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January

HM Treasury publishes sustainability reporting guidance for public sector annual reports

31 Jan 2019

HM Treasury has published guidance to assist those in the public sector in meeting sustainability reporting requirements.

The guidance sets out minimum requirements that must be met, provides some best practice examples and also indicates the underlying principles that should be adopted in preparing the information for reporting on sustainability within annual reports and accounts.

The guidance is applicable to all central government bodies that fall within the scope of the Greening Government Commitments (i.e. departments, non-ministerial departments, agencies and Non departmental public bodies) and which produce annual reports and accounts in accordance with HM Treasury’s Government Financial Reporting Manual (FReM). These bodies are required to report on sustainability (unless exempt from doing so).

The press release and guidance are available on the HM Treasury website.

The Carbon Trust publishes findings on climate risk disclosure

31 Jan 2019

The Carbon Trust has published a summary of its findings on climate risk disclosure, in which it reveals that two-thirds (67%) of UK corporates plan to disclose climate-related risks and opportunities in their 2019 annual reports.

72% of those surveyed believe that disclosing information about climate change in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) will increase a company's brand value and reputation. Other potential benefits mentioned include greater investor diversity, improved access to capital and an increased company valuation. Conversely, 59% did not identify any disadvantages in the short or medium-term which could arise as a result of providing the disclosures recommended by the TCFD. 

The majority of respondents (62%) confirmed that none of their key investors or stakeholders have approached them to request improved climate risk disclosures.

The survey was conducted by Ipsos Mori and is based on interviews with 100 board members from the UK’s top 500 companies.

Please click to access further information on the Carbon Trust's website.

FRC proposes revisions to the UK Stewardship Code

31 Jan 2019

The Financial Reporting Council (FRC) is consulting proposed changes to the UK Stewardship Code (“the Code”).

The revised Code sets higher expectations for investor stewardship policy and practice and will focus on how effective stewardship delivers sustainable value for beneficiaries, the economy and society.

The revised Code aims to increase demand for more effective stewardship and investment decision-making which is better aligned to the needs of institutional investors’ clients and beneficiaries. It also aims to set out more rigorous reporting requirements, to be overseen by the FRC, focusing on how stewardship activities deliver outcomes against objectives.

The significant proposed changes to the Code include:

  • Purpose, values and culture: Investors must report how their purpose, values and culture enable them to meet their obligations to clients and beneficiaries, aligning the Code to the UK Corporate Governance Code.
  • Recognising the importance of environmental, social and governance (ESG) factors: The proposed code refers to ESG factors. Signatories are expected to take material ESG issues into account when fulfilling their stewardship responsibilities.
  • Stewardship beyond listed equity: The proposed Code now expects investors to exercise stewardship across a wider range of assets where they have influence and rights, in the UK and globally.

Comments on the questions raised within the consultation are invited until 29 March 2019. A press release and the link to the revised UK Stewardship Code is available on the FRC website here.

Additionally the FRC and the Financial Conduct Authority (FCA) have published a joint discussion paper entitled ‘Building a regulatory framework for effective stewardship’. The discussion paper aims to enhance the debate about what effective stewardship entails, what the minimum expectations of financial services firms which invest for clients and beneficiaries should be, what higher standards the UK should aspire to and how these might be achieved. Comments on the discussion paper are invited until 30 April 2019.  A press release and the Discussion paper is available on the FCA website here.

IPSASB issues amendments to keep IPSASs in line with IFRSs

31 Jan 2019

The International Public Sector Accounting Standards Board (IPSASB) has released 'Long-term Interests in Associates and Joint Ventures (Amendments to IPSAS 36) and Prepayment Features with Negative Compensation (Amendments to IPSAS 41)'.

The amendments to IPSAS 36 converge IPSASs with the narrow-scope amendments to IAS 28 Investments in Associates and Joint Ventures made by the IASB in Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28) issued October 2017.

The amendments to IPSAS 41 converge IPSASs with the narrow-scope amendments to IFRS 9 Financial Instruments made by the IASB in Prepayment Features with Negative Compensation (Amendments to IFRS 9) also issued October 2017.

Please click to access the amendments on the IPSASB website.

FRC proposes amendments to FRS 101 and FRS 102

31 Jan 2019

The Financial Report Council (FRC) has issued FRED 70 ‘Draft amendments to FRS 101 – 2018/19 cycle’ and FRED 71 ‘Draft amendments to FRS 102 – Multi-employer defined benefit plans’.

FRED 70 arises from the annual review of FRS 101 Reduced Disclosure Framework. FRS 101 requires the application of the recognition and measurement requirements of EU-adopted IFRS with reduced disclosures. Unlike accounts that apply IFRS in full (IAS accounts), those prepared in accordance with FRS 101 (non-IAS accounts) must comply with detailed accounting requirements set out in company law. Some of these requirements conflict with the requirements of IFRS 17 Insurance Contracts. The primary conflict being in relation to Schedule 3 formats of the primary statements; the approach and methodology that underpins IFRS 17 is so fundamentally different that presenting amounts determined in accordance with that standard, within the formats laid down in law for non-IAS accounts, is not possible. Consequently, FRED 70 proposes amendments to the definition of a ‘qualifying entity’ such that entities that are required both to comply with Schedule 3 to the Regulations and have contracts within the scope of IFRS 17 may not be qualifying entities. This means that these entities cannot apply FRS 101. The proposed amendment is necessary to ensure that insurance companies that are not required to, and choose not to, prepare IAS accounts, continue to comply with company law requirements by only applying FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland and FRS 103 Insurance Contracts. The comment period for FRED 70 closes on 30 April 2019.

FRED 71 responds to a current financial reporting issue by proposing new requirements, to be included in Section 28 of FRS 102, for presenting the impact of transition from defined contribution accounting to defined benefit accounting. Such a transition is required by FRS 102 when sufficient information becomes available for an employer participating in a multi-employer defined benefit plan to apply defined benefit accounting. It is proposed that the amendments are effective for accounting periods beginning on or after 1 January 2020, with early application permitted. The comment period for FRED 71 closes on 31 March 2019.

Click for (all links to FRC website):

Recent sustainability reporting developments

31 Jan 2019

A summary of recent developments at WEF, the University of Oxford, NCFA,SSE, and SASB.

The World Economic Forum (WEF) has published a White Paper Seeking Return on ESG: Advancing the Reporting Ecosystem to Unlock Impact for Business and Society, uncovering opportunities for collective action between the complex and diverse set of stakeholder groups that influence ESG reporting, and highlighting where greater action is needed to accelerate system-level progress. Please click to download the paper from the WEF website.

In December, the Saïd Business School, University of Oxford, offered a debate on "Should FASB and IASB be responsible for setting standards for nonfinancial information?". A recording of the debate is available on YouTube.

The Natural Capital Finance Alliance (NCFA) has launched the world’s first step-by-step guide to help financial institutions conduct a rapid natural capital risk assessment. Please click to access the guide on the UNEP FI website.

The United Nation's Sustainable Stock Exchanges (SSE) initiative notes the following developments:

  • The Botswana Stock Exchange has published guidance for its listed companies on reporting ESG information to investors (press release).
  • The Budapest Stock Exchange has become an SSE Partner Exchange (press release).
  • The Abu Dhabi Securities Exchange has become an SSE Partner Exchange (press release).

The US Sustainability Accounting Standards Board (SASB) has appointed former FASB member Marc A. Siegel as a Board member of the SASB. Please see the press release on the SASB website for more information.

Pre-meeting summaries for the February IASB meeting

30 Jan 2019

The IASB will meet in London on 7–8 February 2019 to discuss five topics. We have posted our pre-meeting summaries for the meeting that allow you to follow the IASB’s decision making more closely. For each topic to be discussed we summarise the agenda papers made available by the IASB staff and point out the main issues to be discussed by the IASB and the staff recommendations.

The Board is considering amending IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement to provide relief from the effects of uncertainties caused by the reform of IBOR. The staff are recommending that relief be provided in relation to the highly probable requirement and prospective assessments, but not for designation of risk components that are not separately identifiable. An Exposure Draft is likely to be published in April with a short comment period, enabling any amendments to be finalised and published by December 2019, with an effective date of 1 January 2020.

The Board will continue to assess concerns and implementation challenges raised by stakeholders about the requirements in IFRS 17 Insurance Contracts. The staff are recommending that IFRS 17 and IFRS 9 be amended to allow an entity to apply either IFRS 17 or IFRS 9 to insurance contracts for which the only insurance in the contract is for the settlement of some, or all, of the obligation created by the contract (with consequential amendments to the disclosure requirements). The staff are recommending that the transition requirements in IFRS 17 be retained, except for a liability that relates to the settlement of claims incurred before an insurance contract was acquired. The staff are recommending a change to the modified retrospective approach that would require an entity to classify such liabilities as a liability for incurred claims (to the extent that it does not have reasonable and supportable information to apply a retrospective approach) and to permit an entity applying the fair value approach to choose to classify such liabilities as a liability for incurred claims.

For the Primary Financial Statements project, the staff are recommending that the Board modify some of its earlier decisions. Within the statement of cash flows, the starting point for the reconciliation of operating cash flows should be the operating profit subtotal, for all entities. Additionally, they are recommending that all entities classify cash flows from dividends paid as financing cash flows and cash flows from dividends received from equity-accounted associates and joint ventures as investing cash flows. However, the staff also set out special requirements, for both the statement of cash flows and the statement(s) of profit or loss and other comprehensive income, for entities that have as their main business activity providing financing to customers or investing in assets that generate a return individually and largely independently of other resources held by the entity. The staff also present additional proposals related to aggregation and disaggregation of information in the primary financial statements and in the notes, including a requirement to describe items in a way that faithfully represents the items they aggregate.

The Board will consider a project plan for a comprehensive review of the IFRS for SMEs Standard that proposes the publication of a Request for Information by about July 2019, an Exposure Draft sometime between January 2020 and February 2021 and amendments between July 2021 and May 2022. The IFRS for SMEs Standard does not reflect the current requirements in IFRS 3, 10, 11, 12, 13, 14, 15, 16 or 17.

The staff will also give an oral update on the Management Commentary project (the consultative group met in January).

More information

Our pre-meeting summaries are available on our February meeting note page and will be supplemented with our popular meeting notes after the meeting.

Report from the October 2018 Emerging Economies Group meeting

30 Jan 2019

The 16th meeting of the IASB's Emerging Economies Group (EEG) was held in Seoul, South Korea on 29–31 October 2018. The IASB has published a full report from the meeting.

Participants at the meeting — which was chaired by IASB member Amaro Gomes — discussed the Discussion Paper Financial Instruments with Characteristics of Equity, the next steps in the goodwill and impairment project, accounting for micro-entities in Brazil, the forthcoming review of IFRS for SMEs standard, implementation of IFRS 9 Financial Instruments, the extractive activities project, and a project update.

The next meeting of the EEG will be held 25–27 March 2019 in Argentina.

Please click for access to the full report (seven pages) on the IASB website.

Summary of the December 2018 ASAF meeting now available

30 Jan 2019

The IASB staff have published a summary of the Accounting Standards Advisory Forum (ASAF) meeting held in London on 6–7 December 2018.

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

  • Financial instruments with characteristics of equity (1–25): ASAF members provided comments on the Discussion Paper Financial Instruments with Characteristics of Equity based on the outreach in their jurisdictions.
  • Business combinations under common control (BCUCC) (26–32): ASAF members discussed whether a current value measurement approach based on the acquisition method set out in IFRS 3 Business Combinations should be applied to all or some BCUCC that affect non-controlling shareholders in the receiving entity and if not, how the distinction should be made on when to use a current value measurement approach.
  • Pension benefits that depend on asset returns (33–43): ASAF members discussed whether the measurement approach (described in Agenda Paper 7) would be helpful in solving the measurement inconsistency described in that paper when applying IAS 19 Employee Benefits to pension benefits that depend on asset returns.
  • IFRS 17 Insurance Contracts (44–61): ASAF members provided advice on six topics in IFRS 17 Insurance Contracts that the Board is considering for possible amendments to the Standard.
  • Management commentary (62–76):ASAF members were updated on the Board's tentative decision on the objective of management commentary as part of the update to IFRS Practice Statement 1 Management Commentary.
  • Goodwill and impairment (77–87): ASAF members discussed (1) disclosure objective and requirements and (2) amortisation of goodwill, including whether members believe it is feasible to estimate the useful life of goodwill.
  • Update and agenda planning (88–91): ASAF members discussed the proposed agenda for the April 2019 ASAF meeting and considered future discussions on (1) how the ANC has established an accounting framework for crypto-currencies and (2) EFRAG's forthcoming discussion paper Hybrid Pension Schemes.
  • Better communication – primary financial statements (92–108):ASAF members discussed the Board's tentative decisions made to date in the primary financial statements project.

A full summary of the meeting is available on the IASB's website.

IASB issues podcast on IFRS 17 discussions at the January IASB meeting

30 Jan 2019

A podcast has been recorded by Darrel Scott, IASB member, and Roberta Ravelli, technical staff, reporting on the discussion at the January 2019 meeting of the Board about IFRS 17 'Insurance Contracts'.

The 7-minute podcast can be accessed through the press release on the IASB website. Our Deloitte meeting notes of the session are available here.

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