2022

New and revised pronouncements as at 31 December

14 Dec, 2022

Our popular summary of new and revised financial reporting requirements, updated for financial reporting periods ending on 31 December 2022. This listing can be used to perform a quick check that new financial reporting requirements such as new and revised accounting standards and interpretations, and amendments to standards and interpretations, have been fully considered in the reporting close process.

The information below reflects developments to 14 December 2022 and will be updated through to 31 March 2023 to reflect new and revised financial reporting requirements that need to be considered for financial reporting periods ending on 31 December 2022. For accounts approved after March 2023, please also refer to subsequent versions of this document for any new and revised IFRS Accounting Standards that have additionally been issued that might require disclosure in the accounts under IAS 8:30.

The information below is organised as follows:

Summary

Financial reporting considerations related to the Russia-Ukraine War
Below is our usual analysis of new and amended standards, however, we are also aware that many entities will have been impacted by Russia's invasion into Ukraine. Please see our Need to know — Financial reporting considerations related to the Russia-Ukraine War highlighting some of the key issues to be considered by the entities in preparing their financial statements.

The table below provides a summary of the pronouncements which will be mandatorily applied by UK entities for the first time at 31 December 2022, for various quarterly reporting periods. Where a UK entity chooses to prepare financial statements in accordance with IFRS Accounting Standards as issued by the IASB, as well as in compliance with International Accounting Standards as adopted in conformity with the requirements of the Companies Act 2006, that entity should comply with the earlier IASB effective date for those items.

Endorsement of IFRS Accounting Standards by the EU has not applied in the UK since the end of the transition period following the UK’s withdrawal from the EU (31 December 2020). The UK Endorsement Board (UKEB) is now responsible for endorsing IFRS Accounting Standards for use in the UK which all UK companies that are required or choose to apply IFRS Accounting Standards must apply. However, because UK endorsed IFRS Accounting Standards have not been granted equivalence to EU endorsed IFRS Accounting Standards by the EU, UK companies that are listed in the EEA may need to state compliance with both EU-endorsed and UK-endorsed IFRS Accounting Standards. Alternatively, they may state compliance with both UK-endorsed IFRS Accounting Standards and IFRS Accounting Standards as issued by the IASB, if this is permitted by the relevant listing authority.

Further information on IFRS Accounting Standards in the UK is available here.

The table below provides a summary of these pronouncements, and which reporting periods they apply to:

Pronouncement IASB Effective date* EU/UK effective date* UK Mandatory at 31 December 2022?
1st qtrs.** 2nd qtrs.*** 3rd qtrs.**** Full yrs*****
Applying IFRS 9 'Financial Instruments' with IFRS 4 'Insurance Contracts' (Amendments to IFRS 4)
1 January 2018 1 January 2018 Optional ~ Optional ~ Optional ~ Optional ~
Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16) 1 April 2021 1 April 2021 Already applied in prior year (October 21 Already applied in prior year (July 21 Already applied in prior year (April 21 Yes
Property, Plant and Equipment — Proceeds before Intended Use (Amendments to IAS 16) 1 January 2022 1 January 2022 Yes Yes Yes Yes
Annual Improvements 2018-2020 Cycle 1 January 2022 1 January 2022 Yes Yes  Yes Yes
Reference to the Conceptual Framework (Amendments to IFRS 3) 1 January 2022 1 January 2022 Yes Yes Yes Yes
Onerous Contracts — Cost of Fulfilling a Contract (Amendments to IAS 37) 1 January 2022 1 January 2022 Yes Yes Yes Yes

* Generally annual reporting periods beginning on or after the date indicated, may only apply to first-time adopters in some limited cases (see below for full details).

** 1st quarter ending on 31 December 2022 (accounting period began on 1 October 2022).

*** 2nd quarter ending 31 December 2022 (accounting period began 1 July 2022).

**** 3rd quarter ending 31 December 2022 (accounting period began 1 April 2022).

***** 4th quarter ending 31 December 2022 (accounting period began 1 January 2022).

~ The application of both approaches (overlay approach/ deferral approach) is optional and an entity is permitted to stop applying them before the new insurance contracts standard is applied.

More information about these pronouncements, and all new and revised pronouncements, is set out below.

Financial statement considerations in adopting new and revised pronouncements

Where new and revised pronouncements are applied for the first time, there can be consequential impacts on annual financial statements, including:

  • Updates to accounting policies. The terminology and substance of disclosed accounting policies may need to be updated to reflect new recognition, measurement and other requirements, e.g IAS 19 Employee Benefits may impact the measurement of certain employee benefits.
  • Impact of transitional provisions. IAS 8 Accounting Policies, Changes in Estimates and Errors contains a general requirement that changes in accounting policies are retrospectively applied, but this does not apply to the extent an individual pronouncement has specific transitional provisions.
  • Disclosures about changes in accounting policies. Where an entity changes its accounting policy as a result of the initial application of an IFRS Accounting Standard and it has an effect on the current period or any prior period, IAS 8 requires the disclosure of a number of matters, e.g. the title of the IFRS Accounting Standard, the nature of the change in accounting policy, a description of the transitional provisions, and the amount of the adjustment for each financial statement line item affected
  • Third statement of financial position. IAS 1 Presentation of Financial Statements requires the presentation of a third statement of financial position as at the beginning of the preceding period in addition to the minimum comparative financial statements in a number of situations, including if an entity applies an accounting policy retrospectively and the retrospective application has a material effect on the information in the statement of financial position at the beginning of the preceding period
  • Earnings per share (EPS). Where applicable to the entity, IAS 33 Earnings Per Share requires basic and diluted EPS to be adjusted for the impacts of adjustments result from changes in accounting policies accounted for retrospectively and IAS 8 requires the disclosure of the amount of any such adjustments.

Whilst disclosures associated with changes in accounting policies resulting from the initial application of new and revised pronouncements are less in interim financial reports under IAS 34 Interim Financial Reporting, some disclosures are required, e.g. description of the nature and effect of any change in accounting policies and methods of computation.

 

New or revised standards

The information below can be used to assist with the disclosure requirements under paragraph 30 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, which requires entities to disclose any new IFRS Accounting Standards that are in issue but not yet effective and which are likely to impact the entity

New or revised pronouncement Effective date

UK Application at 31 December 2022 to:

1st qtrs 2nd qtrs 3rd qtrs Full yrs

IFRS 17 Insurance Contracts

IFRS 17 requires insurance liabilities to be measured at a current fulfillment value and provides a more uniform measurement and presentation approach for all insurance contracts. These requirements are designed to achieve the goal of a consistent, principle-based accounting for insurance contracts. IFRS 17 supersedes IFRS 4 Insurance Contracts as of 1 January 2021.

Issued: 18 May 2017 (Summary of IFRS 17, Article, Newsletter).

Applicable to annual reporting periods beginning on or after 1 January 2023. The original effective date of IFRS 17 of 1 January 2021 was amended by Amendments to IFRS 17 issued by the IASB in June 2020.

Endorsed for use in the EU, albeit with an optional exemption from applying the annual cohort requirement.  Also endorsed for use in the UK.

Optional

Optional

Optional

Optional

Amendments

New or revised pronouncement When effective UK Application at 31 December 2022 to:
1st qtrs 2nd qtrs 3rd qtrs Full yrs

Editorial Corrections (various)

The IASB periodically issues Editorial Corrections and changes to IFRSs and other pronouncements. Since the beginning of calendar 2012, such corrections have been made in February 2012, July 2012, March 2013, September 2013, November 2013 and March 2014, September 2014, December 2014, March 2015, April 2015, September 2015, December 2015, March 2016, May 2016, September 2016, December 2016, September 2017, November 2017, December 2018, March 2019, May 2019, December 2019, July 2020, September 2020, October 2020, November 2020, June 2021, October 2021, December 2021, February 2022, July 2022 and September 2022.

Note: For details of these editorial corrections, see our IASB editorial corrections page.

As minor editorial corrections, these changes are effectively immediately applicable under IFRS See comment in previous column
Applying IFRS 9 'Financial Instruments' with IFRS 4 'Insurance Contracts' (Amendments to IFRS 4)
Amends IFRS 4 Insurance Contracts provide two options for entities that issue insurance contracts within the scope of IFRS 4:
  • an option that permits entities to reclassify, from profit or loss to other comprehensive income, some of the income or expenses arising from designated financial assets; this is the so-called overlay approach;
  • an optional temporary exemption from applying IFRS 9 for entities whose predominant activity is issuing contracts within the scope of IFRS 4; this is the so-called deferral approach.
The application of both approaches is optional and an entity is permitted to stop applying them before the new insurance contracts standard is applied.
Issued: 12 September 2016 (article, newsletter)

Overlay approach to be applied when IFRS 9 is first applied. Deferral approach effective for annual periods beginning on or after 1 January 2018 and only available for five years after that.

In June 2020 the IASB issued Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to IFRS 4) which changes the fixed expiry date for the temporary exemption (the deferral approach) in IFRS 4 Insurance Contracts from applying IFRS 9 Financial Instruments, so that entities would be required to apply IFRS 9 for annual periods beginning on or after 1 January 2023.

 

Optional

Optional

Optional

Optional

Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16)

Extends, by one year, the May 2020 amendment that provides lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification

The Changes in Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16) amend IFRS 16 to

  • permit a lessee to apply the practical expedient regarding COVID-19-related rent concessions to rent concessions for which any reduction in lease payments affects only payments originally due on or before 30 June 2022 (rather than only payments originally due on or before 30 June 2021);
  • require a lessee applying the amendment to do so for annual reporting periods beginning on or after 1 April 2021;
  • require a lessee applying the amendment to do so retrospectively, recognising the cumulative effect of initially applying the amendment as an adjustment to the opening balance of retained earnings (or other component of equity, as appropriate) at the beginning of the annual reporting period in which the lessee first applies the amendment; and
  • specify that, in the reporting period in which a lessee first applies the amendment, a lessee is not required to disclose the information required by paragraph 28(f) of IAS 8.

Issued: 31 March 2021 (article)

The amendment is effective for annual reporting periods beginning on or after 1 April 2021 (earlier application permitted, including in financial statements not yet authorised for issue at the date the amendment is issued).

 

Already applied in prior year (October 2021)

Already applied in prior year (July 2021).

Already applied in prior year (April 2021).

Mandatory - Endorsed by both the UK and EU.

Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)

The amendments aim to promote consistency in applying the requirements by helping companies determine whether, in the statement of financial position, debt and other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled within one year) or non-current

Issued: 23 January 2020 (article)

Annual reporting periods beginning on or after 1 January 2023 (see 'Classification of Liabilities as Current or Non-current — Deferral of Effective Date (Amendment to IAS 1)' below). Original effective date 1 January 2022.

Not yet endorsed for use in the EU or the UK.

 

 

 

 

Property, Plant and Equipment — Proceeds before Intended Use (Amendments to IAS 16)

The amendments amend IAS 16 to prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognises the proceeds from selling such items, and the cost of producing those items, in profit or loss.

Issued: 14 May 2020 (article, newsletter)

Annual reporting periods beginning on or after 1 January 2022

Mandatory

Mandatory

Mandatory

Mandatory

Annual Improvements 2018-2020 Cycle

Makes amendments to the following standards:

  • IFRS 1 First-time Adoption of International Financial Reporting Standards - Subsidiary as a first-time adopter. The amendment permits a subsidiary that applies paragraph D16(a) of IFRS 1 to measure cumulative translation differences using the amounts reported by its parent, based on the parent’s date of transition to IFRSs.
  • IFRS 9 Financial Instruments - Fees in the ‘10 per cent’ test for derecognition of financial liabilities. The amendment clarifies which fees an entity includes when it applies the ‘10 per cent’ test in paragraph B3.3.6 of IFRS 9 in assessing whether to derecognise a financial liability. An entity includes only fees paid or received between the entity (the borrower) and the lender, including fees paid or received by either the entity or the lender on the other’s behalf.
  • IFRS 16 Leases - Lease incentives. The amendment to Illustrative Example 13 accompanying IFRS 16 removes from the example the illustration of the reimbursement of leasehold improvements by the lessor in order to resolve any potential confusion regarding the treatment of lease incentives that might arise because of how lease incentives are illustrated in that example.
  • IAS 41 Agriculture - Taxation in fair value measurements. The amendment removes the requirement in paragraph 22 of IAS 41 for entities to exclude taxation cash flows when measuring the fair value of a biological asset using a present value technique. This will ensure consistency with the requirements in IFRS 13.

Issued: 14 May 2020 (article, newsletter)

The amendments to IFRS 1, IFRS 9, and IAS 41 are all effective for annual periods beginning on or after 1 January 2022. Early application is permitted. The amendment to IFRS 16 only regards an illustrative example, so no effective date is stated.

 

 

Mandatory

Mandatory

Mandatory

Mandatory

Reference to the Conceptual Framework (Amendments to IFRS 3)

The changes:

  • update IFRS 3 so that it refers to the 2018 Conceptual Framework instead of the 1989 Framework;
  • add to IFRS 3 a requirement that, for transactions and other events within the scope of IAS 37 or IFRIC 21, an acquirer applies IAS 37 or IFRIC 21 (instead of the Conceptual Framework) to identify the liabilities it has assumed in a business combination; and
  • add to IFRS 3 an explicit statement that an acquirer does not recognise contingent assets acquired in a business combination.

Issued: 14 May 2020 (article, newsletter)

The amendments are effective for annual periods beginning on or after 1 January 2022. Early application is permitted if an entity also applies all other updated references (published together with the updated Conceptual Framework) at the same time or earlier

 

 

Mandatory

Mandatory

Mandatory

Mandatory

Onerous Contracts — Cost of Fulfilling a Contract (Amendments to IAS 37)

The changes specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (examples would be direct labour, materials) or an allocation of other costs that relate directly to fulfilling contracts (an example would be the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract).

Issued: 14 MAy 2020 (article, newsletter)

Annual reporting periods beginning on or after 1 January 2022. 

 

Mandatory

Mandatory

Mandatory

Mandatory

Amendments to IFRS 17

Amends IFRS 17 to address concerns and implementation challenges that were identified after IFRS 17 Insurance Contracts was published in 2017.

The main changes are:

  • Deferral of the date of initial application of IFRS 17 by two years to annual periods beginning on or after 1 January 2023
  • Additional scope exclusion for credit card contracts and similar contracts that provide insurance coverage as well as optional scope exclusion for loan contracts that transfer significant insurance risk.
  • Recognition of insurance acquisition cash flows relating to expected contract renewals, including transition provisions and guidance for insurance acquisition cash flows recognised in a business acquired in a business combination.
  • Clarification of the application of IFRS 17 in interim financial statements allowing an accounting policy choice at a reporting entity level.
  • Clarification of the application of contractual service margin (CSM) attributable to investment-return service and investment-related service and changes to the corresponding disclosure requirements.
  • Extension of the risk mitigation option to include reinsurance contracts held and non-financial derivatives.
  • Amendments to require an entity that at initial recognition recognises losses on onerous insurance contracts issued to also recognise a gain on reinsurance contracts held.
  • Simplified presentation of insurance contracts in the statement of financial position so that entities would present insurance contract assets and liabilities in the statement of financial position determined using portfolios of insurance contracts rather than groups of insurance contracts.
  • Additional transition relief for business combinations and additional transition relief for the date of application of the risk mitigation option and the use of the fair value transition approach.
  • Several small amendments regarding minor application issues.

Issued: 25 June 2020 (article)

 

The amendment is effective for annual reporting periods beginning on or after 1 January 2023. Earlier application is permitted.

 

Optional

Optional

Optional

Optional

Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to IFRS 4)

The amendment changes the fixed expiry date for the temporary exemption in IFRS 4 Insurance Contracts from applying IFRS 9 Financial Instruments, so that entities would be required to apply IFRS 9 for annual periods beginning on or after 1 January 2023.

Issued: 25 June 2020 (article)

In June 2020 the IASB issued Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to IFRS 4) which changes the fixed expiry date for the temporary exemption (the deferral approach) in IFRS 4 Insurance Contracts from applying IFRS 9 Financial Instruments, so that entities would be required to apply IFRS 9 for annual periods beginning on or after 1 January 2023.

Optional

Optional

Optional

Optional

'Classification of Liabilities as Current or Non-current — Deferral of Effective Date (Amendment to IAS 1)'

The amendment defers the effective date of the January 2020 amendments (see above) by one year.

Issued: 15 July 2020 (article)

 

The changes in Classification of Liabilities as Current or Non-current — Deferral of Effective Date defer the effective date of Classification of Liabilities as Current or Non-current (Amendments to IAS 1) to annual reporting periods beginning on or after 1 January 2023. Earlier application of the January 2020 amendments continue to be permitted.

Not yet endorsed for use in the EU or the UK.

Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)

The amendments require that an entity discloses its material accounting policies, instead of its significant accounting policies. Further amendments explain how an entity can identify a material accounting policy. Examples of when an accounting policy is likely to be material are added. To support the amendment, the Board has also developed guidance and examples to explain and demonstrate the application of the ‘four-step materiality process’ described in IFRS Practice Statement 2.

Issued: 12 February 2021 (article)

Annual reporting periods beginning on or after 1 January 2023.  Early application is permitted.  

 

 

 

 

Optional

Optional

Optional

Optional

Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)

The amendments clarify how companies account for deferred tax on transactions such as leases and decommissioning obligations.

The amendments provide an exemption from the initial recognition exemption provided in IAS 12.15(b) and IAS 12.24. Accordingly, the initial recognition exemption does not apply to transactions in which both deductible and taxable temporary differences arise on initial recognition that result in the recognition of equal deferred tax assets and liabilities.

Issued: 7 May 2021 (article)

Annual reporting periods beginning on or after 1 January 2023. Endorsed for use in the Earlier application is permitted.

Optional

Optional

Optional

Optional

Initial Application of IFRS 17 and IFRS 9 — Comparative Information (Amendment to IFRS 17)


The amendment permits entities that first apply IFRS 17 and IFRS 9 at the same time to present comparative information about a financial asset as if the classification and measurement requirements of IFRS 9 had been applied to that financial asset before.

Issued: 9 December 2021 (article)

An entity that elects to apply the amendment applies it when it first applies IFRS 17

 

 

 

 

Optional 

Optional 

Optional 

Optional 

Definition of Accounting Estimates (Amendments to IAS 8)

The amendments replace the definition of a change in accounting estimates with a definition of accounting estimates. Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject to measurement uncertainty”. Entities develop accounting estimates if accounting policies require items in financial statements to be measured in a way that involves measurement uncertainty. The amendments clarify that a change in accounting estimate that results from new information or new developments is not the correction of an error.

Issued: 12 February 2021 (article)

 

 

Annual reporting periods beginning on or after 1 January 2023.  Earlier application is permitted.

 

 

Optional

Optional

Optional

Optional

Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)

The amendments clarify how a seller-lessee subsequently measures sale and leaseback transactions that satisfy the requirements in IFRS 15 to be accounted for as a sale.

Issued: 22 September 2022 (article)

Annual reporting periods beginning on or after 1 January 2024.  Not yet endorsed for use in the EU or the UK.

Non-current Liabilities with Covenants (Amendments to IAS 1)

The amendments clarify how conditions with which an entity must comply within twelve months after the reporting period affect the classification of a liability.

Issued: 31 October 2022 (article)

Annual reporting periods beginning on or after 1 January 2024.  Not yet endorsed for use in the EU or the UK.

 

IOSCO Chair outlines progress on ISSB standards and their endorsement

13 Dec, 2022

At the A4S Summit 2022 on 13 December 2022 on latest developments in the global sustainability-related reporting landscape, IOSCO Chair Jean-Paul Servais noted the work still to be done for the ISSB sustainability disclosure standards to be ready for use by corporates for their end of 2024 accounts.

He noted that

  • the IFRS Foundation has delivered on its commitments to establish the ISSB;
  • the ISSB will issue its standards for climate disclosures and general requirements in the first part of 2023;
  • IOSCO will then move fast and assess the ISSB standards against its agreed endorsement criteria;
  • maximising interoperability across the world will be an important factor in IOSCO’s endorsement decision;
  • it is important to ensure that corporates at all stages of development, size and sophistication can apply the standards;
  • IOSCO, working closely with the ISSB, has initiated a comprehensive capacity-building programme aimed at assisting securities regulators in their preparations to adopt and implement the ISSB standards; and
  • the Monitoring Board will make sure that due process remains top of mind during the development of the sustainability reporting standards by the ISSB and there can be no shortcuts.

A transcript of the full speech is available on the IOSCO website. There is also a recording available (16 minutes).

Remarks by IASB Chair at the Annual AICPA & CIMA Conference on Current SEC and PCAOB Developments

12 Dec, 2022

At the 2022 AICPA & CIMA Conference on Current SEC and PCAOB Developments, IASB Chair Andreas Barckow discussed developments in the IASB’s work and its future plans.

Dr Barckow began his speech by discussing convergence between the  IASB and FASB standards. He discussed that there are two angles related to convergence: product-related view (compatibility of standards) and process-related view (maintenance). He noted that by ‘bringing the two boards together for education and information-sharing sessions, by talking regularly to our colleagues at FASB at all levels, and by alerting each other of new information and developments arising’, the IASB and FASB can continue to keep their converged standards converged.

Next, Dr Barckow highlighted areas that the IASB will focus on over the next five years. This includes finalizing current projects in its work plan, working with the ISSB to make sure both boards collaborate where possible, and three new projects on intangible assets, statement of cash flows, and climate-related risks. In addition, he discussed why a project on cryptocurrencies was not added to the work plan but suggested that the IASB will continue to monitor any developments in this area and connect with the FASB on their project.

Full transcript of the speech is available on the IFRS Foundation’s website.

UKEB approves Due Process Handbook

12 Dec, 2022

The UK Endorsement Board (UKEB) has published its final Due Process Handbook (the Handbook).

The Handbook sets out the due process the UKEB applies to its activities, enabling it to uphold its guiding principles of accountability, independence, transparency and thought leadership when fulfilling its statutory functions.

The final Due Process Handbook is available on the UKEB website.  A feedback statement is available on the UKEB website here.

Recording of the September WSS meeting on Third Edition of the IFRS for SMEs ED

12 Dec, 2022

The IFRS Foundations has made available a video recording of the presentation from the World Standard-setters Conference 2022 on the exposure draft for the third edition of the IFRS for SMEs Accounting Standard.

The presentation discussed the following topics:

  • Background (objective, scope and framework)
  • Main proposals
  • Other topics the IASB is seeking feedback on

The record­ing can be accessed through the press release or con­fer­ence page (sign-in required) on the IFRS Foundation’s website.

FRC introduces plans to support smaller audit firms

12 Dec, 2022

The Financial Reporting Council (FRC) has published, for the first time, its supervision and inspection work at Tier 2 and Tier 3 audit firms. As a result of those findings, it has outlined a number of measures in order to support smaller audit firms seeking to grow their share of the audit market without compromising quality.

The report sumarises the findings of the FRC over the period 2016/17 to 2021/22.  It inspected 51 audits at Tier 2 and Tier 3 firms and identified that 67% of the audits required more than limited improvements.  This compares to 27% for larger Tier 1 firms over a comparable period.  The FRC has called these findings 'clearly unacceptable'.

Acknowledging that some of the smaller audit firms need support, the FRC report sets out a number of support measures including:

  • Increasing its supervisory resources dedicated to Tier 2 and Tier 3 firms.
  • Sharing more about ‘what good looks like’ and the FRC’s expectations through: increasing its face-to-face engagement with firms; holding more events such as roundtables and briefings; and, developing new publications, in particular a guide to what makes a good audit firm operating at or planning to enter the smaller end of the PIE audit market.
  • The creation an ‘Audit Firm Scalebox’ to provide bespoke input, outside of the formal inspection process, to Tier 2 and Tier 3 firms and firms considering entering the PIE audit market, so as to improve their ability to meet the standards the FRC expects of them as they enter the market and grow.
  • Creating an ‘Audit Sandbox’ to explore audit policy and innovative ways to drive improvements in audit quality, including through technology.
  • Conducting research to better understand the challenges faced by smaller firms in entering the PIE audit market and performing high-quality audits.

The FRC has also gained additional supervisory powers through the new PIE Auditor Registration regime which came into effect on 5 December 2022. This enhances the FRC’s ability to drive improvements in audit quality, ensure firms are growing sustainably and more closely monitor the auditor’s work as well as enabling the FRC to apply conditions or undertakings when concerns are identified.

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

Pre-meeting summaries for the December 2022 IASB meeting

09 Dec, 2022

The IASB meets in London on Tuesday 13, Wednesday 14 and Thursday 15 December 2022. We have posted our pre-meeting summaries for the meeting that allow you to follow the IASB’s decision making more closely. We summarised the agenda papers made available by the IASB staff and point out the main issues to be discussed by the IASB and the staff recommendations.

The following topics are on the agenda.

Financial Instruments with Characteristics of Equity (FICE)

The staff recommend that no changes are made to the presentation requirements in IAS 32 for equity instruments or to specifically address financial liabilities containing contractual obligations to pay amounts based on the entity’s performance or changes in the entity’s net assets. However, the staff recommend entities with these types of financial liabilities measured at fair value through profit or loss be required to disclose the total gains or losses recognised in profit or loss in each reporting period that arise from remeasuring such financial liabilities.

Work Plan

The staff expects that the IASB will conclude its post-implementation review (PIR) of the classification and measurement requirements in IFRS 9 with the publication of its Feedback Statement in December 2022. The staff also expects that the IASB will conclude its Disclosure Initiative—Targeted-Standards Level Review of Disclosures with the publication of its Project Summary in Q1 2023. In addition, the staff expects that the IASB will issue final amendments for International Tax Reform—Pillar Two Model Rules and Supplier Finance Arrangements in Q2 2023.

Rate-regulated Activities

The staff recommend that an entity not recognise inflation adjustments to the regulatory capital base as a regulatory asset. They also recommend that an entity recognise a regulatory asset (regulatory liability) relating to an allowable expense or performance incentive included in its regulatory capital base when there is a direct relationship between the entity’s regulatory capital base and its property, plant and equipment, and the entity has an enforceable present right (obligation) to add (deduct) the allowable expense or performance incentive to (from) future regulated rates. An entity would not recognise a regulatory asset (regulatory liability) relating to an allowable expense or performance incentive included in its regulatory capital base when there is no direct relationship between the entity’s regulatory capital base and its property, plant and equipment.

Maintenance and consistent application

The IASB will discuss matters raised in the feedback on the Exposure Draft (ED) Lack of Exchangeability. The staff recommend that the IASB proceed with its proposals in the ED with some changes. For factors to consider when assessing exchangeability, clarify that an entity does not consider ‘unofficial markets’ in assessing exchangeability but, when exchangeability is lacking, it can use exchange rates from these markets to estimate the spot exchange rate and that all factors are to be considered holistically. For determining the spot exchange rate—the staff recommend to amend proposed paragraph 19A to state that an entity’s objective in estimating the spot exchange rate is to reflect at the measurement date the rate at which an orderly exchange transaction would take place between market participants under prevailing economic conditions.

Equity Method

In this session, the IASB will discuss applying the preferred approach after purchase of an additional interest in an associate and two application questions. The staff recommend the IASB proceed with the view that an investor is measuring a single investment in the associate rather than layers of the investment in the associate. The staff also recommend that an investor that has reduced its interest in an associate to zero does not recognise the unrecognised losses from the cost of the additional interest in the associate. Lastly, the staff recommend that an investor recognises its share of comprehensive income until its interest in the associate is reduced to zero.

Goodwill and Impairment

The staff recommend that the IASB move the project from the research programme to the standard-setting work plan.

Digital Financial Reporting Strategy

This paper sets out a strategic framework that is intended to provide strategic direction and boundaries to help identify possible digital financial reporting activities that the IASB could undertake and provide consistent language for communicating the digital financial reporting strategy. There are no recommendations.

Disclosure Initiative—Subsidiaries without Public Accountability: Disclosures

The staff recommend that the IASB confirms its proposals in the draft Standard, that the application of the disclosure requirements in IFRS 8, IFRS 17 and IAS 33 remain applicable for a subsidiary applying the Standard, and reduced disclosure requirements for IAS 34 in the Standard.

Our pre-meeting summaries is available on our December meeting notes page and will be supplemented with our popular meeting notes after the meeting.

Pre-meeting summaries for the December 2022 ISSB meeting

09 Dec, 2022

The ISSB is meeting in Montreal on Tuesday 13, Wednesday 14 and Thursday 15 December 2022. We have posted our pre-meeting summaries for the meeting that allow you to follow the ISSB’s decision making more closely. We summarised the agenda papers made available by the ISSB and pointed out the main issues and recommendations.

The following topics are on the agenda:

ISSB Consultation on Agenda Priorities

The ISSB has begun work on a Request for Information (RFI) as part of its consultation for developing its work plan. The RFI will include two main components: foundational work and potential projects. ISSB staff have conducted outreach and research activities to put together a short-list of potential projects to be considered for inclusion within the RFI. The four potential projects identified are biodiversity, including ecosystems, ecosystem services and other nature-related issues; human capital, with a focus on diversity, equity and inclusion (DEI); human rights, particularly in the context of the value chain, with a focus on worker, labour and community rights; and connectivity in reporting, management commentary and integrated reporting.

General Sustainability-related Disclosures

The staff recommend that the ISSB provide some clarifications to the proposals: the framing and objective of [draft] S1 in with respect to the relationship between value and sustainability; and identifying sustainability-related risks and opportunities and assessment of material information.

Climate-related Disclosures

The staff recommend that the ISSB address specific feedback received during the comment period in relation to the disclosure requirements for Scope 1 and 2 GHG Emissions. For Scope 3 GHG emissions the staff recommend that the ISSB provide some dislcosure relief, introduce a framework for measuring Scope 3 GHG emissions, provide relief related to an entity’s value chain, require an entity to reassess the ‘scope’ of its sustainability-related risks and opportunities in its value chain only upon the occurrence of either a significant event or a significant change in circumstances, and confirm that no additional relief will be provided regarding the proposal that an entity is required to include information about which of the 15 Scope 3 GHG emissions categories described in the GHG Protocol Value Chain Standard are included within the entity’s measure of Scope 3 GHG emissions. In relation to financed emissions, the staff recommend that the ISSB confirm the proposed disclosure requirements for financed emissions for three industries—Asset Management & Custody Activities, Commercial Banks and Insurance but not for the Investment Banking & Brokerage industry. There are other more detailed changes recommended by the staff.

Our pre-meeting summaries is available on our December meeting notes page and will be supplemented with our popular meeting notes after the meeting.

IPSASB takes next step in public sector sustainability reporting

09 Dec, 2022

Building on strong global stakeholder support for the proposals in its consultation paper 'Advancing Public Sector Sustainability Reporting', the International Public Sector Accounting Standards Board (IPSASB) has decided to commence the scoping of three potential public sector specific sustainability reporting projects pending securing the resources needed to begin guidance development.

The IPSASB’s immediate action will be to establish a Sustainability Task Force to lead the first critical phase of research and scoping. The Board’s prioritised research topics are:

  • General requirements for disclosure of sustainability-related financial information,
  • Climate-related disclosures, and
  • Natural resources – Non-financial disclosures.

Please click for more information on the IPSASB website.

Hyperinflationary economies - updated IPTF watch list available

09 Dec, 2022

IAS 29 'Financial Reporting in Hyperinflationary Economies' defines and provides general guidance for assessing whether a particular jurisdiction's economy is hyperinflationary. But the IASB does not identify specific jurisdictions. The International Practices Task Force (IPTF) of the Centre for Audit Quality (CAQ) monitors the status of 'highly inflationary' countries. While it monitors the status of highly inflationary countries for the purposes of applying US GAAP, its criteria for identifying such countries are similar to those for identifying 'hyperinflationary economies' under IAS 29.

The IPTF's discussion document for the 9 November 2022 meeting is now available and states the following view of the Task Force:

Countries with three-year cumulative inflation rates exceeding 100%:

  • Argentina
  • Ethiopia
  • Iran
  • Lebanon
  • South Sudan
  • Sudan
  • Suriname
  • Turkey
  • Venezuela
  • Yemen
  • Zimbabwe

Countries with projected three-year cumulative inflation rates exceeding 100%:

There are no countries in this category for this period.

Countries where the three-year cumulative inflation rates had exceeded 100% in recent years:

There are no countries in this category for this period.

Countries with recent three-year cumulative inflation rates exceeding 100% after a spike in inflation in a discrete period:

There are no countries in this category for this period.

Countries with projected three-year cumulative inflation rates between 70% and 100% or with a significant (25% or more) increase in inflation during the current period

  • Angola
  • Ghana (new entry)
  • Haiti
  • Moldova (new entry)
  • Sierra Leone (new entry)
  • Sri Lanka (new entry)
  • Ukraine (new entry)

The IPTF also notes that there may be additional countries with three-year cumulative inflation rates exceeding 100% or that should be monitored which are not included in the analysis as the necessary data is not available. Examples cited are Afghanistan and Syria.

The full list, including exact numbers, detailed explanations of the calculation of the numbers, and observations of the Task Force is available on the CAQ website.

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.