The DECL Taskforce’s first report consisted of recommendations to describe what a comprehensive set of good ECL disclosures might look like, drawing from and building on existing disclosure recommendations and requirements. The second report now adds guidance and illustrative examples that show how the recommendations in the first report can be presented in a way that enhances comparability between banks.

The second report particularly focuses on disclosures that help users to understand the types and extent of credit risk exposure a bank has and how that risk has evolved; the forward-looking information about macro-economic conditions used in estimating ECL; and the sensitivity of ECL provisions to different macro-economic conditions.  

The guidance is aimed primarily at the biggest UK-headquartered banks and building societies, but is likely to be relevant to a much wider group of preparers.

Please click to download the report from the FRC website.

In the Point of View, IFAC sets forth recommendations for various stakeholders including Governments, Businesses, Professional accountancy organisations and accountants.

The IFAC indicates that professional accountancy organisations have a key role to play in influencing climate-change mitigation and adaption as advocates for the profession and providers of accounting training and support. It calls on professional accountancy organisations to commit to keeping accountants informed of how they can support their organisations’ and clients’ efforts to respond to climate risk.

IFAC identifies that accountants themselves are influential in governments, not-for-profits, and businesses large and small. It highlights that accountants “are uniquely positioned to enhance meaningful action on climate change by providing relevant insights and analysis, reporting, and assurance to help organisations create and protect long-term value”. IFAC has signalled its intention to continue to support and facilitate the involvement of professional accountants in climate action in the following areas:

• Providing objective data and insights to help organisations set and achieve appropriate emissions targets.
• Contributing to efforts to integrate climate change risk into governance, strategy, finance, and operations, and enabling reliable and decision-useful climate related information.
• Delivering insights on the financial impacts of climate risk and how it relates to revenues, expenditures, assets, liabilities, and financial capital.
• Providing assurance on climate information serving to enhance confidence in public disclosures and to facilitate capital flows to sustainable organisations.
• Advising on potential changes in tax law dealing with emissions regulations and helping fulfil evolving tax requirements impacted by climate change.  

The call comes as the UN Climate Change Conference meets and follows an earlier Points of View publication, Enhancing Corporate Reporting, which discusses the need for enhancing the corporate reporting system, integrated reporting, and the role of the accountancy profession in enhancing corporate reporting.

A press release and the Points of View publication are available on the IFAC website.

The DPOC will discuss:

• Correspondence received on due process matters; and
• Due process handbook review — agenda decisions.

The correspondence slot regards two letters received by the DPOC that question whether the full due process was adhered to in an agenda decision of the IFRS Interpretations Committee regarding the lease term and the useful life of leasehold improvements.

Agenda papers for the meeting are available on the IASB's website.

The amendments clarify the definition of ‘material’ and align the definition used in the Conceptual Framework and the standards themselves.

The European Union effective date is the same as the IASB effective date (1 January 2020).

The Commission Regulation amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council was published in the Official Journal of the European Union on 10 December 2019.

Mr Volcker led the restructuring of the Foundation, appointed the first Board and garnered widespread international support for its mission of global accounting standards.

Please click for the Statement on the passing of Paul Volcker on the IASB website.

The FRC's annual review of corporate reporting and ESMA’s common enforcement priorities provide areas of regulatory scrutiny which reporters of all sizes should focus on within in the coming reporting season.

Whether this is correctly classifying cash flows in the cash flow statement, disclosing the nature and amount and impact on liquidity of complex supplier arrangements or proper disclosure of the judgements and estimates applied in preparing financial statements; there are many things to consider.

2019 sees the introduction of a number of new requirements for the front half of the annual report, perhaps the most significant of which is the requirement for all large companies to present an identifiable statement in the strategic report which describes how the directors have discharged their duty under section 172 of the Companies Act 2006. It is expected that most companies will include discussion of their capital allocation and dividend policy within this statement.

In addition, a new Corporate Governance Code takes effect for companies with a premium listing. Very large private companies and unlisted public companies will need to start disclosing their corporate governance arrangements within their directors' report for the first time. Meanwhile, companies required to prepare a directors’ remuneration report will need to include information about the ratio of their chief executive officer’s total remuneration compared to the remuneration of their employees.

Regulators are increasingly taking the position that environmental, social and governance (ESG) matters, including climate change, should be considered as core business issues. Companies are expected to avoid boilerplate disclosures and provide specific disclosure of the impact on a company’s operations on the environment and how environmental matters may affect a company’s development, performance and position.  

Further FRC challenge can be expected over presentation and reconciliation of APMs and business reviews, which should be a balanced and comprehensive analysis of both performance and position.

Turning to the financial statements, UK GAAP reporters will need to consider the changes as a result of the first triennial review of FRS 102. For IFRS reporters, the biggest change for most will be the adoption of IFRS 16 Leases. The FRC expects companies to apply this new standard properly and provide sufficient disclosure of the impact including key judgements made and clear communication of the transition methods adopted. It has published a thematic review to help companies with disclosures in this area.

Our Closing Out 2019 publication covers all these topics and more, providing an invaluable guide to the issues affecting today’s corporate reporting.

The Update reports on the meeting of the EFRAG Board on 13 November, the EFRAG Technical Expert Group (TEG) meeting on 5-6 November and Project Task Force on Climate-related Reporting meeting on 19 November 2019. 

The Update also lists EFRAG publications issued in November:

• EFRAG's final comment letter in response to the IASB's Exposure Draft ED/2019/5 Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction - Proposed amendments to IAS 12;
• EFRAG's  feedback statement on its final comment letter to the IASB's ED2019/1 Interest Rate Benchmark Reform (Proposed amendments to IFRS 9 and IAS 39); and
• EFRAG's conference IFRS & Regulation: Searching for Common Ground - Europe has a leading role to play in shaping future financial reporting standards.

Please click to download the November EFRAG update from the EFRAG website.

The CASS Standard establishes requirements and provides guidance for CASS auditors reporting to the Financial Conduct Authority (FCA) in accordance with its SUP (Supervision Manual) rules in respect of engagements that involve evaluating and reporting on a regulated firm’s (firm) compliance with the FCA’s CASS rules and other rules relevant to the holding of client assets.

The CASS Standard is applicable to the CASS audit of each firm that is required to have a CASS audit pursuant to SUP 3. 3

More specifically, the CASS Standard establishes requirements with respect to:

• The process for forming, and the expression of, reasonable assurance opinions;
• The process for forming, and the expression of, limited assurance opinions;
• The provision of reasonable assurance to the FCA with respect to a firm’s proposed adoption of:
  • i. The alternative approach to client money segregation; and
  • ii. A non-standard method of client money reconciliation1; and
• CASS auditor confirmations in respect of non-statutory client money trusts.

The CASS Standard is effective for reports to the FCA with respect to Client Assets for periods commencing on or after 1 January 2020.

A press release and the revised standard are available on the FRC website.

On primary financial statements, Ms Lloyd noted that the IASB's work reflects the fact that while the traditional financial statements continue to remain the core of investment analysis, the way in which that information is consumed has evolved. In this environment proper structure and comparability of the financial information provided by companies is especially important.  She explained the Board's thinking on new subtotals that are to be introduced and  on non-GAAP measures, where the IASB's proposals will reflect the growth in the use of these measures in the market and their relevance for investors. The IASB plans to publish its proposals in an exposure draft around the end of this year.

On management commentary, Ms Lloyd pointed out that wider corporate reporting information can be classified broadly into two types: (i) information about how the company affects the world and (ii) information about how the world affects the company. It is the second area where the IASB has decided it can and should play a larger role. The corresponding project is therefore aimed at updating the IASB's practice statement on management commentary so that investors have visibility of factors that may affect a company’s future cash flows but may not yet be reflected in the financial statements. As a next step in this project the IASB intends to publish an exposure draft proposing changes to the practice statement in 2020.

Finally, on supporting consistent application, Ms Lloyd explained the work of the IASB's IFRS Interpretations Committee, which she chairs.

The full text of the speech is available on the IASB website.

The AICPA conference ran from 9 to 11 December and featured speeches by — as well as panel discussions and question-and-answer sessions with — members of the SEC, PCAOB, FASB, and IASB and professionals from various industries. Our US colleagues have prepared a Heads Up newsletter with highlights from all days of the conference.

The press release on the EFRAG website offers a general analysis of the comments received (proposals that were generally supported, proposals that ed to concerns, calls for reconsideration of certain aspects, and effective date) and access to the full feedback statement (29 pages).