition to publishing its first two exposure draft, the ISSB has also published a statement on its plans for building upon the SASB standards and for embedding SASB’s industry-based standards development approach into the ISSB’s standards development process. The statement discusses the industry-based approach to standards development, the inclusion of SASB standards in the exposure drafts published today, the commitment to improving the international applicability of SASB standards, the starting point for ISSB industry-based requirements, and current SASB projects. The statement also notes that the ISSB actively encourages preparers and investors to continue to provide full support for and to use the SASB Standards in this transition phase.

Review the full statement on the IFRS Foundation's website.

 

ISSB Image

ISSB exposure draft of general requirements of sustainability reporting

Mar 31, 2022

On March 31, 2022, the Chair and Vice-Chair of the International Sustainability Standards Board (ISSB) have published the exposure draft "General Requirements for Disclosure of Sustainability-related Financial Information" that builds on the TRWG prototype of the same name. The deadline for submitting comments is July 29, 2022.

 

Background

In November 2021, the IFRS Foundation announced the creation of its new International Sustainability Standards Board (ISSB) tasked with developing a comprehensive global baseline of high-quality sustainability disclosure standards to meet investors’ information needs.

In order to facilitate a running start of the ISSB, a Technical Readiness Working Group (TRWG) had been created in March 2021. Concomitantly with the announcement of the formation of the ISSB, the TRWG published a General requirements for disclosure of sustainability-related financial information prototype.

In an additional meeting in March 2022, the Due Process Oversight Committee (DPOC) confirmed that it does not object to the ISSB Chair and Vice-Chair publishing the exposure draft General Requirements for Disclosure of Sustainability-Related Financial Information that builds on the TRWG prototype before the ISSB is quorate.

The proposed standard on general requirements for sustainability-related disclosures published today is accompanied by an exposure draft of the ISSB's first thematic standard on climate related disclosures.

 

Key proposals

The main proposals in ED/2022/S1 General Requirements for Disclosure of Sustainability-Related Financial Information generally reflect the proposals in the prototype with some changed titles and strengthened definitions and some changes to the order of proposals. They cover the following aspects of sustainability reporting: 

  • Objective: The objective of sustainability-related financial disclosures is providing information about the significant sustainability-related risks and opportunities to which the reporting entity is exposed that is useful to primary users of general purpose financial reporting in deciding whether to provide resources to the entity. A reporting entity discloses material information about all of the significant sustainability-related risks and opportunities to which it is exposed. Materiality is assessed in the context of the information necessary for users of general purpose financial reporting to assess enterprise value.
  • Scope: A reporting entity would apply the proposed standard in preparing and disclosing sustainability-related financial information in accordance with IFRS Sustainability Disclosure Standards. The application of the standard is not restricted to entities applying IFRSs.
  • Core content: An entity would provide disclosures about governance, strategy, risk management, and metrics and targets unless another IFRS Sustainability Disclosure Standard permits or requires otherwise.
  • General features: Applying the proposed general requirements standard, an entity would disclose information that is relevant and faithfully represents what it purports to represent. Usefulness of the information provided is enhanced if the information is comparable, verifiable, timely and understandable.
  • Reporting entity: The exposure draft proposes that the reporting entity's boundary for its general purpose financial reporting is the same for its financial statements and sustainability-related financial disclosures. When currency is specified as the unit of measure, the reporting entity would use the presentation currency of its financial statements. The financial statements to which the sustainability-related financial disclosures relate must be disclosed.
  • Connected information: The disclosures provided must enable users of general purpose financial reporting to understand the connections between the different sustainability-related risks and opportunities and how these are linked to general purpose financial reporting information.
  • Fair presentation: A complete set of sustainability-related financial disclosures would present fairly the sustainability-related risks and opportunities to which the entity is exposed. A fair presentation requires the faithful representation of sustainability-related risks and opportunities in accordance with the principles set out in the proposed standard and would include additional disclosures when necessary.
  • Materiality: An entity would disclose all information on sustainability matters that is material for investors and other providers of capital in respect of a reporting entity. Sustainability-related financial information is considered material if omitting, misstating or obscuring that information could reasonably be expected to influence decisions that the primary users of general purpose financial reports make on the basis of those reports.
  • Comparative information: An entity would present comparative information regarding the previous period for all metrics reported in the current period. This might include comparative information for narrative and descriptive sustainability-related financial disclosures if relevant to an understanding of the current period’s sustainability-related financial disclosures.
  • Frequency of reporting: An entity would report its sustainability-related financial disclosures at the same time as its related financial statements and the sustainability-related financial disclosures would be for the same reporting period as the financial statements.
  • Location of information: An entity would disclose information required by IFRS Sustainability Disclosure Standards as part of its general purpose financial reporting. This can include an entity’s management commentary when management commentary forms part of an entity’s general purpose financial reporting or cross-referencing if the cross-referenced information is available to users of general purpose financial reporting on the same terms and at the same time as the general purpose financial reporting.
  • Sources of estimation and outcome uncertainty: When sustainability-related financial disclosures cannot be directly quantified and can only be estimated, the use of reasonable estimates is an essential part of preparing sustainability-related financial disclosure and does not undermine the usefulness of the information if the estimates are clearly and accurately described and explained. When sustainability-related financial disclosures incorporate financial data and assumptions, such financial data and assumptions would be consistent with the corresponding financial data and assumptions incorporated in the entity’s financial statements (to the extent possible).
  • Errors: Prior period errors are omissions from, and misstatements in, the entity’s sustainability-related financial disclosures for one or more prior periods. Unless impracticable, an entity would correct material prior period errors retrospectively in the first general purpose financial reporting authorized for issue after their discovery.
  • Statement of compliance: An entity whose sustainability-related financial disclosures comply with all of the relevant requirements of IFRS Sustainability Disclosure Standards would include an explicit and unqualified statement of compliance.

The deadline for submitting comments on these proposals is July 29, 2022.

The ISSB has also developed a survey to support stakeholders in responding to the proposals in the exposure draft as an alternative or in addition to a comment letter.

 

Transition and effective date

The standard would be applied prospectively. Comparative information would not be required to be disclosed in the first period in which an entity applies the proposed standard.

The Board intends to decide on the effective date after exposure. Earlier application would be permitted.

 

Additional information

Review the following additional information on the IFRS Foundation's website:

The press release also notes that the ISSB's proposals will be presented in two live webinars on April 28 at 9am and 5pm BST.

In addition to publishing its first two exposure draft, the ISSB has also published a statement on its plans for building upon the SASB standards and for embedding SASB’s industry-based standards development approach into the ISSB’s standards development process. The statement discusses the industry-based approach to standards development, the inclusion of SASB standards in the exposure drafts published today, the commitment to improving the international applicability of SASB standards, the starting point for ISSB industry-based requirements, and current SASB projects. The statement also notes that the ISSB actively encourages preparers and investors to continue to provide full support for and to use the SASB Standards in this transition phase.

Review the full statement on the IFRS Foundation's website.

 

PCAOB (US Public Company Accounting Oversight Board) (dark gray) Image

PCAOB issues publication on auditing considerations related to the invasion of Ukraine

Mar 31, 2022

On March 31, 2022, the Public Company Accounting Oversight Board (PCAOB) has issued Spotlight, “Auditing Considerations Related to the Invasion of Ukraine”. The publication highlights “important considerations for auditors of issuers and broker-dealers as they plan and conduct audits in this evolving environment.”

Re­view the press release and Spot­light pub­li­ca­tion on the PCAOB's web­site.

IFRS - IASB Image

Special Purpose Acquisition Companies (SPAC): Classification of Public Shares as Financial Liabilities or Equity (IAS 32)

Mar 30, 2022

The staff paper prepared for the IFRS Interpretations Committee meeting lays out two contrasting views on whether, and under what circumstances, SPACs should classify public shares as financial liabilities or as equity. It concludes, however, that this matter is part of a broader practice issue on the effect of shareholder elections on the characteristics of specific instruments.

Review the Staff Paper on the IASB's website.

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