The Commission notes that while EU sustainability standards are necessary to meet the political ambition and urgent timetable of the European Green Deal and necessary to ensure consistency of reporting rules at the heart of the EU's sustainable finance agenda, coordinating the development of EU sustainability reporting standards with existing and emerging global initiatives is also important.

The first report proposes a roadmap for the development of a comprehensive set of EU sustainability reporting standards. The report contains 54 proposals organised into four groups and describes a three-layered target architecture that would contain sector agnostic standards, sector specific standards, and entity specific standards. It also contains an ambitious standard-setting roadmap that would see a first set of draft standards by mid-2022.

The second report proposes reforms to EFRAG's governance structure to establish a non-financial reporting pillar with a robust governance structure and due process, and a sustainable funding structure. The non-financial reporting pillar would basically mirror the financial reporting pillar, and an Administrative Board sitting above the two pillars would join them. The report notes that establishing a non-financial reporting Board must not come at the cost of weakening the financial reporting pillar.

Please click for access to the reports on the EC website:

• Report on preparatory work for possible standards
• Report on possible changes to EFRAG's structure

The feedback received on the first three questions that was discussed by the Trustees in February 2021 already indicated that there is a need for a global set of internationally recognised sustainability reporting standards and for the IFRS Foundation to play a role in the development of these standards.

Also in February 2021, the IOSCO Board issued a statement noting IOSCO's intention to work with the IFRS Foundation in developing a plan to establish a new board for setting sustainability reporting standards that meet the needs of the capital markets.

Based on the further discussion of the feedback to the consultation and encouraged by the IOSCO statement, the Trustees have now concluded on the strategic direction and further steps in their initiative.

The new Sustainability Standards Board (SSB) to be set up would

• focus on information that is material to the decisions of investors, lenders and other creditors;
• initially focus its efforts on climate-related reporting, while also working towards meeting the information needs of investors on other ESG matters;
• build upon the well-established work of the Financial Stability Board’s Task Force on Climate related Financial Disclosures (TCFD), as well as work by the alliance of leading standard-setters in sustainability reporting focused on enterprise value; and
• work with standard setters from key jurisdictions to issue standards that provide a globally consistent and comparable sustainability reporting baseline, while also providing flexibility for coordination on reporting requirements that capture wider sustainability impacts.

The Trustees also announced that they will consider the prototype climate-related financial disclosure standard published in December 2020 as a potential basis for the new board to develop climate-related reporting standards.

As regards further steps, the Trustees note that they

• intend to publish a feedback statement that summarises the responses received to their consultation paper, and how that feedback informed their decisions;
• will publish for public comment the proposed changes to the Foundation’s constitution necessary to formalise establishment of a new board, including its composition; and
• will continue to engage with the IFRS Foundation Monitoring Board regarding the proposed changes.

The Trustees underline that they remain on track to make a final determination about a new board in advance of the November 2021 United Nations COP26 conference.

Please click to access the Trustees' full announcement on the IASB website.

The proposed amendment would extend the scope of the 2020 amendment by increasing the period of eligibility to apply the practical expedient from 30 June 2021 to 30 June 2022.

EFRAG supports the proposals and agrees that there remains a need to provide relief for lessees given the ongoing challenges that lessees face in assessing whether lease modifications have occurred under the circumstances of COVID-19.  EFRAG supports a continued time restriction to ensure the Amendments only apply to COVID-19-related concessions and to limit the effect of reduced comparability due to the Amendments. 

Additionally EFRAG supports the proposed transition requirements, believes the Amendments should be applied on a modified retrospective basis and believes that early adoption should be allowed at the date of the IASB’s issuance of the extension of the amendment.

A press release and the final comment letter are available on the EFRAG website.

The Committee will discuss the following:

• Ad­min­is­tra­tive matters
• Comment letter analysis of IAS 38 Intangible Assets — Configuration or customisation costs in a cloud computing arrangement
• IFRS 16 — Non-refundable VAT on lease payments
• IAS 32 — Accounting for warrants that are initially classified as liabilities
• 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.

The Exposure Draft proposes to extend the May 2020 amendment that provides lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification.

The UKEB supports the IASB’s proposal to extend the eligible date of the May 2020 reliefs to assist lessees to 30 June 2022.

The UK Endorsement Board secretariat plan to issue a draft Endorsement Criteria Assessment for public consultation in the same week that the IASB publish the final amendment which is expected by the end of March 2021.  The UKEB aims to complete adoption procedures by early May making the amendment available for use by UK entities with financial years ending on or after 31 March 2021.

For more information, see the press release and final comment letter on the UKEB's website.

The recommendations called for action from all stakeholders and importantly included a target of 33% representation of women on FTSE 350 Boards and FTSE 350 leadership teams (comprising the executive committee and the direct reports to the executive committee) by the end of 2020.

The key findings of the report include: 

• On average, the FTSE 100, FTSE 250 and FTSE 350 have all reached the target of women holding 33% of board positions by the end of 2020 and this target has been achieved by 220 of the 350 companies involved, rising from just 53 companies in 2015
• 34.3% of FTSE 350 board positions are held by women and the number of women on boards has increased by 50% over the past five years
• There are no longer any all-male boards in the FTSE 350
• However, gender diversity in leadership can still improve as women still only hold 14% of executive directorships in the FTSE 100 and less than 30% of senior leadership positions

A successor review has not yet been established and so Sir Philip Hampton outlines four recommendations in his introduction, two for companies and two for Government:

• Companies should have a woman in at least one of the four roles of Chair, CEO, SID and CFO, and investors should support this best practice
• Companies should publish a gender pay gap for their board and their executive committee, to “shine a light on the pronounced structural subordination of women in most boards and executive committees”
• BEIS and the Government Equalities Office(GEO) should co-ordinate as much as possible the initiatives Government backs on diversity in business
• BEIS and GEO should annually review with the Investor Association and other investor groups any proposed voting sanctions applied to listed companies which fail to meet the gender diversity targets they have set

The final report of the Hampton-Alexander Review can be found here. 

The full agenda for the meeting is sum­marised below:

Agenda papers for this meeting are available on the IASB's website.

The paper notes that currently there is no shortage of opinions when it comes to how, and even if, to proceed with the standardisation of ESG disclosures and reporting. However, the IVSC notes, regardless of the path taken by standard setters, ESG factors represent fundamental considerations to inform valuation analysis. Therefore, steps to begin incorporating ESG considerations into valuation practice are critical for the relevance, and therefore the sustainability, of the profession.

Please click to access the paper on the IVSC website.

The FRC strongly encourages companies to aim for high quality reporting of good governance practice, rather than an attempt to declare full compliance with the Code when that may not in fact be the case.

In summary, the FRC explains that when a company departs from a Provision of the Code, the annual report should clearly demonstrate both:

1. The action taken by the company: What Provision it has departed from and what alternative approach it has chosen; and
2. The outcome: How is that alternative approach more efficient and appropriate than that prescribed by the Code, and how is it helping the company to achieve good governance?

The publication includes examples of good practice and descriptions of ineffective practice. It is split into three main sections.

Section 1: Companies should offer clarity about the Provisions of the Code that they have departed from by making it easy for a reader to find this in their annual reports

1. Companies should state in the Compliance Statement required by the Listing Rules whether the company has:
   1. fully complied with all elements of the Provisions of the Code; or
   2. has departed from any of the Provisions of the Code citing any Provisions that they have not complied with and state where in the report the explanation can be found
2. Companies should provide the explanation for non-compliance in one of the following ways:
   1. as part of the compliance statement (particularly when the company has only departed from one or two Provisions); or
   2. signpost to another page/section of the annual report, where the reader can easily find the explanation.

Section 2: Companies should report any departure from any Provision of the Code

The FRC’s research indicates that some companies have not acknowledged departure from one or more Provisions of the Code. The FRC calls out certain Provisions where companies are not reporting non-compliances, including:

• Provision 19 – a non-compliance should be disclosed where the Chair has been in place for more than 9 years.
• Provision 38 – a non-compliance should be disclosed unless all executive director pension contributions are in line with those of the workforce.

In line with the Listing Rules and the Code’s requirements, the FRC explains that it expects companies to clearly acknowledge any departures from the Code and provide full and comprehensive explanations.

Section 3: Clear and meaningful explanations for departures from the Code

The FRC explains that a full and meaningful explanation for non-compliance should show that an alternative arrangement is more appropriate and beneficial in upholding high standards of governance.

It proposes the following structure for providing clear and meaningful explanations that demonstrate that departures from Provisions of the Code are justified:

• Set the context and background
• Give a convincing rationale for the approach being taken
• Consider any risks and describe any mitigating actions
• Set out when the company intends to comply (timescales)
• Explanations should be understandable and persuasive

The FRC also notes that it is a good addition to an explanation to state that shareholders are supportive of the departure, having consulted appropriately. However, this statement should not replace any of the elements of a good explanation set out above.

A press release and the guidance material are available on the FRC website.

Mr Lanfermann is the new president of the Accounting Standards Committee of Germany (ASCG), and took over from Andreas Barckow, who will succeed Hans Hoogervorst as IASB Chair on 1 July 2021.

The IFRS Advisory Council member section on the IASB website has been updated accordingly.

For more information, please see the press release on the ASCG website.