The report highlights that the most significant quality issues identified by the FRC over a number of years involve the inconsistent application of professional scepticism and challenge, resulting in the poor application of professional judgement.

The report sets out the key attributes of a high-quality environment that enable professional scepticism and challenge in an audit and provides examples of good practice from the FRC’s ongoing supervision work.

A press release and the full report are available on the FRC website.

The ITCG will discuss the following topics:

• Digital representation of specific proposals related to the primary financial statements project:
  • subtotals/categories in the statement of profit or loss
  • disclosure of operating expenses by nature in the notes
• Summary of feedback on the staff draft of the IFRS Sustainability Disclosures Taxonomy

The agenda papers for this meeting are available on the IASB website.

The following topics were discussed:

General Sustainability-related Disclosures

The ISSB decided to clarify that the requirement to revise comparative information to reflect updated estimates applies to current period estimates that were disclosed in prior periods (historic estimates), and does not apply to forward-looking estimates. The ISSB also confirmed the proposed requirement for an entity to report its sustainability-related financial disclosures at the same time as its related financial statements but intends to introduce transitional relief for a limited period of time to permit an entity to report sustainability-related financial disclosures potentially up to half a year after the publication of its annual financial statements. The ISSB has not decided how long the transitional relief should last.

Climate-related Disclosures

The ISSB considered the proposed requirements for an entity to disclose information on strategy and decision-making (including transition planning) and climate-related targets. The ISSB confirmed that an entity would be required to disclose Information about its strategy and decision-making and information about its climate-related targets. The ISSB also decided to introduce additional disclosure requirements about the assumptions made, and dependencies identified, by the entity in developing its transition plan and the implications for the entity’s transition plan if the assumptions are not met. Furthermore, they also decided to include requirements to disclose information about the scope of the target to enable users to understand whether the target applies to the entity in its entirety or to only a part of the entity (for example, specific business units or specific geographic regions).

General Sustainability-related Disclosures and Climate-related Disclosures

The proposed requirements in paragraph 22 of Exposure Draft IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information ([draft] S1) and the equivalent requirements in paragraph 14 of Exposure Draft IFRS S2 Climate-Related Disclosures ([draft] S2) would require entities to disclose the effects of its sustainability-related risks and opportunities on its financial position, financial performance and cash flows for the reporting period and the anticipated effects. The staff presented a summary of the feedback received and asked the ISSB to provide feedback on some illustrative examples they have prepared. 

ISSB Taxonomy

In May 2022, the IFRS Foundation published a staff draft of a taxonomy for digital reporting representing the disclosure proposals in the two ISSB exposure drafts. The staff draft was accompanied by a Request for Feedback soliciting public feedback on staff recommendations on fundamental matters that need to be considered early to enable the ISSB to develop a Taxonomy. The purpose of this meeting was to provide a summary of the feedback obtained during the feedback period.

Please click to access the detailed notes taken by Deloitte observers for the entire meeting.

The IASB did not discuss whether either the impairment-only model or the amortisation model are conceptually superior but rather whether there was compelling evidence that would justify a switch from one model to the other. IASB members expressed different views as to which model they would have preferred, however, ten out of eleven members agreed that there was not enough evidence to change the IASB's original decision to work with an impairment only model. However, IASB members also noted that the decision might be revisited in later years.

After the meeting, the IASB issued a press release on the vote.

The staff have developed an addendum to the paper developed for the 22 November meeting (summarised here). It will discussed today at 13:30 hours.

The work programme will guide the standard setting activities of the Global Reporting Initiative (GRI) over the next three years.   

In addition to comments on the activities and priorities set out in the draft documents, the GSSB also invites stakeholders to consider four questions:

1. Should the GSSB change the order of prioritisation of the existing GRI Topic Standards for review during the period covered by the work program?
2. Which topics should the GSSB prioritise for the development of new GRI Topic Standards during the period covered by the work program?
3. Are there any sectors currently listed in priority groups 2, 3, and 4 in the list of prioritised sectors that should be prioritised for development during the outlined period?
4. What activities or materials should the GSSB prioritise with regard to cooperation with other standard-setting bodies and international organizations?

Comments are requested by 17 February 2023.

A press release with further links to the consultation are available on the GRI website.

The number of drafts has been brought down to twelve, two cross-cutting draft standards, five topical draft standards on environment, four topical draft standards on social aspects, and one topical draft standard on governance:

• Cross-cutting:
  • Draft ESRS 1 General requirements
  • Draft ESRS 2 General disclosures
• Environmental:
  • Draft ESRS E1 Climate change
  • Draft ESRS E2 Pollution
  • Draft ESRS E3 Water and marine resources
  • Draft ESRS E4 Biodiversity and ecosystems
  • Draft ESRS E5 Resource use and circular economy
• Social:
  • Draft ESRS S1 Own workforce
  • Draft ESRS S2 Workers in the value chain
  • Draft ESRS S3 Affected communities
  • Draft ESRS S4 Consumers end users
• Governance:
  • Draft ESRS G1 Business conduct

In developing the final drafts, the EFRAG Sustainability Reporting Board (SRB) acknowledged that comment letters had claimed that EFRAG was asking too much and that the proposed disclosure requirements went far too deep. As a consequence the final drafts require considerably less information/data points to be disclosed. The SRB also considered whether re-exposure of the final drafts was required but came to the conclusion that the need to re-expose would only apply if there were any fundamental changes that do not address comments received in the public consultation.

As a next step, the EC now has to approve the ESRS drafts or revise them itself before they are to be applied as a delegated act by companies within the scope of the Corporate Sustainability Reporting Directive (CSRD).  

Please click for the press release and access to the draft ESRS on the EFRAG website.  Our news item on the adoption of the CSRD by the European Union is here.

The two-hour workshop was structured into three sections:

1. What is digital financial reporting?
2. IFRS Accounting Taxonomy, and
3. Digital reporting and standard-setting.

The IASB was represented by IASB member Ann Tarca.

A recording of the workshop is now available on YouTube.

Highlights of the podcast include discussions on:

• scenario analysis;
• reference materials for companies;
• interoperability;
• the digital taxonomy;
• climate transition planning; and
• disclosure timing.

The podcast can be accessed through the press release on the IFRS Foundation’s website.

Please click to view the detailed notes taken by Deloitte observers for the supplementary ISSB meeting held on 1-3 November. Notes for the ISSB meeting held on 15-16 November are available here.

The new guidance, International Non-Profit Accounting Guidance (INPAG), seeks to improve clarity and consistency of Non-Profit Organisation (NPO) financial reports, resulting in greater credibility and trust in the sector globally.

The exposure draft is the first of three parts, each followed by a 4-month consultation period. ED1 addresses four main topics that are important for the framing and context of INPAG:

1. A description of Non-Profit Organisations
2. A framework for INPAG
3. Financial statements presentation
4. Narrative reporting

INPAG will have 36 sections. ED1 contains the preface, sections 1 to 10, and section 35. The remaining sections will be covered in ED2 and ED3 in 2023.

Please click for the press release and the ED and supporting material on the IFR4NPO website.