In addition to the recent major developments reported separately on our sustainability and integrated reporting site, the following smaller developments occurred recently:

• The World Business Council for Sustainable Development (WBCSD) has published the eighth edition of Reporting matters – WBCSD’s annual review of its member companies’ sustainability and integrated reports. Please click to access the publication through the press release on the WBCSD website.
• The International Integrated Reporting Council (IIRC) has released a report investigating the extent to which investors and analysts value non-financial information, the ways they use it and the benefits they see from integrated reporting. Please click to access the publication through the press release on the IIRC website.
• The IIRC also announces the launch of the revised <IR> Framework in January 2021. Please see this press release for more information.
• Climate Action 100+ has released its 2020 progress report. One section of the report (p. 13 ff.) also deals with disclosures. Please click to access the report through the press release on the Climate Action 100+ website.
• At its last meeting, the Board of the International Organization of Securities Commissions (IOSCO) considered the IFRS Foundation's Trustees' sustainability consultation and agreed that the IOSCO Sustainable Finance Task Force should further explore engaging with the IFRS Foundation to ensure that any proposals stemming from the consultation paper meet securities regulators’ expectations both in terms of content and governance. Please see the press release on the IOSCO website for more information.
• The latest report released by the Climate Disclosure Standards Board (CDSB), The state of EU environmental disclosures in 2020 analyses the strength and weaknesses of disclosure among 50 largest companies in the European Union under the EU Non-Financial Reporting Directive (NFRD). Please click to access the publication through the press release on the CDSB website.
• The CDSB website also offers access to a series of briefings around the disclosure under the NFRD. They can be accessed here.
• In addition, the CDSB and the United Nations Sustainable Stock Exchanges (SSE) initiative have formalised their long term and ongoing collaboration and cooperation with an official Exchange of Letters. The announcement is available on the SSE website.
• The US Securities and Exchange Commission’s (SEC’s) Asset Management Advisory Committee recently published its recommendations on Environmental, Social and Governance (ESG) disclosure. The recommendations focus on the adoption of ESG standards for disclosures and ESG investment products. Please click to access a draft of the recommendations on the SEC website.
• The Sustainability Accounting Standards Board (SASB) has issued a staff bulletin on human capital management disclosure. The bulletin provides an overview of the human capital-related topics and metrics in SASB’s 77 industry-specific standards to assist companies in preparing human capital-related disclosures. Please click for more information in the press release on the SASB website.
• The UK Government has announced its intention to mandate climate disclosure by large companies and financial institutions across the economy by 2025. The announcement is available on the Government website.
• The Accounting Bodies Network of the Prince of Wales' Accounting for Sustainability project (A4S) has published a statement of support agreeing with the IASB that existing standards should be applied to climate-related and other emerging risks. The statement of support is available on the A4S website.
• The Alliance for Corporate Transparency has published joint position on the reform of the EU NFRD setting out seven recommendations. Please click for the list of recommendations and access to the full joint position on the Alliance for Corporate Transparency website.
• Accountancy Europe has released a podcast discussing what is being done on the side of accountants to accommodate sustainability into corporate reporting. The podcast can be accessed on the Accountancy Europe website.
• The following new translations are available (links to the organisations' websites):
  
  • Global reporting initiative (GRI): GRI 306 Waste 2020 now also available in Arabic, Traditional Chinese, French, German, Italian, Japanese, Portuguese, and Spanish and the full set of GRI standards now also available in Portuguese;
  • WBCSD guidance framework and checklist tool on the COVID-19 business recovery now also available in Spanish; and
  • SASB implementation guidance for companies now also available in French, German, Japanese, and Spanish.

The participants discussed:

• Updates on Trustees and Board’s Activities — The Advisory Council received an update on recent Trustee activities that focused on COVID-19, roles requiring succession, and sustainability. There was also an update on recent Board activities that focused on IFRS 17 amendments, IBOR Phase 2, COVID-19, and the post-implementation reviews of IFRS 9 and IFRS 15.
• Feedback from previous Adisory Council meetings — Council members received an update on how the IFRS Foundation has incorporated past Advisory Council feedback into its strategic activities related to relevance, risk, process and the IFRS Standards, since the last Council meeting.
• Sustainability — This was the main agenda item and focused on the consultation paper on sustainability reporting. Questions considered were:
  • Is there a need for a global set of internationally recognised sustainability reporting standards?
  • Is the development of a sustainability standards board (SSB) to operate under the governance structure of the IFRS Foundation an appropriate approach to achieving further consistency and global comparability in sustainability reporting?
  • Do Council members have any comment or suggested additions on the requirements for success (including on the requirements for achieving a sufficient level of funding and achieving the appropriate level of technical expertise)?
  • Could the IFRS Foundation use its relationships with stakeholders to aid the adoption and consistent application of SSB standards globally? If so, under what conditions?
  • How could the IFRS Foundation best build upon and work with the existing initiatives in sustainability reporting to achieve further global consistency?
  • How could the IFRS Foundation best build upon and work with the existing jurisdictional initiatives to find a global solution for consistent sustainability reporting?
  • If the IFRS Foundation were to establish an SSB, should it initially develop climate-related financial disclosures before potentially broadening its remit into other areas of sustainability reporting?
  • Should an SSB have a focused definition of climate-related risks or consider broader environmental factors?
  • Do Council members agree with the proposed approach to materiality that could be taken by the SSB?

The full meeting summary is available on the IASB's website. There are also recordings of the individual sessions.

Similar to most other respondents, Accountancy Europe calls for global non-financial reporting standards and sees the IFRS Foundation in the best position to achieve this. The comment letter states:

We fully support setting up a sustainability standards board (SSB) to address NFI reporting, in parallel with the International Accounting Standards Board (IASB). The SSB would benefit from the global acceptance and applicability, oversight and due process of the IFRS Foundation.

Nevertheless, the letter also sets out a few point that Accountancy Europe believes merit further consideration by the IFRS Foundation:

• Interconnected standard setting following a clear vision;
• a two-stage approach to materiality;
• collaboration with global and European stakeholders; and
• building upon the work of existing initiatives such as CDP, CDSB, GRI, IIRC, and SASB.

Please click to access the full comment letter on the Accountancy Europe website.

We look forward to seeing you again after the holidays and to continue to be your preferred accounting website in 2021.

The three apparent paradoxes Mr Maijoor identified were:

• the need to ensure that reporting standards are, at the same time, international and jurisdiction-specific;
• the importance of ensuring that the disclosure standards are sufficiently robust to help prevent the risk of greenwashing, while at the same time allowing for sufficient flexibility for entities to tell their own story; and
• the difficulty of establishing a robust and extensive disclosure regime covering as many companies as possible so to ensure that information by (actual or potential) investee companies is available, while maintaining a proportionate set of requirements especially for smaller companies.

On the first paradox, he stated that he did not believe that global and EU-specific standardardisation are in contradiction, rather, he said, they would be complementary to one another. Mr Maijoor explained that to be effective, a set of international standards would need to be modular to cater for the needs of jurisdictions that are at different stages of progress in the area of sustainable finance.

On the second paradox, Mr Maijoor explained that principles-based standards are typically well-suited to support the efforts of those issuers that aim at innovating in their reporting practices, but they are also helpful in preventing the risk that non-financial reporting is merely based on a check-list approach.

And on the third paradox, he suggested that one potential way forward would be to acknowledge that the size of a company alone is an imperfect proxy of its ESG impact, but that at the same time it is a relatively good indicator of the resource constraint that a company might face if a heavy reporting burdens is imposed on it.

Mr Maijoor concluded his speech by noting:

The future of sustainability reporting depends, in my view, upon good international cooperation, robust, proportionate and principles-based reporting requirements and, most importantly, on a standard-setting process that is centred around the public interest. Like for any standard setting process, extensive and thorough consultation of all relevant stakeholders will also be essential.

Please click to access the full text of Mr Maijoor's speech on the ESMA website.

Below is an analysis of all changes made to the work plan since our last analysis on 20 November 2020.

Stan­dard-set­ting projects

• Dis­clo­sure ini­tia­tive — Targeted Standards-level Review of Disclosures — Project recategorised from maintenance projects to standard-setting project.
• Financial instruments with characteristics of equity — the work plan still has this as a research project although the Board decided at its December meeting to move it to the standard-setting programme to be able to publish an exposure draft; no expected date for the exposure draft is given.
• Primary Financial Statements — after discussing the feedback to the exposure draft, a decision on the project direction is now expected in January 2021.

Main­te­nance projects

• Accounting policies and accounting estimates (Amend­ments to IAS 8) — the issuance of final amend­ments is now expected in February 2021 (pre­vi­ously first quarter of 2021).
• Dis­clo­sure ini­tia­tive — Accounting policies — the issuance of final amend­ments is now expected in February 2021 (pre­vi­ously first quarter of 2021).
• Lease Liability in a Sale and Leaseback — an exposure draft of proposed amendments was published on 27 November 2020 and the feedback on the exposure draft is expected to be discussed in the first half of 2021.

Research projects

• Business combinations under common control — a discussion paper was published on 30 November 2020 and the feedback on the discussion paper is expected to be discussed in the second half of 2021.
• Ex­trac­tive ac­tiv­i­ties — a decision on the project direction is now expected in the second quarter of 2021 (pre­vi­ously first quarter of 2021).
• Pension benefits that depend on asset returns — the review of the research was first discussed at the IASB's December 2020 meeting and detailed analysis is expected in February 2021.
• Post-implementation review of IFRS 10, IFRS 11 and IFRS 12 — the request for information was published on 9 December 2020 and discussion of the feedback is expected to begin in the second half of 2021.
• Post-implementation review of IFRS 9 — Classification and Measurement — the request for information is expected in the second half of 2021.
• Second comprehensive review of the IFRS for SMEs Standard — this is the new name of the 2019 Comprehensive Review of the IFRS for SMEs Standard project, which has also been recategorised from maintenance project to research project; after the IASB's discussion of the feedback to the request for information at its December 2020 meeting, a decision on the direction of the project expected in the first quarter of 2021.

Other projects

• IFRS Taxonomy Update — 2020 General Improvements and Common Practice — the feedback on the proposed IFRS Taxonomy Update is now expected in February 2021 (previously first quarter of 2021).
• IFRS Taxonomy Update — Amend­ments to IAS 1, IAS 8 and IFRS Practice Statement 2 — while a proposed Taxonomy Update was pre­vi­ously expected in the first quarter of 2021, the work plan now states that an "IFRS Amendment" is now expected in February 2021.
• IFRS Taxonomy Update — Common practice (IAS 19) — after a proposed IFRS Taxonomy Update was published on 24 November 2020 discussion of the feedback received is expected in February 2021.
• IFRS Taxonomy Update — Interest Rate Benchmark Reform — Phase 2 — Removed from the work plan since the final Taxonomy Update was published on 17 December 2020.

The above is a faithful com­par­i­son of the IASB work plan at 20 November 2020 and 18 December 2020. For access to the current IASB work plan at any time, please click here.

In our response to the discussion paper, we support the Board’s initiative to assess whether information provided to investors on business combinations can be improved, including by setting clearer disclosure objectives. However, we are not convinced that the proposals in the discussion paper would result in disclosures that provide more useful information to users of the financial statements. We believe that additional work is required to understand more precisely what additional information is needed by investors and why it is needed, and what information is currently prepared by management to monitor the impact of business combinations.

Also, we do not support the preliminary view of the Board not to reintroduce amortisation of goodwill. Whilst we continue to recognise the conceptual merits of the impairment-only model, we note that there continues to be a perception that too little impairment is recognised too late. Finally, without the reintroduction of goodwill amortisation, we strongly diagree with the proposal to remove the requirement to perform a quantitative impairment test every year.

Download the full comment letter here.

We support the Board’s initiative to review these two documents to ensure that they describe clearly the concepts on which SASB Standards are based and the procedures that the organisation follows when developing, issuing and maintaining a SASB Standard. We believe it is important that SASB take this opportunity to ensure maximum alignment of both the SASB Conceptual Framework and the Rules of Procedure with global best practice (in particular the corresponding documents of the IFRS Foundation), in order to facilitate moves towards global sustainability standard setting. We therefore recommend that SASB now moves to adopt the approach set out in the recent joint paper.

Download the full comment letter here.

In our comments on the proposals in the consultation paper, we also note that the standards to be developed should build on the best of what we have and cite the work of CDP, CDSB, GRI, IIRC and SASB who in September 2020 released a statement of intent to work together towards comprehensive corporate reporting in a comprehensive corporate reporting system. We believe the vision in that statement could serve as a natural starting point for progress towards a more coherent, comprehensive corporate reporting system. For the reasons stated in the consultation paper, we believe that the IFRS Foundation should begin with sustainability reporting standards for climate-related information, however, whilst we believe these standards to be the first priority, we also note that the SSB should proceed without delay to other sustainability topics.

In addition, we point out that the IFRS Foundation’s proposal would lead to a significant step towards a comprehensive corporate reporting system that builds on the well-established efforts of the existing sustainability standards and frameworks to create a standard-setting solution for reporting focused on long-term value creation, connected to financial information. Further blocks can be added to address the wider impacts of companies on the economy, environment and people, and to reflect regional and local public policy priorities. We cite IFAC’s Enhancing Corporate Reporting: The Way Forward as a demonstration of how a ‘building block approach’ can both achieve a core set of global sustainability standards and respond to the local or regional public policy objectives.

Lastly, we stress that timely action is needed to avoid fragmentation, duplications or parallel reporting requirements on topics that are common across the system. In the absence of a single set of global sustainability reporting standards, some regions are moving ahead by themselves. This could result in multiple reporting frameworks and reporting standards existing for an extended (or indefinite) period. The primary objective needs to be a reduction in, and consolidation of, the plethora of different frameworks and standards that currently exist.

We sum up our position by stating:

The scale of the challenges and the increasing momentum from all stakeholders for a global solution for sustainability reporting standards make the undeniable case for immediate action. The actions proposed in the Consultation Paper should be taken without delay.

Download the full comment letter here.