In the first session the ISSB discussed climate resilience and the use of scenario analysis. The ISSB decided to confirm that entities will be required to use climate-related scenario analysis to conduct its climate resilience assessment. However, an entity will be able to use a method that is commensurate with its size, capabilities and level of exposure to climate-related risk. References to ‘alternative methods’ will be removed.

In the second session, the ISSB discussed the sources of guidance to identify sustainability-related risks and opportunities and disclosures. The ISSB decided to modify the requirements for considering sources of guidance to identify sustainability-related risks and opportunities and related disclosures. The ISSB also decided to clarify for each of the materials referenced, if a preparer is required to consider these materials or if consideration is permitted as an option. Due to mixed views within the Board, the ISSB did not vote on whether references to Global Reporting Initiative (GRI) Standards and European Sustainability Reporting Standards (ESRS) will be added.

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

On sustainability disclosures, IOSCO set out its expectations that both disclosures and assurance standards should be ready for use by corporates for their end-2024 accounts. IOSCO noted that once the ISSB standards are available it will move quickly on its endorsement decision:

In 2023, the ISSB will issue its standard for climate disclosures and general requirements. IOSCO will move promptly to decide on endorsement and will develop a support program for its members to assist them in moving forward immediately should IOSCO decide to endorse these standards. IOSCO also supports the efforts of the ISSB in seeking to be inclusive through its capacity building partnership initiative.

The IOSCO also highlighted the importance of maximizing interoperability of standards and aligning key climate disclosures and noted that interoperability across the world will be an important factor in IOSCO’s endorsement decision. IOSCO believes close alignment between the ISSB and those jurisdictions seeking to implement their own sets of standards is essential to ensure capital flows to where it is most needed.

Please click for the full statement on the IOSCO website

This follows the government's response to its ‘Restoring trust in audit and corporate governance’ consultation, and was driven by a specific recommendation from the Competition & Markets Authority’s Statutory Audit Services Market Study that the FRC “should have the power and a requirement to mandate minimum standards for both the appointment and oversight of auditors”.

The Standard is applicable to the FTSE350 only and is not intended to cover all aspects of the audit committee’s remit – it just covers the appointment of the auditor and ongoing oversight of the audit and the auditor.  Additionally until the establishment of Audit Reporting and Governance Authority (ARGA), the FRC does not have powers to enforce the Standard and so until that time, the intention is that the Standard is adopted on a ‘comply or explain’ basis by FTSE350 audit committees.

In addition to an initial section on ‘Scope & Authority’, the draft standard comprises the following sections:

• Responsibilities
• Tendering
• Oversight of auditors and audit
• Reporting

Responsibilities

Key new audit committee responsibilities included within the Standard are as follows:

• requiring that the company manages its non-audit relationships with audit firms to ensure that it has a fair choice of suitable external auditors at the next tender and in light of the need for greater market diversity and any market opening measures which may be introduced.
• engaging with shareholders on the scope of the external audit (where appropriate).
• inviting challenge by the external auditor, giving due consideration to points raised and making changes to financial statements in response where appropriate.

Tendering

This section of the Standard includes the recommendations from the FRC’s ‘Audit Tenders: Notes on Best Practice’ but has been expanded to incorporate considerations of the need to expand audit market diversity and also challenges to those firms eligible to participate in a tender process but who choose not to and how that is in the public interest. In particular, the Standard states “The Audit Committee should remind eligible firms that refuse to tender that they may as a result be ineligible to bid for non-audit services work.”

Oversight of auditors and audit

This section emphasises the need for the audit committee to create a culture which recognises the work of and encourages challenge by the auditor. The Standard also notes that engagement level Audit Quality Indicators can be used as evidence of the effectiveness of the external audit and the auditor.

Reporting

The audit committee will be required to report on the activities it has undertaken to meet the requirements of the Standard. Where, in line with the new responsibility to engage with shareholders on the scope of the audit, shareholders have requested that certain matters be covered in an audit and that request has been rejected, an explanation of the reasons why should be provided.

Following the consultation, the plan is for the standard to be available to committees on a voluntary basis by the end of 2023, ahead of the planned legislation that will make the standard mandatory.

The consultation is open until 8 February 2023.  A press release and the consultation are available on the FRC website.

On 8 September 2022, the IASB published ED/2022/1 Third edition of the IFRS for SMEs Accounting Standard published (still open for comment until 7 March 2023).

The newsletter now released explains the feedback the IASB received from SMEs’ investors, lenders and creditors during outreach and as a result of the request for information published in January 2020 and how the IASB responded to the feedback with the proposals in the exposure draft.

Please click to access the newsletter on the IASB website.

The topics discussed at the meeting included:

• IASB Update
• Primary financial statements
• Provisions — Targeted improvements
• Post-implementation review of IFRS 9 — Impairment
• Post-implementation review of IFRS 15

The meeting summary is available on the IASB website.

The next CMAC meeting will be held on 9 March 2023.

The meeting focused on the interaction between the IASB’s tentative decision on regulatory returns on an asset not yet available for use and an entity’s capitalization of its borrowing costs and how the IASB might respond to feedback on the proposed treatment of the inflation adjustment to the regulatory capital base, as set out in the IASB’s Exposure Draft Regulatory Assets and Regulatory Liabilities.

The meeting summary is available on the IFRS Foun­da­tion’s website.

The topics covered during the meeting were the following (numbers in brackets are ref­er­ences to the cor­re­spond­ing para­graphs of the summary):

• Agenda planning and feedback from previous ASAF meeting (1–3): The ASAF members discussed proposals for its next meeting on 8–9 December 2022.
• Subsidiaries without public accountability: Disclosures (4–17): The ASAF members were updated on the Disclosure Initiative — Subsidiaries without Public Accountability: Disclosures project and provided views on (1) parent’s consolidated financial statements be ‘available for public use’, (2) disclosure requirements, and (3) structure.
• Post-im­ple­men­ta­tion Review of IFRS 9 (18–23): The ASAF members provided views on applying the impairment requirements in IFRS 9 and decided which topics to include as part of the post-implementation review.
• Rate-regulated activities (24–31): The ASAF members were provided an update on feedback to Exposure Draft Regulatory Assets and Regulatory Liabilities and expressed their views on the IASB’s tentative decisions on scope and total allowed compensation.
• UKEB research on goodwill (32–35): The ASAF members presented with the UK Endorsement Board’s research on subsequent accounting for goodwill.

A full summary of the meeting is available on the IASB's website.

Details on the new Partnership Framework, which is designed to support preparers, investors and other capital market stakeholders as they prepare to use IFRS Sustainability Disclosure Standards, are already available on the IFRS Foundation website, including a timeline for the five-year, three-phase effort.

The announcement that CDP and the ISSB have agreed that CDP will incorporate the IFRS S2 requirements into its disclosure platform means that CDP’s 17,000+ voluntary users will disclose data structured to IFRS S2 in the 2024 disclosure cycle as a step towards delivering a global baseline for capital markets through the adoption of ISSB standards.

The Board will discuss the following:

• Sustainability disclosure taxonomy
• General requirements  
  
  • Comparative information and updated estimates
  • Timing of reporting
• Climate-related disclosures
  • Strategy and decision-making and climate-related targets
• Cross-cutting issues

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 2022 Statement of Principles, which implements the revised pre-emption regime set out in the UK Secondary Capital Raising Review (UKSCRR), is effective immediately.

The Statement of Principles provides guidance on the factors to be taken into account by companies and investors when considering the case for disapplying pre-emption rights.  It applies to all companies (wherever incorporated) with shares admitted to the Premium Listing segment of the Official List, although companies with shares admitted to the Standard Listing segment of the Official List, to the High Growth segment or to trading on AIM are also encouraged to adopt the Statement of Principles. 

Further information including the revised Statement of Principles and template resolutions is available on the FRC website.