We welcome this thought leadership paper and the opportunity to reflect on the current reporting system in the UK. We believe that the Paper is timely given the significant pace of development in the UK and global corporate reporting landscape.

While we welcome the aspiration to simplify the corporate reporting landscape to drive accessible, meaningful information for stakeholders, we have significant concerns about the primary outcome being focused on promoting separate reports as set out in the paper. Key points we make in our response include:

• Connectivity: Reporting affects business behaviour. In our view, the approach to corporate reporting of the future set out in the Paper adversely impacts the critical connectivity that exists between non-financial and financial reporting, driving fragmented and siloed strategic behaviour - a step back from the move towards integrated thinking that Deloitte advocates. The narrative must be connected to judgements and estimates in the financial statements. Separating this narrative would be wrong, and including it twice is a duplicative and expensive exercise.
• Dilution of board focus: There is a risk that the silo approach may also result in diluting a Board’s focus if separate reports end up at different committees rather than being overseen as a whole by the audit committee. For example, the Public Interest Report may go to a governance committee and the business report to the Executive Committee and then maybe straight to the main Board, thereby reducing the overall level of scrutiny.
• Audience: The focus of UK annual reports on providers of financial capital as a primary audience is consistent with integrated reporting and the focus of other current global developments. This must remain the priority in order to direct capital to sustainable and resilient business. We believe investors should have easy access to the information that is relevant to their needs and not have to piece together various reports prepared to differing materialities. We are concerned that purely objective-driven reporting, as proposed in the Paper, would be unlikely to lead to the right outcome: although different users of a report may have the same overriding objective or interest in a topic, as the Paper suggests, we believe the needs of users from different stakeholder groups will vary as a result of the different lenses through which the users are viewing the information they are using.
• Materiality: The distinction between a) users with the objective of making economic decisions, and b) the broader user group focusing on the impacts a business has, is articulated clearly as a “dynamic” and “nested” approach to materiality of sustainability information in recent joint publications by CDP, CDSB, GRI, IIRC and SASB e.g. their Statement of Intent to Work Together Towards Comprehensive Corporate Reporting. We believe this approach to be consistent with that of the FRC to date and that it is a compelling starting point as to how a future system of comprehensive corporate reporting might be designed.
• Assurance: Assurance is an important contributor to trust, but for this to be the case clarity is needed regarding what level and quality of assurance each piece of information is subject to. We strongly feel that the quality of assurance over the connected ‘enterprise value’ report whose primary user is the shareholder is best delivered holistically by the auditor, recognising that the majority of the value of a company is represented by intangible factors which are currently discussed in the front half of the annual report. However, there is real opportunity for ‘non enterprise value’ data points required by broader stakeholders to be assured by other providers, subject to comparable independence and quality requirements. This approach could promote more choice and competition in the market and should link to the Audit and Assurance Policy recommendation from Brydon. It is critical that the market has clarity on the scope and quality of assurance that is applied to reported data.

The full response is contained within the comment letter.

The IASB's project on Common control transactions is designed to address accounting for transactions between entities that are ultimately controlled by the same party or parties (so-called 'common control transactions').

In its draft comment letter on the discussion paper published in November 2020, EFRAG

• supports the proposed scope of the discussion paper but considers that the IASB should better define 'group restructurings' without labelling them Business Combinations under Common Control (BCUCC) when they do not meet the description of a business combination in IFRS 3 Business Combinations;
• agrees that a single measurement method is not appropriate for all BCUCC and supports the two concepts of acquisition method and book-value method but proposes a few modifications to the IASB’s decision tree on when to apply each method;
• generally agrees with the IASB's proposals on how to apply the two methods but is consulting constituents on certain aspects of both methods;
• supports the proposed disclosure requirements for BCUCC accounted for under both the acquisition method and a book-value method.

Comments on EFRAG's draft comment letter are requested by 30 July 2021. For more information, see the press release and the draft comment letter on the EFRAG's website.

The webinars lasted approximately 60 minutes and consisted of an overview of the standard’s objectives and related research opportunities, followed by questions and answers.

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

The event will focus on the views of European investment decision-makers and information that they consider important in this area. The audience will be able to contribute to the discussion through polling questions and Q&A sessions. 

For more information and registration, please see the press release on the EFRAG website.

A recording of this webinar was released on 8 March 2021.

A summary report on the webinar was released on 12 May 2021.

In the short article he draws attention to the following disclosure practices and names a number of companies where he believes these practices have been displayed effectively:

• provision of concise yet rigorous analysis of how the Principles have been applied using cross-referencing to other parts of the Directors’ Report for further detail;
• reference to the Principles as a guide for reviewing and, where appropriate, improving governance arrangements;
• wholly-owned subsidiaries applying the Wates Principles and commenting specifically on how they apply to the subsidiary, rather than just referring to their holding company’s governance standards; and
• clear description of examples of issues that the board is grappling with.

There are two matters which Sir James cites as being “some disappointments”. Similar to previous Financial Reporting Council (FRC) comments on reporting on the UK Corporate Governance Code, there is reference to companies not fully embedding Purpose in their organisation and failing to provide specific examples of how the purpose has actually guided Board-level discussions and decisions. There is also criticism of companies who fail to make the Corporate Governance report easily accessible on their website.

In a final comment Sir James commends some common sense principles of good communication that he believes should apply to all corporate governance reporting:

• Brevity, Comprehensibility and Usefulness
• Relevance
• Company-specific
• Comparability

The full article is available via the FRC website here.

A summary of the agenda is set out below:

Agenda papers for the meeting will be made available on the IASB website.

The proposed amendment aims to clarify how a seller-lessee should apply the subsequent measurement requirements in IFRS 16 Leases to the lease liability that arises in a sale and leaseback transaction. The amendment would also add two illustrative examples to IFRS 16.

In its draft comment letter the UK Endorsement Board secretariat:

• Supports the proposals in the ED as they provide guidance on an area not covered by the existing Standard which should reduce diversity of practice leading to consistency and comparability of financial statements.
• Supports the IASB’s view that the information necessary to estimate asset fair values and future lease payments is likely to be readily available, either from the process used to price and approve the sale and leaseback transaction, or from other sources.
• Observes an inconsistency in the definition of a variable lease payment between that used in IFRS16 and that proposed in the exposure draft, which could lead to potential inconsistency in financial reporting.
• Proposes two solutions to align the definition of variable lease payment and considers the consequences of each approach.
• Supports the IASB's decision to require retrospective application.

Comments on the draft comment letter are requested by 1 March 2021. For more information, see the press release on the UKEB's website.

The Discussion paper introduces possible improvements to the information companies report about acquisitions of businesses to help investors assess how successful those acquisitions have been. The Discussion Paper also seeks feedback on how companies should account for goodwill arising from such transactions.

In its final comment letter, the UK Endorsement Board’s secretariat:

• Proposes a mixed model for accounting for goodwill, in which an annual amortisation charge is supported by indicator-based impairment testing.
• Suggests possible methods for establishing the useful life of goodwill in the amortisation calculation.
• Supports moving to an indicator-only impairment model for goodwill only if amortisation is reintroduced.
• Seeks further stakeholder input on anticipated cost savings of moving to an indicator-only impairment test for goodwill.
• Supports the IASB’s proposed simplifications to the impairment test and makes additional recommendations to reduce risks of shielding and management optimism.
• Supports the principle of improved disclosures on acquisitions but recommends the IASB undertake illustrative examples and field-testing.

For more information, see the response letter on the UKEB's website.  A feedback statement summarising the main comments received by the UKEB and how those views were reflected in the final comment letter submitted to the IASB is available on the UKEB website here.

We support the proposals related to the streamlining of filing of financial information. There are clear potential efficiencies to be gained through the transformative use of technology, and we are supportive of the move towards digital corporate reporting in the UK. We note that the proposals in this paper overlap in several instances with broader considerations raised in the Financial Reporting Council’s (FRC’s) recent discussion paper on the Future of Corporate Reporting. There is also overlap with HMRC’s current consultation regarding Making Tax Digital (MTD) for corporation tax in the context of digital filing of financial information. We believe it is essential for BEIS to liaise with both HMRC and the FRC in this regard, especially with regard to proposals for streamlined digital filing and continued use of size thresholds. In particular this represents an opportunity to simplify the existing size regime and to consider whether the information currently filed meets the needs of stakeholders.

However, we have significant concerns around the proposal to shorten filing deadlines to three months for public companies. A three-month deadline for public companies would create considerable practical and logistical challenges given the substantial amount of work required to prepare, have audited and approve a public company annual report. It seems unlikely that a shorter filing deadline would improve the quality of reporting and could in fact result in poorer quality if processes are condensed into a tighter timeframe. We consider that four months would be more acceptable, consistent with the requirements of Chapter 4 of the Financial Conduct Authority (FCA)’s Disclosure Guidance and Transparency Rules (DTR).

We also believe that any shorter filing deadline should apply only to those companies in the public interest, rather than to all public limited companies, and recommend that this be aligned to the outcome of the forthcoming government consultation on the definition of a Public Interest Entity (PIE).

Finally, given both the timing and the short duration of the consultation period, we are concerned that businesses may not have the opportunity to respond and recommend that BEIS seek further feedback before implementing any of the changes proposed.

The full response is contained within the full comment letter.

During the meeting, the IASB will discuss the following:

• Financial in­stru­ments with char­ac­ter­is­tics of equity
• Management commentary
• Agenda consultation
• Disclosure initiative — Subsidiaries that are SMEs
• SME Standard review and update
• Extractive activities

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.