This Taxonomy update includes elements to reflect the amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, and IFRS 16 introduced by Interest Rate Benchmark Reform — Phase 2 issued in August 2020.

For more information, see the press release and Taxonomy update on the IASB’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

This issue features:

• Spotlight — Reflecting on the financial reporting challenges stemming from COVID-19.
• In Profile — Florian Esterer, Head of Core Equities, Bank J Safra Sarasin and member of the Capital Markets Advisory Committee
• We need your views
• Stay up to date
• Resources for investors

The Investor Update newslet­ter is available on the IASB’s website.

The Government believes there are opportunities to improve the way financial information is filed with, and published by, Companies House. It is seeking to deliver benefits for those filing information, the users of that information, for Companies House and for the rest of government.

The headline proposals are to:

• Shorten the time limits for filing annual accounts at Companies House from six months to three months for public companies (plcs) and from nine months to six months for private companies;
• Require all accounts filings to be digital with full i-XBRL tagging;
• Introduce a ‘file with government once’ approach which would also cover tax filings;
• Require directors to make a formal declaration of entitlement to small and micro company accounting exemptions;
• Remove some small and micro company exemptions; and
• Give Companies House greater powers to make checks on financial information.

The proposals in the consultation seek to:

• Deliver efficiencies for filers, users and Companies House by requiring digital submission of accounts in a machine-readable format, bringing the UK into line with global best practice;
• Expand the use of tagging standards to make comparison and bulk analysis of accounts simpler for investors and assist businesses seeking investment;
• Simplify the multiple processes for filing financial information across Companies House and HMRC systems, and explore opportunities for filing financial information once with government;
• Tackle fraud and error by closing known loopholes in filing requirements and address problems of companies filing the wrong set of accounts;
• Improve the quality and value of information on the register by reviewing the timescales for delivering accounts and exploring options to improve how information is displayed; and,
• Require additional information to be submitted with accounts to improve their statistical and analytical value.

The consultation sets out proposals under three themes:

How information is submitted to Companies House

The first part of the consultation focuses on how accounts are delivered to Companies House and includes:

• Proposed new timescales for accounts to be filed. It is proposed to cut the time limit for filing accounts from six months to three months for a plc and from nine months to six months for a private company. The Government states that this will improve accuracy as financial information is often significantly out of date before it is filed with Companies House.
• Options for progressing towards filing once with government which would also cover tax filings where the same set of accounts would be received by both Companies House and HMRC.
• Proposals to require accounts to be delivered digitally and to introduce full tagging of accounts in line with the requirements that are already in place when filing with HMRC. The consultation indicates that this will be an important step towards any future plans for companies to be able to file once with the government.

What information should be filed at Companies House

This part of the consultation outlines the information that is currently required by Companies House and asks whether further information might improve the value of the register. It includes:

• A proposal that company directors should confirm the company’s eligibility to file small or medium-sized accounts under Part 15 of the Companies Act. Under the proposals all three threshold conditions set out in Part 15 of the Act (turnover, balance sheet and number of employees) will be required to be disclosed by all companies. It is proposed that the director(s) will have to confirm that the company meets the threshold conditions to file under the regime being used. In the case of dormant accounts being filed, it is proposed that the declaration will confirm that the company is not trading and meets the criteria for filing dormant accounts.
• Proposals which will also see Companies House introduce validation checks to ensure that the threshold conditions match the requirements for the filing regime being used. Additionally the Government proposes to create an offense if a false declaration is made by director(s).
• Proposals for revising the small company accounts filing options. These include proposals to:
  • Remove the current filing exemptions whereby small and micro companies do not need to file their profit and loss account.
  • Require micro entities to provide more information in accounts filed at Companies House.
  • Abolish ‘abridged accounts’ which enable small companies to omit some information from their profit and loss account and balance sheet prepared for members and for filing.

What Companies House does with this information

The final part of the consultation explores what Companies House should do with information it receives in accounts. It:

• Sets out proposals to increase the checking of accounts. This would include a check by Companies House to ensure that the information provided is coherent, complete for a company of that size/type and consistent with accounts submitted to other relevant agencies.
• Asks for views on how financial information could be better displayed on the register.

Responses are requested by 3 February 2021.

A press release and the full consultation are available on the BEIS website.

Mr Hoogervorst commented on the work done during the coronavirus pandemic which included the publishing of educational materials to support the application of IFRS 9, Financial Instruments, and IFRS 16, Leases and changes to the IASB’s work plan to give stakeholders more time on consultations.

Next, he reflected on the key developments of the past 10 years as the IASB Chair. These developments included the revised Conceptual Framework, primary financial statements project, issuance of major standards (IFRS 9, IFRS 15, IFRS 16 and IFRS 17), and progress in the adoption of IFRS Standards around the world. He then touched upon the IASB’s future plans that will include a focus on sustainability, goodwill, and the agenda consultation.

The full transcript of the speech is available on the IASB’s website.

Robert Pozen is a senior lecturer at MIT Sloan School of Management and a non-resident senior fellow at the Brookings Institution.

Kenneth Robinson is a trustee of the Financial Accounting Foundation and a board member of Paylocity and Morgan Stanley.

Erhard Schipporeit is an independent management consultant and is a supervisory board member for several German companies.

In addition, the current IFRS Foundation Trustees Colette Bowe, Teresa Ko, Larry Leva, Michel Madelain, Ross McInnes, Vinod Rai, and Lucrezia Reichlin have been reappointed to serve a second three-year term, also beginning on 1 January 2021.

For more information, see the press release on the IASB's website.

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.

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.

In its comment letter, GRI agrees with the assessment of the IFRS Trustees that demand for reporting on sustainability is growing, and that a global solution has to reflect the needs of the companies preparing sustainability reports together with the information needs of their stakeholders, including investors, as well as the information needs of the jurisdictions they operate in.

GRI also notes that not only is a global solution needed, sustainability reporting should also become mandatory to truly contribute to better decision-making. The comment letter also states that financial reporting itself must be strengthened to reflect the financial implications of sustainability issues on the reporting entity. Enhanced financial reporting would then exist alongside sustainability reporting. Under such a regime, GRI believes, financial reporting will be able to leverage the information made available through sustainability reporting so as to fully reflect the financial implications of all impacts of corporate activities.

GRI also comments on the role of the IFRS Foundation:

The IFRS Foundation is in a position to support the further evolution of the existing public interest oversight mechanism to become inclusive of sustainability reporting, thereby allowing even more jurisdictions that have mandated a global solution for financial reporting to do the same for sustainability reporting.

Please click to access the full comment letter through the press release on the GRI website.

GRI also offers two webinars on its response to the consultation: On 17 December 2020, at 9:00 GMT and at 17:00 GMT (links are to registration pages).)

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.