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.

FRC responds to International Sustainability Standards Board's consultation

30 Jun, 2022

The Financial Reporting Council (FRC) has published its comment letters relating to the International Sustainability Standards Board (ISSB) Exposure Drafts (EDs): S1 General Requirements for Disclosure of Sustainability-related Financial Information (IFRS S1) and S2 Climate Related Disclosures (IFRS S2).

In March 2022, the ISSB issued two EDs, IFRS S1 (ED/2022/S1) and IFRS S2 (ED/2022/S2).  The FRC strongly supports the development of high-quality global standards for sustainability reporting and welcomes the opportunity to provide comments on the ISSB's first Exposure Drafts.  The comment letters highlight some overarching comments for consideration in relation to the EDs including areas such as:

  • clarification on the use of non-mandatory guidance, structure of S1 and the architecture of IFRS Sustainability Disclosure Standards, clarity of the standard, connectivity, and basis of preparation (IFRS S1)
  • the current industry-based requirements, consistency between the assumptions used in climate-related reporting and those used elsewhere in the financial statements, connection to IFRS S1 and clarity of the standard (IFRS S2).

Whilst emphasising that there is a clear and urgent need for IFRS Sustainability Disclosure Standards, the FRC highlights that a balanced approach is needed to ensure the standards are published timely without compromising on the quality and due process required to ensure the standards are of high quality, drive high quality reporting and are globally accepted.   

A press release and the comment letters (IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures) are available on the FRC 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 seeks stakeholders’ views on publicly available audit quality indicators to drive audit quality improvements

28 Jun, 2022

The Financial Reporting Council (FRC) has issued a consultation on publishing audit quality indicators (AQIs) for the largest UK audit firms, which would provide users of audited information with greater detail on audit firms’ efforts to deliver high quality audit.

The 11 proposed AQIs would provide stakeholders with a range of comparable indicators on perceived culture within an audit firm, audit quality inspection results, staff workloads, and the level of partners’ involvement in individual audits.

Responses to the consultation are requested by 18 August 2022.

A press release and the consultation document, are available on the FRC website.

Updated IASB and ISSB work plan — Analysis (June 2022)

27 Jun, 2022

Following the IASB's June 2022 meeting, we have analysed the work plan on the IFRS Foundation website to see what changes have resulted from the meeting and other developments since the work plan was last revised in May 2022. Some clarifications now also relate to ISSB projects.

Below is an analysis of all changes made to the work plan since our last analysis on 30 May 2022.

Standard-setting projects

  • Climate-related disclosures — Feedback on the exposure draft will now be discussed in Q4 2022 (previously H2 2022)
  • Disclosure initiative — Subsidiaries without public accountability: Disclosures — The IASB decided to publish a final accounting standard as next project step (no date given)
  • Disclosure initiative — Targeted standards-level review of disclosures — Following the discussion received on the exposure draft, the IASB will decide on the project direction in Q3 2022
  • Dynamic risk management — After deciding on the future direction of the project, the IASB will publish an exposure draft as next project step (no date given)
  • General sustainability-related disclosures — Feedback on the exposure draft will now be discussed in Q4 2022 (previously H2 2022)

Maintenance projects

  • Contractual cash flow characteristics of financial assets — This project has been moved from the standard-setting agenda to the maintenance agenda
  • Lack of exchangeability — The entry of when a decision on the project direction is to be expected has been removed
  • Non-current liabilities with covenants — After discussing the feedback received, the IASB decided to publish a final amendment as next project step in Q4 2022
  • Supplier finance arrangements — Feedback on the exposure draft will now be discussed in July 2022 (previously June 2022)

Research projects

  • Goodwill and impairment — A decision on the project direction is now expected in Q4 2022 (previously H2 2022)
  • Post-implementation review of IFRS 10-12 — The project has been concluded by publishing a feedback statement and has therefore been removed from the work plan

Other projects

  • IFRS Sustainability disclosure taxonomy — Feedback on the staff request for feedback will be now be discussed in Q4 2022 (previously H2 2022)
  • IFRS Taxonomy update — 2022 General improvements and common practice — This project has been renamed from 2021 to 2022

The above is a faithful comparison of the IASB and ISSB work plan at 30 May 2022 and 27 June 2022. For access to the current work plan at any time, please click here.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.