ESRS outreach event focused on SMEs

30 Jun 2022

On 8 July 2022, the European Financial Reporting Advisory Group (EFRAG) will host a joint outreach event in Brussels to discuss the draft European Sustainability Reporting Standards (ESRS) published in April. The event will have a special focus on small and medium-sized entities (SMEs).

Please click for more information and registration in the press release on the EFRAG website.

UN issues statement on ISSB exposure drafts

29 Jun 2022

Several United Nations (UN) organisations have responded with a joint statement to the proposed standards of the International Sustainability Standards Board (ISSB).

The statement notes that the standards being developed by the ISSB provide a unique opportunity. They can support global convergence of sustainability-related disclosure, create a common reporting baseline, and help mainstream sustainability-related issues into regular business strategy and management.

However, they also warn that a narrow interpretation of enterprise value could mean that ISSB standards could leave out important sustainability risks and opportunities and that the ISSB standards could result in selective disclosure by reporting companies. 

The statement also includes proposed additional elements to consider for improving the standards:

  • Including clear guidance on what constitutes appropriate sustainability analysis and management;
  • encouraging entities to set sustainability targets;
  • requiring geographically contextualized disclosures; and 
  • adopting an explicit long-term time horizon. 

Please click to access the full statement on the UN website.

IFRS Foundation and Value Reporting Foundation consolidation delayed by one month

29 Jun 2022

The consolidation of the Value Reporting Foundation (VRF) into the IFRS Foundation just approved last week has been delayed by one month. The consolidation will now become effective on 1 August 2022.

The press release on the IFRS Foundation website notes that the extra month is needed to finalise the remaining procedures necessary to complete the legal consolidation.

Memorandum of understanding signed to establish ISSB presence in Montreal

28 Jun 2022

During the meeting of the Trustees of the IFRS Foundation currently taking place in Montreal, Canada, the Trustees have signed a memorandum of understanding to obtain the financial support of the Government of Canada and the Government of Quebec for the International Sustainability Standards Board (ISSB).

This support will help the IFRS Foundation to fully establish the ISSB within the Canadian sustainability ecosystem. In exchange, the IFRS Foundation has committed to scheduling initial ISSB meetings to be held in Montreal in October and December 2022 and hosting the inaugural ISSB Symposium in Montreal, with the dates to be confirmed.

Please click for additional information in the press release on the IFRS Foundation website.

Speech of the Chair of the Board of IOSCO at the IFRS Foundation Conference

28 Jun 2022

On 23 June 2022, Mr Ashley Alder, Chief Executive Officer of the Securities and Futures Commission (SFC) of Hong Kong and Chair of the Board of the International Organization of Securities Commissions (IOSCO) outlined in a speech at the IFRS Foundation Conference the path forward for the endorsement of future standards of the International Sustainability Standards Board (ISSB) by IOSCO. A comprehensive summary of the speech is now available on the SFC website.

In his speech, Mr Alder noted that by endorsing the standards, IOSCO would send a strong signal to its large membership of market regulators that they should examine how they might adopt the standards in their own jurisdictions.

While the critical step in evaluating the ISSB standards and finally endorsing them would be to consider the degree to which and how they can be adopted in practice, there were also more detailed points to be considered by IOSCO as well:

  • the ISSB standards should be compatible and connected with existing accounting and financial reporting standards — serving as a “bridge”;
  • they should act as a common base for jurisdiction-level requirements, making them interoperable with one another using a building blocks approach;
  • they should provide the degree of consistency necessary to enable markets to reliably price sustainability-related risks and opportunities and support capital allocation; and
  • they should form the basis for the development of a credible assurance framework.

Mr Alder stressed that he firmly believed the ISSB was the most credible mechanism for achieving the above and creating a baseline for climate disclosure standards.

Mr Alder also commented on the relationship between sustainability disclosures and traditional financial statements and noted this had become increasingly important. He suggested that the ISSB should work closely with the International Accounting Standards Board (IASB) to consider how preparers could be encouraged to develop the factors relevant to calculating enterprise value from a quantitative perspective, and to consider how that calculation might connect to traditional financial statements. The overall aspiration was to bridge the divide between conventional financial disclosures and ISSB sustainability disclosures centred on the concept of enterprise value, so that in combination they paint the full picture.

Please click for the full summary on the SFC website.

New SMEIG members appointed

28 Jun 2022

The IFRS Foundation have announced that four new members from Africa and Asia/Oceania have been appointed to the SME Implementation Group (SMEIG).

The new members were appointed for a three-year term beginning 1 July 2022. SMEIG members can serve up to three terms.

Please click for the IASB press release announcing the appointments.

G7 welcomes ISSB’s progress on global baseline of sustainability disclosures

28 Jun 2022

Following the G7 Leaders' Summit 2022, a joint declaration has been published that stresses the need for a transition of the whole economy towards sustainability, net-zero and nature-positive outcomes to achieve a sustainable planet.

The declaration mentions the work and progress of the International Sustainability Standards Board (ISSB) and highlights the need of sustainability disclosures for mobilising private sector finance to support the transition to a sustainable economy. It notes:

We welcome the inauguration of the International Sustainability Standards Board’s (ISSB) and its progress of work on the global baseline of sustainability reporting standards. We support mandatory climate-related financial disclosures and look forward to the recommendations of the Taskforce on Nature-related Financial Disclosures.

Please click to access the full statement on the G7 website.

FRC publishes professional judgement guidance for auditors

24 Jun 2022

The Financial Reporting Council (FRC) has published professional judgement guidance for auditors to improve how they exercise professional judgement.

The new guidance includes a framework for making professional judgements followed by a series of illustrative examples showing how professional judgement might be applied in practice.  The FRC anticipates that the guidance will improve audit quality by enhancing the consistency and quality of professional judgement exercised by auditors.
The guidance will be of particular use for auditors and central technical teams but will also have wider interest for those interested in audit quality, such as audit committee members and investors.  It is non-authoritative and is intended to be persuasive rather than prescriptive, encapsulating good practice.  However, practitioners who chose not to use or consider this guidance will need to be prepared to explain how they have complied with the relevant engagement standards.

The full report, framework, illustrative examples and expectations paper are available on the FRC website.

IASB Chair discusses the IASB work plan

24 Jun 2022

At the IFRS Foundation Conference currently held in London, IASB Chair Andreas Barckow discussed the IASB’s decisions on its work plan as a result of the outcomes of the IASB's third agenda consultation and the rationale for these decisions.

Mr Barckow grouped his arguments into five major messages the IASB received from its stakeholders:

  • Completing the IASB's current work plan. The IASB will prioritise completing projects currently on the agenda before beginning new ones. It expects to continue the deliberations on its current projects throughout 2022 and the majority (if not all) of 2023. Mr Barckow described the projects on primary financial statements, goodwill and impairment, and rate-regulated activities as being "in an intense stage of decision-making".
  • Balancing the IASB's activities. Even though standard-setting is the core activity of the IASB, it also engages in supporting the consistent application of IFRSs, assisting the digital consumption of financial reports, and actively involving in stakeholder engagement around the world. The feedback received indicates that the balance of the IASB’s activities is about right, however, there were calls for increasing the efforts on digital reporting and on understandability and accessibility of the standards. Therefore, the IASB will provide for a modest increase in these two areas.
  • Two new research pipeline projects. The IASB considered the suggestions made by stakeholders and weighed them against the criteria set for adding new projects to its agenda and the likely time needed to complete its current projects. The IASB has decided to add a comprehensive review of its standard on intangible assets, IAS 38, and a project devoted to the statement of cash flows and related matters.
  • Climate-related risks as a maintenance pipeline project. As the IASB has already published educational guidance on how to consider climate-related risks in financial statements, this will not be a full-scale project in its own right. The IASB wants to investigate whether there are any shortcomings in today’s reporting in the financial statements by entities and, if so, whether these shortcomings are due to a deficiency in its literature. Interaction with the ISSB has also to be considered in this case. 
  • A limited reserve list of two further projects. The IASB has decided to create a reserve list of projects and add operating segments and pollutant pricing mechanisms to it. They will only be added to the work plan if additional capacity becomes available unexpectedly. If they are not activated, they will be included for consideration in the next agenda consultation.

Mr Barckow concluded his remarks with short a short discussion of the connectivity between the IASB and the ISSB and where projects on the agenda of the two Boards may overlap. Please click to access the full transcript of his speech on the IFRS Foundation website.

IFRS Foundation announces two additional ISSB members

24 Jun 2022

The Trustees of the IFRS Foundation have announced the appointment of Jeffrey Hales and Michael Jantzi as ISSB Board members. Their appointments mean that the ISSB is now quorate.

Mr Hales, who has been appointed to a part-time role, has served as Chair of the SASB Standards Board since 2018 and is also a professor of accounting at the University of Texas in Austin, US. He has previously served as an academic research fellow at the Financial Accounting Standards Board (FASB) and as a member of its Financial Accounting Standards Advisory Council. His first term expires on 30 June 2027.

Mr Jantzi joins the ISSB from Morningstar, where he currently serves as Managing Director of ESG Strategy. He is the founder and former CEO of Sustainalytics, an ESG research and ratings firm that was subsequently acquired by Morningstar in 2020. He currently serves on the Board of Directors of the Value Reporting Foundation (VRF) and of the Principles for Responsible Investment. His first term expires on 30 September 2025.

The press release on the IFRS Foundation website notes that in the next several weeks, the Trustees will complete the ISSB’s full membership with further appointments in July and the goal to reach the full complement of 14 members during the third quarter of 2022.

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