January

Joint regulators statement for companies, auditors and users of financial accounts on reporting timetables

27 Jan, 2021

The Financial Reporting Council (FRC) and the Financial Conduct Authority (FCA) have published a joint statement reminding companies that extended financial information timelines continue to apply in light of the continued disruption caused by the COVID-19 pandemic.

The FCA and the FRC encourage all stakeholders, including in particular boards of listed companies, to re-familiarise themselves with the measures which remain in place. These are as follows:

Corporate Reporting for listed companies

Temporary reliefs for delayed publication of financial statements will remain in place until the disruption caused by the COVID-19 pandemic abates. The joint statement indicates that companies will be given plenty of notice when it is decided to bring any of these measures to an end.  The measures are:

  • An additional two months to publish annual financial reports (link to FCA website) (i.e. within six rather than four months of the financial year end date).
  • An additional month to publish half yearly financial reports (link to FCA website) (i.e. within four rather than three months of the financial half year end date). 

Extended period for filing accounts at Companies House

At present the deadline for filing any accounts with Companies House is extended by 3 months. While this automatic extension expires on 5 April 2021, it will be replaced with an application process (link to Companies House website) to Companies House, with companies granted a discretionary 3-month extension where they cite coronavirus as a factor impacting the timely completion and/or audit of accounts. 

Delaying or adapting Annual General Meetings (AGMs)

The temporary ability to postpone AGMs provided by the Corporate Insolvency and Governance Act 2020 (CIGA) expired on 30 September 2020. Further CIGA measures to provide flexibilities around the conduct of AGMs have been extended to 30 March.  The Act provides no scope to extend them beyond that date.  The Chartered Governance Institute ('ICSA') in association with the City of London Law Society Company Law Committee and Martin Moore QC, with the support of the Department for Business, Energy and Industrial Strategy and the Financial Reporting Council has published guidance (link to ICSA website) to help clarify expectations surrounding company meetings scheduled to be held after 30 March 2021.   

The joint statement also covers extended reporting deadlines for public sector bodies

AIM Companies

Concurrently, the London Stock Exchange has also confirmed that the temporary measures put in place last year to allow AIM companies to request an extension of their reporting deadline remain available until further notice.  The temporary reliefs for AIM companies are:

  • An additional three months to publish the annual audited accounts (i.e. within nine rather six months of the financial year end date).
  • An additional month to publish its half yearly report (i.e. within four months rather than three months of the financial half year date).

As well as reminders of the temporary reporting reliefs in place, the joint statement also serves to alert investors to the changes in reporting timetables and remind companies of their reporting obligations under the Market Abuse Regulation.  The joint statement additionally highlights the guidance for companies that the FRC issued in December 2020 related to corporate governance and financial reporting during the COVID-19 pandemic. 

FCA and PRA regulated firms

The Prudential Regulation Authority (PRA) has also issued a statement (link to PRA website) setting out its approach to regulator reporting for PRA-regulated banks, building societies, designated investment firms and credit unions (firms) in response to COVID-19.  The statement indicates that consistent with the above measures announced by the FRC and FCA, the PRA will accept a delay in the submission by UK banks and designated investment firms of their annual reports and accounts by up to two calendar months, where the remittance deadlines contained in the PRA Rulebook fall on or before Saturday 31 July 2021. For building societies, while the PRA is prepared to accept a similar delay, firms considering this may need to consider other statutory requirements that apply to them.  The PRA statement indicates that firms should keep their supervisory contact at the PRA notified of any significant developments in their financial circumstances and those that are able to submit before the end of the delayed submission window are encouraged to do so.

The FCA has also announced (link to FCA website) that the deadline for FIN-A (annual report and accounts) returns due up to and including 31 July 2021 is extended for two months. This extension applies to the “80 day” deadline for most FCA regulated firms with Part 4A permission, the seven month deadline for non-UK banks, and the six month deadline for the Society of Lloyds and service companies.

The FRC and FCA joint statement is available in full on the FCA website here along with Q&As here.  The updated guidance from the London Stock Exchange is available on the London Stock Exchange website.

Accountancy Europe comments on EFRAG outreach document

26 Jan, 2021

As reported before, EFRAG conducted a series of online outreach events to gather stakeholders' view from various jurisdictions on the tentative proposals of the Project Task Force on non-financial reporting standards. An outreach document was provided to facilitate discussions at those meetings. Accountancy Europe has published a letter noting several shortcomings of the document.

Accountancy Europe agrees that some non-financial information topics such as climate change are urgent and need an urgent solution. This would include non-financial information reporting standards to enable consistent and comparable reporting on this topic. In its letter, Accountancy Europe notes that it is happy to help and collaborate with the task force, EFRAG and the European Commission to achieve progress in this area.

However, Accountancy Europe also stresses the following points:

  • A global approach with an additional building block approach is still the preferred solution. This would also be helpful in view of the urgency of the matter. "Re-inventing the wheel" is regarded as too time-consuming and unnecessary. Also, a European approach should consider the developments in the non-financial information playing field since EFRAG received the mandate.
  • Many market participants (including preparers) are already familiar with and report under international initiatives such as those of CDP, CDSB, GRI, IIRC and SASB. Introducing a new initiative would result in further fragmentation.
  • The outreach document uses new and different terminology compared to the widely used concepts in corporate reporting, non-financial information, sustainability or environmental, social and governance (ESG) terminology. This is considered confusing and unhelpful, especially as it was unclear whether this is intentional or not and what the underlying intention is and why (if there is one).
  • The proposals in the document relate to both the standard-setting process and reporting standards’ content, at times intermingling them. A clear split between standard-setting and reporting standards ́ content in the final document would simplify the tasks of a future European standard setter.
  • A conceptual framework would be key to a non-financial information principles-based reporting system. It could build on the well-known concepts of the IFRS Conceptual Framework and the concepts of the existing non-financial information frameworks and standards (e.g. CDSB, IIRC, SASB, GRI, etc.). Regional adaptations important for EU non-financial information reporting standards could be made to some items in these frameworks.
  • The outreach events to discuss the ideas in the outreach document are appreciated, however, the letter notes that clarification on the due process and the next steps for the project is needed. It is noted that it is common practice within EFRAG to open a consultation period on its preliminary proposals, receive stakeholders’ feedback and ultimately provide its final advice to the European Commission.

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

2021 required and annotated required IFRS Standards now available

26 Jan, 2021

The IFRS Foundation announces that the annual publication formerly known as the 'Blue Book' is now available.

The Required IFRS Standards 2021 publication contains all official pronouncements that are mandatory on 1 January 2021. It does not include IFRSs with an effective date after 1 January 2021. The Annotated Required IFRS Standards 2021 includes the same content as Required IFRS Standards 2020, but with additional annotations containing extensive cross-references, explanatory notes and IFRS Interpretations Committee agenda decisions.

The books are available in electronic format for subscribers to eIFRS Professional. Printed copies of the books are available for sale through the IASB's web shop.

Agenda for the February 2021 ITCG meeting

25 Jan, 2021

The agenda is available for the next meeting of the IFRS Taxonomy Consultative Group (ITCG), which will be a virtual meeting on 1 February 2021, from 12:30 to 14:30 GMT.

The staff will provide the ITCG with a summary of the public feedback received on PTU/2020/4 IFRS Taxonomy 2020 — 'General Improvements and Common Practice — Presentation of information in primary financial statements' and the ITCG will discuss the proposed response.

The agenda paper for this meeting is available on the IASB website.

Recent sustainability and integrated reporting developments

25 Jan, 2021

A summary of recent developments at IIRC, IRC, UNEP FI, GRI, and EFRAG.

Following the launch of its revised International <IR> Framework, the International Integrated Reporting Council (IIRC) has now made available a recording of the launch event that provides an overview of the revisions. Please click to access the recording on the IIRC website.

In the context of the revised IIRC framework, the South African Integrated Reporting Committee (IRC) has published a version of the International <IR> Framework (2021) with marked up changes. Please click to access the document on the IRC website.

The IRC has also released Delivering a meaningful and concise integrated report. Please click to access the information paper on the IRC website.

A group of 22 leading insurers and reinsurers convened by the UN Environment Finance Initiative (UNEP FI) has published the first comprehensive guidance for the insurance industry to identify and disclose the impact of climate change on their businesses. Please click to access the guidance on the UNEP FI website.

The Global Reporting Initiative (GRI) has published updated version of Linking the SDGs and the GRI Standards. This free resource gives a breakdown of the targets under each of the 17 UN Sustainable Development Goals (SDGs) and maps how they correlate against the disclosures in the GRI Standards, including the latest published versions. Please click to access the publication on the GRI website.

The GRI has also responded to the to the consultation document on the ad personam mandate on potential need for changes to the governance and funding of EFRAG setting out how GRI and the Global Sustainability Standards Board (GSSB) can contribute to a European solution. Please click to access the letter on the EFRAG website.

The European Financial Reporting Advisory Group (EFRAG) has launched a survey on stakeholders’ views on non-financial risks and opportunities reporting practices. Please click to access the survey on the EFRAG website.

ICSA publishes its review of the effectiveness of independent board evaluation in the UK listed sector

24 Jan, 2021

The Chartered Governance Institute (ICSA) has published the findings of its review into the effectiveness of independent board evaluation in the UK listed sector. The report has identified a number of ways in which board evaluation might be improved.

The purpose of the review was to assess the quality of independent board evaluation in the UK listed sector and identify ways in which it might be improved. It was carried out at the request of the Department of Business, Energy and Industrial Strategy (BEIS).  In conducting the review, ICSA considered not only the available evidence on the current state of the market for independent board evaluations in the listed sector, but also the potential impact of the actions taken by the Financial Reporting Council (FRC) in 2018 to strengthen the UK Corporate Governance Code.

The report concludes that there is scope for broader adoption of good practice and greater transparency on the part of both board reviewers and companies using their services.  It also concludes that this is best done through a voluntary rather than a regulatory approach.  It makes a number of recommendations:

  • The FRC should consider adopting the terminology ‘board performance review’ instead of ‘board evaluation’ when it next updates the UK Corporate Governance Code and the Guidance on Board Effectiveness.
  • Any set of actions to improve the conduct and accountability of external board performance reviews must be addressed to companies as well as reviewers and must enhance the ability of shareholders and other stakeholders to hold both to account.
  • Any actions expected of board reviewers and listed companies as a result of the report should be voluntary, at least initially.
  • A code of practice should be published to which all organisations conducting external board performance reviews for FTSE 350 companies, and those that aspire to do so, should be encouraged to become signatories. While the Code would be voluntary, signatories would be expected to demonstrate that they adhere to the standards set out in the code on an ‘apply and explain’ basis.  The proposed Code is included in an appendix to the report.
  • BEIS should either issue the Code itself or identify a suitable organisation to become the ‘owner’ of the Code. Ownership should entail maintaining a public register of signatories and checking that applicants have made the disclosures required by the code before their status as signatories is ratified.
  • Details of how board reviewers can register should be announced as soon as practicable, but reviewers should be given a reasonable period to adjust their practices and update their disclosures as necessary before the register ‘goes live’. Depending on how quickly these arrangements can be agreed, the recommendation is that the register would become active by the end of 2021.
  • Listed companies, and other organisations using the services of external board reviewers, should be encouraged voluntarily to adopt principles of good practice covering the selection of the reviewer and how the review is conducted and reported on. The report includes proposed Principles in an appendix. The Institute will promulgate these Principles with its own members and recommends that BEIS and the FRC consider doing so more broadly.
  • The FRC should issue additional voluntary guidance to listed companies on how to report against Provisions 21 and 23 of the 2018 UK Corporate Governance Code (which require companies to make certain disclosures relating to board evaluation), with the aim that companies should be able to draw on the guidance in their annual reports published in 2022. Proposed guidance is included in an appendix to the report.
  • As part of this guidance, listed companies that used an external board reviewer in the period covered by the annual report should disclose whether that reviewer was a signatory to the new Code of Practice. This could provide an incentive for reviewers to become signatories.
  • As a matter of good practice, listed companies should agree with the reviewer any references to the process followed by the reviewer, and any observations attributed to them, and confirm in the annual report that they have done so.
  • The Code of Practice for board reviewers should not define ‘independent board performance review’ in such a way that a reviewer is required to follow prescribed methodologies in order to be accepted as a signatory, nor should it prescribe minimum qualifications. However, it should include a ‘de minimis’ definition that excludes those firms that simply supply companies with software or other tools that the company then uses as part of its internal review.
  • Board reviewers should not be prevented from providing other services to their clients, but both reviewers and companies should explain how any conflicts of interest or threats to the independence of the reviewer are managed in these circumstances, and companies should indicate in the annual report whether the fees paid for the board performance review exceed those paid for other services.
  • Board reviewers should disclose their policies relating to the length of their relationship with clients. Companies should disclose whether the relationship exceeds six years and, if so, explain how any conflicts of interest or threats to the independence of the reviewer are managed. An explanation should also be provided by the company where the reviewer has any other connections with the person leading the appointment process for the company.
  • The FRC should assess board performance review practice and reporting in the listed sector as part of its regular monitoring of the UK Corporate Governance Code, and report on its conclusions.
  • BEIS should conduct or commission a formal review of the impact of these measures three years after the proposed register of board reviewers becomes active. This review should consider whether mandatory measures or enhanced oversight of the Code of Practice for board reviewers are required, as well as whether changes are needed to the content of the Code of Practice, Principles or guidance.

Alongside the report the ICSA has published:

  • Principles of good pracrice for listed companies using external board reviewers; and
  • Reporting on board performance reviews. 

The press release with links to supporting documents are available on the ICSA website.

EFRAG launches survey on the post-implementation review of IFRS 10, 11 and 12

22 Jan, 2021

In the context of the post-implementation review of IFRS 10, IFRS 11, and IFRS 12 launched by the IASB in December 2020, the European Financial Reporting Advisory Group (EFRAG) is inviting stakeholders to participate in a survey that addresses a number of areas of the standards that have been identified as potentially unclear.

Separate questions have been developed for preparers and users of financial statements. Auditors, standard setters and regulators are also invited to participate in the survey. The survey is open until 16 April 2021.

Please click for more information and access to the survey on the EFRAG website.

EFRAG Lab project task force launches survey on non-financial risks and opportunities reporting practices

22 Jan, 2021

The European Corporate Reporting Lab project task force on reporting of non-financial risks and opportunities and linkage to the business model has launched a survey on stakeholders’ views on non-financial risks and opportunities reporting practices.

The objective of the survey is to understand the factors that influence companies’ reporting of sustainability-related risks and opportunities and the impacts on the business model. The project task force is seeking stakeholder views on users’ expectations and needs, and preparer challenges associated with current reporting practices

Responses are requested by 20 February 2021.

A press release and the survey are available on the EFRAG website.

Pre-meeting summaries for the January 2021 IASB meeting

20 Jan, 2021

The IASB is meeting on Tuesday 26 January 2021, 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.

Board Work Plan Update: This is a regular update of the work plan. Within the next six months the IASB expects to finalise amendments related to three projects and publish consultation documents for six projects. The Board will not start any remaining research pipeline projects or the PIR of IFRS 5. Rather, as decided at the Board’s October 2020 meeting, the Board will obtain updated information about those projects as part of the 2020 Agenda Consultation to help reassess their relative priority. The Board will be asked at a future meeting to add a narrow-scope project on disclosure requirements in relation to supply chain financing arrangements.

Maintenance and Consistent Application—IFRIC Update: The IASB will discuss the December 2020 IFRIC Update.

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 Board will discuss disclosures about cash-generating units containing goodwill and intangible assets with indefinite useful lives and the scope of the proposed Standard. The staff recommend that it apply to entities that, at any point during their reporting period, are subsidiaries of a parent presenting consolidated financial statements applying IFRS Standards and that the scope should not be limited to single entity financial statements. They also recommend that the consultation document should be an ED.

Primary Financial Statements: In December 2019, the IASB published Exposure Draft ED/2019/7 General Presentation and Disclosures. At the December 2020 meeting the Board began discussing summarised feedback from the 215 comment letters it received, outreach activities, fieldwork and a review of academic literature. The Board did not discuss four of the 11 papers and at this meeting will continue its discussions. The staff are also presenting a redeliberation plan.

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

February 2021 IFRS Interpretations Committee meeting agenda posted

20 Jan, 2021

The IFRS Interpretations Committee has posted the agenda for its next meeting, which will be held by video conference on 2 February 2021.

The Committee will discuss the following:

  • Ad­min­is­tra­tive matters
  • IFRS 10 and IFRS 16 — Sale and leaseback of an asset in a single-asset entity
  • IAS 2 — Costs necessary to sell inventories
  • IAS 10 — Preparation of financial statements when an entity is no longer a going concern
  • Work in progress

The full agenda for the meeting can be found here. We will post any updates to the agenda, our com­pre­hen­sive pre-meet­ing summaries as well as observer notes from the meeting on this page as they become available.

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