Gerard van Santen will represent the Dutch Standard Setter for the remainder of the mandate previously filled by Peter Sampers who will retire from the EFRAG Board.

For more information, see the press release on the EFRAG’s website.

In their response to the consultation, the Chairs of the ESAs agree that improving data availability and public disclosure by corporates is a key element to foster sustainable growth, and strongly support the development of globally accepted non-financial reporting standards to facilitate the disclosure of meaningful and comparable metrics on environmental, social and governance aspects. They also support that international standards should build on existing jurisdictional and international initiatives, including those of the European Union. The comment letter notes:

Whilst the ESAs are fully committed to support the European Commission in the further development of the Taxonomy Regulation and the Non-Financial Reporting Directive for the European Union, the ESAs strongly support the development of globally accepted non-financial reporting standards.

The ESAs also note it is important that the standards to be developed cater for jurisdictions at different stages of development in the area of sustainable finance. ESMA's letter adds that this could be achieved by developing a common basis consisting of a globally accepted set of standards that, if necessary, could be complemented at the level of individual jurisdictions to fulfil any additional jurisdiction-specific obligations.

ESMA also points out that there are three principles to take into account when establishing a standard-setter in this area: independent governance, public-sector oversight and ability of the disclosure standards to promote investor protection. The comment letter notes:

ESMA believes that the IFRS Foundation is well placed to implement a standard-setting solution for non-financial reporting that is in line with the above-mentioned principles. ESMA notes that the IFRS Foundation could also leverage on its role in financial reporting to help build the much-needed connectivity between financial and non-financial reporting.

Please click to access the full comment letters below:

• ESAs joint comment letter on the EBA website
• ESMA comment letter on the ESMA website

The amendments replace the 2019 IFRS Taxonomy with the most recent one published by the IFRS Foundation in March 2020 as core taxonomy. The ESEF is amended on a yearly basis to reflect updates to the IFRS Taxonomy published by the IFRS Foundation.

Please click for the following additional information on the ESMA website:

• Press release
• Amendments

Note: A corresponding delegated regulation was published in the Offical Journal of the European Union on 18 December 2020.

The amendments change the fixed expiry date for the temporary exemption in IFRS 4 Insurance Contracts from applying IFRS 9 Financial Instruments, so that entities will be required to apply IFRS 9 for annual periods beginning on or after 1 January 2023 (instead of 1 January 2021).

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 16 December 2020.

EFRAG has updated its endorsement status report to reflect that the European Union has adopted the amendments.

The proposals which were first consulted on in March 2020, introduce a new rule in LR 9.8 that will require commercial companies with a UK premium listing (including sovereign-controlled commercial companies) to include a statement in their annual financial report setting out:

• Whether they have made disclosures consistent with the Task Force on Climate-related Financial Disclosures (TCFD’s) recommendations and recommended disclosures in their annual financial report.
• Where they have not made disclosures consistent with some or all of the TCFD’s recommendations and/or recommended disclosures, an explanation of why, and a description of any steps they are taking or plan to take to be able to make consistent disclosures in the future – including relevant timeframes for being able to make those disclosures.
• Where they have included some, or all, of their disclosures in a document other than their annual financial report, an explanation of why.
• Where in their annual financial report (or other relevant document) the various disclosures can be found.

The rule is accompanied by guidance to help listed companies determine whether their disclosures are consistent with the TCFD’s recommendations and recommended disclosures. The guidance also clarifies the limited circumstances in which the FCA would expect in-scope companies to explain rather than disclose.

The FCA is also introducing a Technical Note clarifying existing disclosure obligations set out in EU legislation and in its Handbook, that may already require issuers to disclose information on climate-related (and other environmental, social and governance matters) in certain circumstances.

The new Listing Rule will apply for accounting periods beginning on or after 1 January 2021. The first annual financial reports including disclosures subject to the new rule would then be published in spring 2022. The finalised Technical Note will apply with immediate effect.

The FCA aims to publish further consultation papers to extend the application of TCFD disclosures in early 2021. Its planned next steps were recently set out as part of a Roadmap to mandatory TCFD-aligned disclosures, released by a joint government and regulator taskforce in November.

A press release and the full Policy Statement and Technical Note are available on the FCA website.  Our related Need to know publication is available here.

The newsletter provides an update of the Lab's current projects and a brief overview of its other activities. Some highlights include:

• an update on the Lab's projects, including its project on 'Reporting on stakeholders and section 172 statements' and its project on 'Reporting on risks, uncertainties and scenarios'.
• an update on recent FRC publications including the Annual Review of Corporate Reporting, the Annual end of year letter to CEOs, CFOs and Audit Committee Chairs, thematic reviews into IFRS 15 Revenue from Contracts with Customers, IFRS 16 Leases and a thematic review into climate reporting. 
• an update of published guidance for companies and auditors regarding COVID-19.

The full newsletter is available on the FRC website here.

The evidence the IASB is looking for includes responses to consultative documents, fieldwork such as assessing systems changes or the hypothetical application of a proposed new financial reporting requirement, empirical analysis from studies of reported accounting data, share price relationships and analysts’ forecasts, the results of experimental studies, analytical modelling, and collecting and analysing views from surveys.

The papers in this round address the following topics (all links to the IASB website):

• Financial Statement Comparability in Extractive Industries: International Evidence
• An Assessment of Corporate Disclosures of IFRS 15: Revenue from Contracts with Customers
• The Impact of Hedging and Hedge Reporting on Managers’ and Investors’ Decisions
• Are Non-GAAP Measures Running Amok? Evidence on the Proliferation of Non-GAAP Adjustments and the Quality of the Related Disclosures
• Income Statement Presentation and Forecasting Quality

The role of the FRAB is “to ensure that government financial reporting meets the best possible standards of financial reporting by following Generally Accepted Accounting Practice (GAAP) as far as possible”. The FRAB includes representatives from the accountancy profession in the private and public sectors, academia and government bodies. The board meets regularly to consider proposed changes to policy and practice.

Key topics discussed during the June meeting included:

• An update on the 2020-21 reporting cycle.
• Updates on IFRS 16 Leases and an implementation update on IFRS 17 Insurance Contracts.
• An update on the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom.
• An update on discussions held by and decisions made by the IFRS Interpretations Committee and an update on amendments to IFRS Standards.

The minutes and other supporting documents are available on the HM Treasury website.

Interest rate benchmarks such as the London Interbank Offered Rate (LIBOR) are being reformed, and it is anticipated that LIBOR will not be available after 2021. In response to the uncertainty about the long-term viability of interest rate benchmarks, the FRC published Amendments to FRS 102 – Interest rate benchmark reform, referred to as Phase 1 of the interest rate benchmark related amendments to FRS 102.

Amendments to FRS 102 – Interest rate benchmark reform (Phase 2) represent the second and last phase of the FRC’s standard-setting response to the financial reporting issues arising from the replacement of interest rate benchmarks and are referred to as Phase 2 amendments.

Amendments to Section 11 Basic Financial Instruments provide a practical expedient for the accounting for financial assets and financial liabilities when contractual cash flows change because interest rate benchmarks are being replaced. There are new requirements for disclosure of the nature and extent of risks arising from the interest rate benchmark reform. Amendments to Section 12 Other Financial Instruments Issues give more flexibility regarding the redocumentation of hedging relationships and provide other reliefs that avoid disruption to hedge accounting. A consequential amendment has been made to Section 20 Leases resulting from the changes made to Section 11.

The amendments are intended to adapt and simplify accounting requirements in the context of interest rate benchmark reform and thereby minimise reporting costs for preparers of financial statements compliant with FRS 102 and enable them to provide useful information to the users of their financial statements.

The amendments are effective for accounting periods beginning on or after 1 January 2021, with early application permitted.

A press release and the amendments are available on the FRC website.  Our related Need to know publication is here.

In January 2020 the UK exited the European Union. As a result, changes were required to UK company law to ensure that it continues to operate effectively. Some of these changes also lead to consequential amendments to accounting standards so that the standards remain in line with the law.

Amendments to UK and Republic of Ireland accounting standards – UK exit from the European Union amends five accounting standards, the FRC’s pronouncement on interim reporting and the implementation guidance accompanying FRS 103 Insurance Contracts.

As these amendments reflect changes in UK company law, they are not expected to introduce changes in financial reporting other than when required by law. There should be no practical impact on entities in the Republic of Ireland.

The effective date for these amendments is accounting periods beginning on or after 1 January 2021. Early application is permitted in some circumstances to provide UK entities with the option to use International Accountinf Standards (IASs) that are adopted for use within the UK after 31 December 2020, in addition to International Financial Reporting Standards (IFRSs) that have been adopted in the EU as at this date. This is consistent with the transitional arrangements provided in UK company law for entities preparing ‘IAS accounts’.

A press release and the amendments are available on the FRC website.