December

Investment Association publishes updated Principles of Remuneration

10 Dec, 2020

The Investment Association (IA) has published its updated Principles of Remuneration ("the Principles").

This remuneration guidance sets out its members’ views on the role of shareholders and directors in relation to remuneration and the manner in which remuneration should be determined and structured.

The Principles have received a small number of updates to reflect developments in market practice and investor expectations including:

  • Use of Non-Financial Performance Measures – The Principles have been updated to be clearer on shareholder expectations on the range of non-financial performance metrics (strategic, personal and Environmental, Social and Governance) in variable remuneration.
  • Post-Employment Shareholding Policies – Shareholders are keen to understand the enforcement mechanisms which the Remuneration Committee has in place to ensure that post-employment shareholding policies are enforced once a director has left the Company.
  • Deferral of bonuses – the Principles have been updated to reflect member expectations that a proportion of the entire bonus should be deferred when the bonus opportunity is greater than 100% of salary.

The above changes have been set out in a letter issued to Remuneration Committee chairmen. The letter additionally explains that the approach to pensions should be a key area of focus in the forthcoming AGM season. The Principles are supplemented with separate guidance which sets out member expectations on specific issues arising as a result of the COVID-19 pandemic.

The revised Principles of Remuneration, letter to the chairs of Remuneration Committees and supplementary guidance are available from the IVIS website.

IOSCO responds to the IFRS Foundation's sustainability consultation

24 Dec, 2020

The International Organization of Securities Commissions (IOSCO) has submitted its response to the IFRS Foundation's consultation on sustainability reporting.

IOSCO sees an urgent need to improve the completeness, consistency and comparability of sustainability reporting and notes:

Together, the IFRS Foundation’s consultation and a parallel collaborative initiative of an alliance of sustainability reporting organizations can further efforts to facilitate comparable high-quality international standards that provide the content that capital markets need, within a transparent standard-setting architecture with a robust and inclusive governance structure.

IOSCO also believes that robust sustainability reporting standards, interconnected with financial reporting standards, would also support audit and assurance – enhancing the market’s trust in sustainability disclosures, and laying the foundations for mandatory corporate reporting on sustainability internationally.

Please click to access the full comment letter on the IOSCO website.

IPSASB publishes amendments regarding public sector financial instruments

11 Dec, 2020

The International Public Sector Accounting Standards Board (IPSASB) has published 'Non-Authoritative Amendments to IPSAS 41 'Financial Instruments'' with amendments that supplement the IPSASB’s existing guidance in IPSAS 41 for topics that are unique to the public sector and have a significant impact on government finances.

The amendments clarify existing guidance for four public sector instruments:

  • Monetary gold;
  • Currency in circulation;
  • IMF quota subscriptions; and
  • IMF special drawing rights.

Please click to access Non-Authoritative Amendments to IPSAS 41 'Financial Instruments', a short introductory webinar and an At a Glance introduction on the IPSASB website.

IVSC publishes exposure draft on valuing financial instruments

15 Dec, 2020

In December 2018, the International Valuation Standards Council (IVSC) set up a new Financial Instruments Board, tasked with reviewing and improving IVS 500 'Financial Instruments'. The Board has now published a first exposure draft that addresses improvements to IVS 500 regarding governance and data.

On governance, the exposure draft provides guidance on the processes that entities should follow to ensure proper governance around financial instrument valuations. The guidance requires that a valuation process should be systematic, consistently applied, economically sound, and controlled.

The section on data outlines the principles for creating a data taxonomy or dictionary to categorise, assess and control all data that is used in valuations. It also notes specific requirements that need to be met for different types of data. The section also describes the controls necessary for aggregating and managing data in an organisation and how the concept of proportionality applies in determining the requirements concerning the use of data.

The exposure draft on the improvements to IVS 500 will be published in stages. This first draft addresses governance and data while methods and models as well as controls and reporting will be adressed later. As there are interdependencies between the areas, the different versions of the exposure draft will be cumulative. The exposure draft containing the proposals on methods and models as well as controls and reporting will also include the sections included in this first exposure draft to address any interdependencies and facilitate stakeholder comments on the proposals.

Comments on this first exposure draft are requested by 19 April 2021. It is available on the IVSC website.

IVSC publishes perspectives paper on social value

01 Dec, 2020

International Valuation Standards Council (IVSC) has published a perspectives paper 'Defining and Estimating ‘Social Value’'.

The concept of ‘Social Value’ is an area of growing government, public and commercial interest. However, its meaning is often clouded in uncertainty, with many definitions, and the lack of an internationally recognised measurement framework and standards of practice.

This new perspectives paper explores some of the concepts surrounding social value and seeks comments to determine whether standards or guidance material are required.

Please click to access the paper on the IVSC website.

New CMAC members

08 Dec, 2020

The IASB's Capital Markets Advisory Committee (CMAC) announces that three new members have been appointed.

Oliver Gottlieb, Matthias Meitner, and Larissa van Deventer will join the CMAC for a three-year term beginning 1 January 2021, renewable once for an additional three-year term.

Additional information, including information on the backgrounds of the new members, is available on the IASB website.

 

Option for Member States to delay ESEF by one year

15 Dec, 2020

The European Parliament and the Council agreed to an amendment of the Transparency Directive allowing Member States to delay by one year the application of the European Single Electronic Format (ESEF) requirements for listed companies' annual financial reports, provided that they notify the Commission of their intention to do so, and of their sufficiently justified reasons.

Listed companies who wish to publish their ESEF annual financial reports in 2021 will still be able to proceed.

The announcement Coronavirus: EU agrees to rules to make it easier for firms to raise capital through the 'EU Recovery Prospectus' is available on the European Commission website.

Pre-meeting summaries for the December 2020 IASB meeting

09 Dec, 2020

The IASB is meeting on Monday 14, Tuesday 15 and Wednesday 16 December 2020, by video conference. We have posted our pre-meeting summaries for the meetings 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.

Maintenance and Consistent Application — IFRIC Update: At its December meeting the IFRS Interpretations Committee finalised an agenda decision in relation to supplier financing. At this meeting, the Board will be asked to clear that decision. If four or more Board members object, the decision will not be published. This is the first agenda decision to be subjected to the revised due process.

Disclosure Initiative — Subsidiaries that are SMEs: The IASB is developing a Standard setting out reduced disclosure requirements for subsidiaries that apply IFRS Standards, but meet the definition of an SME. At this meeting, the staff is seeking views on whether the consultation document should include proposed reduced disclosure requirements for IFRS 17; and recommend that IFRS 1 not be amended and that transition provisions are not required. The staff also recommend that if an entity stops applying the reduced disclosure Standard that the comparatives should apply full IFRS; that the reduced disclosures can be applied for the ‘first time’ more than once; and that the Standard is optional and an entity can reverse its decision to apply it.

SME Standard review and update: The IASB published Request for Information (RFI) ‘Comprehensive Review of the IFRS for SMEs Standard' in January. The IASB received 66 comment letters, mainly from accountancy bodies and standard-setting bodies. Overall, respondents expressed support for the IFRS for SMEs Standard to be based on full IFRS Standards. The paper also contains feedback on the specific questions asked in the RFI. The staff recommend that the SME Implementation Group (SMEIG) be asked to develop a set of recommendations for the Board in its review of the IFRS for SMEs Standard. The next meeting of the SMEIG is planned for February 2021.

Disclosure Initiative — Accounting Policies: The Board is amending IAS 1 and its Practice Statement on applying materiality. The staff recommend that the Board does not add transition requirements or an effective date to the amendments to the Practice Statement, as well as a small change to the wording in IAS 1:117B.

Primary Financial Statements: In December 2019, the IASB published Exposure Draft ED/2019/7 General Presentation and Disclosures. The staff have summarised feedback from the 215 comment letters it received, outreach activities, fieldwork and a review of academic literature. There are 11 papers, each summarising an aspect of the feedback. To give a flavour of the feedback, there was support for many aspects of the proposals, such as defined subtotals and categories in the statement of profit or loss and introducing a definition for unusual items. But many respondents thought additional guidance was required and most did not agree with the proposed definition of unusual items. There was broad support for the proposed roles for the primary financial statements and the notes. However, there was almost no support for separating integral and non-integral associates and joint ventures and the proposals related to management performance measures received mixed, and strongly expressed, views. The staff is not asking the Board to make any decisions but are asking for feedback and for the Board to identify areas which would require further research.

Post-implementation review of IFRS 9 — Classification and Measurement: In October 2020, the Board decided to begin the post-implementation review (PIR) of the IFRS 9 classification and measurement requirements. The staff plan to identify and assess the matters to be examined, which will then form the basis for a public Request for Information (RFI). The staff expect the PIR will take around 18-24 months to complete, with the RFI being issued in the third quarter of 2021. The staff will ask the Board if they have any comments on the PIR project objectives or timeline.

Financial Instruments with Characteristics of Equity: The staff recommend that the Board move the FICE project from the research programme to the standard-setting programme.

Pensions Benefits that depend on Asset Returns: In January, the Board decided to develop examples to illustrate how a proposed capped approach would compare to the outcome of the existing requirements in IAS 19 for defined benefit plans with benefits that vary with asset returns. The staff are asking the Board to provide feedback on an illustrative example.

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

President of the EFRAG Board consults on his views on non-financial reporting standard-setting

01 Dec, 2020

In October 2020, EFRAG Board President Jean-Paul Gauzès invited all interested stakeholders to contribute views related to his ad personam mandate from the European Commission to develop proposals for possible changes to the governance and funding of EFRAG in the context of non-financial reporting standard-setting.

He has now collected the input received in to one document, which again consults on. The document focuses on obtaining additional input on a number of matters that were not, or not fully addressed in the first public consultation conducted in October 2020.

Please click for more information in the press release on the EFRAG website.

Prototype climate-related financial disclosure standard

21 Dec, 2020

Following their statement of intent to work together towards a comprehensive corporate reporting system, the five internationally significant framework- and standard-setting institutions (CDP, CDSB, GRI, IIRC, and SASB) have published a prototype climate-related financial disclosure standard.

The group has published a paper that illustrates how their current frameworks, standards and platforms, along with the elements set out by the Task Force on Climate-related Financial Disclosures (TCFD), can be used together to provide a running start for development of global standards that enable disclosure of how sustainability matters create or erode enterprise value.

In their joint statement of intent published in September 2020, the group stressed their willingness and readiness to work with the Trustees of the IFRS Foundation in this area. The paper demonstrates that standard-setting for sustainability-related financial disclosure is a natural extension of the IFRS Foundation’s current role, and provides insight into how such an ambition can be achieved by building on content that already exists.

In the paper, the group of five explain that enterprise value reporting “is not therefore a replacement for sustainability reporting, which serves a broad range of stakeholders, can offer input to public policy design and reveals issues that may emerge as material for economic decision-making over time.” They believe, however, that consistent communication of how sustainability matters affect drivers of enterprise value can be a “complementary enabler of change, since it creates a financial incentive for companies and their investors to improve performance on some sustainability matters as much and as quickly as they can”.

Following the paper’s launch, the group is co-hosting a webinar on 12 January 2020, where the CEOs of each organisation will come together to further outline the concepts and motivations behind the paper. 

joint press release announcing the paper is available on the CDP website.

Our related Purpose-driven Business Reporting in Focus publication is available here.

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