The TRG consists of the experts of the technical groups of the former Climate Disclosure Standards Board (CDSB) and Value Reporting Foundation (VRF), which were integrated into the IFRS Foundation this year. It will provide technical advice and support to the ISSB and its technical staff, initially for a one-year period.

Please click to access the full list on the IFRS Foundation website.

The letter includes thematic findings on IFRS 9 expected credit loss accounting (ECL) and thematic findings relating to accounting for climate-related financial risks. It also sets out observations on disclosure and benchmark reform.

The full letter is available on the PRA website.

Investors and other stakeholders are increasingly interested in disclosures on the environmental and social impact of companies’ activities and their governance arrangements. 

The first phase of the project focussed on the production, distribution and consumption of ESG data.  This next phase of the project will look at the distribution and consumption of ESG data.

The scope of this phase will be determined in conjunction with participants but the Lab expects it to cover:

• How data providers access and collect ESG data from companies and other sources.
• How data providers process company data and, where relevant, generate estimates to create new data sets.
• How Fintech and RegTech firms are using third party data to build new tools and services.
• The sources of ESG data that investors use.
• Identification of barriers to data flow and views on how it can be optimised.
• Useful formats for data communication.
• What disclosures on data processes are decision-useful.
• How investors and others are using ESG data for decision-making.

Further information including the press release and the call for participants is available on the FRC website.

The following topics are on the agenda:

Rate-regulated Activities

The staff recommend that the final Accounting Standard retains the definition of allowable expense proposed in the ED, clarifies that a regulatory agreement may determine the amount that compensates for an allowable expense using the same or a different basis from the basis an entity uses for measuring the allowable expense in accordance with IFRS Accounting Standards; and clarifies the treatment of allowable expenses based on benchmarks and includes examples to help entities identify differences in timing in those cases. The staff also recommend that the final Accounting Standard retains the proposals in the ED for entities to account for regulatory assets or regulatory liabilities arising from differences between the regulatory recovery period and assets’ useful lives when there is a direct relationship between an entity’s regulatory capital base and its property, plant and equipment; provides guidance to help entities determine when there is no direct relationship between their regulatory capital base and their property, plant and equipment; and requires entities that have concluded there is no direct relationship between their regulatory capital base and their property, plant and equipment to provide disclosures to enable users of financial statements to understand the reasons for their conclusion.

Contractual Cash Flow Characteristics

The staff recommend that IFRS 7 be amended to require disclosure of, for each class of financial assets and financial liabilities not measured at fair value through profit or loss, of a qualitative description of the nature of the contingent events that could change the timing or amount of contractual cash flows; quantitative information about the potential range of changes to contractual cash flows that could result from the contractual terms; and the gross carrying amount of financial assets and amortised cost financial liabilities subject to these contractual terms. The effective date would be set after the proposals have been exposed.

Equity Method

The purpose of this session is to review the progress of the equity method research project. The staff acknowledge that developing solutions to the application questions has taken longer than anticipated, but they still think it is possible to develop solutions. The IASB is being asked whether they agree to continue the research project with its current objective and approach. 

IFRS Taxonomy

The staff recommends a 30-day comment period for the Proposed IFRS Accounting Taxonomy Update for Lease Liability in a Sale and Leaseback and Non-current Liabilities with Covenants. 

Maintenance and consistent application

The IASB has on its work plan a project to make three targeted improvements to IAS 37, including one in relation to the discount rate an entity applies in measuring a provision. The IASB will consider developing proposals to specify in IAS 37 whether that rate should reflect its own performance risk. The staff are gathering information to help the IASB reach a tentative decision on this question at a future meeting. The IASB will be asked if any members object to the publication of three IFRS Interpretations Committee agenda decisions: Multi-currency Groups of Insurance Contracts (IFRS 17 and IAS 21); Special Purpose Acquisition Companies (SPAC)—Accounting for Warrants at Acquisition; and Lessor Forgiveness of Lease Payments (IFRS 9 and IFRS 16).

Disclosure Initiative—Targeted Standards-level Review of Disclosures

The staff recommend that the IASB develop a middle ground approach to drafting disclosure requirements with the aim of providing a better framework for entities to use judgement to identify and disclose useful information to users of financial statements. Applying such an approach, disclosure objectives would be accompanied by a prescriptive list of items of information that an entity should disclose to meet the objectives. The staff further recommend the IASB publish the Guidance for the Board as a document posted on the IFRS Foundation website. Furthermore, the staff recommend that the IASB not proceed with any further work on the disclosure requirements in IFRS 13 and IAS 19.

Post-implementation Review (PIR) of IFRS 9—Classification and Measurement

The staff are not recommending any changes to the requirements in IFRS 9. However, to increase the usefulness and transparency of information provided about the overall performance of equity investments for which the other comprehensive income (OCI) presentation election was made, the staff recommend amending paragraph 11A of IFRS 7 to require disclosure of the aggregated fair value of equity investments for which the OCI presentation option is applied at the end of the reporting period and changes in fair value recognised in OCI during the period.

Disclosure Initiative—Subsidiaries without public accountability: Disclosures

In this session, the IASB will discuss the objective and structure of the new Standard and the approach to developing disclosure requirements.

Goodwill and Impairment

The purpose of this meeting is to initiate the IASB’s discussion on the subsequent accounting for goodwill. The IASB will not be asked to make any decisions at this meeting. The staff remind the IASB of its preliminary decision to retain the impairment-only model for the subsequent accounting of goodwill. The staff also provide an overview of respondents’ feedback on the DP and a summary of additional information and recent developments since the feedback on the DP.

ISSB Update

There is no paper for this session.

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

In particular, the G7 stated that ‘support for the global baseline has the potential to improve information and thus mobilise finance for the needed investments, particularly in emerging and developing economies’ and advises the ISSB to work with regional standard setters and local stakeholders during the advisory period.

For more information, see the press release on the G7 presidency website website.

Consultation on Agenda Priorities

The staff previously stated the ISSB’s intention to publish the RFI in the Q4 of 2022. Due to the need to strongly emphasise foundational activities—and the importance of IFRS S1 and IFRS S2 the staff now expect to publish an RFI in the first half of 2023.

General Sustainability-related Disclosures

This is the first decision-making session of the ISSB in relation to the exposure drafts. The staff recommend that the ISSB confirm that information is being provided to meet the information needs of the primary users of general purpose financial reporting who are “existing and potential investors, lenders and other creditors”, in alignment with the IASB’s Conceptual Framework and remove “enterprise value” from the objective and from the definition of materiality which would create alignment with the IASB’s Conceptual Framework but not fundamentally change the focus of the required disclosures. Additional resources and language would clarify the concept of enterprise value and the scope of sustainability-related financial information required. The staff also recommend introducing a requirement to disclose the process of identifying and disclosing material information and/or materiality judgments. The ISSB will also consider whether the term “significant” is needed to achieve the objective of IFRS S1.

Climate-related Disclosures

The staff recommend that the ISSB confirm the requirements for an entity to disclose: its absolute gross Scope 1 and Scope 2 GHG emissions generated during the reporting period, including separate disclosure for the consolidated accounting group and unconsolidated investees; and its Scope 3 GHG emissions, considering the 15 Scope 3 GHG emissions categories described in the Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard. The ISSB will consider ways to help entities meet the Scope 3 disclosure requirements, such as deferring the effective date for this disclosure or developing additional guidance. The staff also recommend that the ISSB proceeds with the proposal that entities use the GHG Protocol Corporate Standard. However, entities that have been using a different measurement methiod would be permitted to do so during a transtion period, or while a jurisdiction requires use of that other method.

General Sustainability-related Disclosures and Climate-related Disclosures

The ISSB will be asked to consider some drafting changes that the staff think would improve the interoperability with proposals published in Europe and the US. The staff recommend that the ISSB confirm the use of the TCFD pillars for structuring the core content in IFRS S1 and IFRS S2 and confirm the meaning of the global baseline. In addition to the recommendations in the other papers, the staff recommend that the ISSB confirm that time horizons not be defined for short, medium and long term; that disclosures be required about the effects of climate-related risks and opportunities on the entity’s financial position, financial performance and cash flows for the reporting period (i.e. the current effects); that disclosures are not required to be reported separately for physical risks, transition risks and climate-related opportunities; that separate disclosures be required about assets subject to physical and transition risks and climate-related opportunities, in the form of metrics; the disclosures proposed in in relation to climate resilience; add a requirement to disclose whether and how an entity uses climate-related scenario analysis to inform the identification of climate-related risks and opportunities; and use the term “carbon credit” instead of “carbon offset”.

Industry-based Materials

The ISSB will discuss and begin alignment around the strategy for integrating industry-based materials into IFRS Sustainability Disclosure Standards, including the role of the SASB Standards in [draft] IFRS S1, the industry-based requirements in Appendix B of [draft] IFRS S2, improving the international applicability of the SASB Standards, the ISSB’s upcoming consultation on agenda priorities and advancing SASB projects inherited by the ISSB. The staff are not asking the ISSB to make any decisions in this session.

Consultation on Agenda Priorities

Update on Planned Approach (Agenda Paper 2)

This paper provides the ISSB with an update on the planned approach to and timing of its consultation on agenda priorities and the publication of a request for information (RFI).

The ISSB will not be asked to make any decisions in this session. However, ISSB members will have the opportunity to provide their thoughts and feedback on the planned approach which will inform a subsequent discussion with the ISSB at a later decision-making meeting.

Recommended approach

The staff recommends that the RFI:

• Outlines the work to build on the foundation established by IFRS S1 and IFRS S2, once finalised
• Sets out proposals for new research and standard-setting for stakeholder input to inform the board’s decisions on the future work plan

These two primary categories of work set out above are broadly aligned with the two aspects of the ISSB’s ‘strategic balance’ discussed at the July 2022 ISSB meeting, i.e. ‘advancing and enhancing existing materials’ and ‘developing new materials.’ Based on clear feedback from the ISSB and stakeholders, the staff recommends that the ISSB initially devote a majority of its resources to work meant to build on the foundation established by IFRS S1 and S2, which may limit the ISSB’s capacity to add a significant number of new research and standard-setting projects in its initial two-year work plan.

Recommended timeline

The staff previously stated the ISSB’s intention to publish the RFI in the Q4 of 2022. Due to the need to strongly emphasise foundational activities—and the importance of IFRS S1 and IFRS S2 in that context—the staff will propose a timeline for the RFI that allows for significant re-deliberations on [draft] IFRS S1 and [draft] IFRS S2. These deliberations might affect the work plan (e.g. decisions on Appendix B of [draft] IFRS S2). Thus, the RFI can more appropriately reflect what is—and what is not—included in IFRS S1 and IFRS S2, as well as any ISSB decisions on other key aspects relevant to the foundational work (e.g. the role of industry-based materials). The staff expectation is that this would result in the publication of the RFI in the first half of 2023. 

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

The first webcast provided an overview of the project. The next six webcasts focused on elements of DRM. The final webcast released today uses a simplified example to illustrate how the DRM model is expected to work in practice, and how different elements explained in the previous webcasts link together.

Please click to access all webcasts released so far on the IFRS Foundation website.

Mr Esterer recently worked at Bank J. Safra Sarasin as Head of Core Equities, leading a team of portfolio managers and analysts who manage the bank’s regional and discretionary equity investment strategies. Previously, he worked at Swisscanto as head of global equities. He is currently a member of the IASB's Capital Markets Advisory Committee (CMAC). His first term as IASB member will commence in April 2023.

The press release on the IFRS Foundation website announcing the appointment also notes that the appointment of the Vice-Chair of the IASB is expected by the end of the year.

The FRC noted in their Environmental, Social and Governance (ESG) statement of intent that reporting in this area is often too high level and fails to provide users with sufficient information to enable them to understand the commitments an entity has set, and its ability to deliver against its targets.

The Lab report outlines the three key elements that investors want to understand about net zero disclosures:

• Commitments: the level of ambition, scope, nature and timing of the commitment, and what is included and excluded.
• Impacts: how the commitment impacts strategy and business model, including information on transition plans, assumptions, uncertainties, and risks and opportunities.
• Performance: how performance is being measured in the short, medium, and long term. How high-quality data and accountability will be ensured, and actions management is taking in response to changes.

The FRC Lab report also highlights investors’ ask for clarity around the use of climate change terminology, including the terms such as ‘net zero’, ‘carbon neutral’, science-based’ or ‘Paris-aligned’.

Companies are at various stages on the journey to net zero – with some companies developing definitions and refining what it is they measure, while others are further along in their transition plans. The Lab report thus helpfully aims its recommendations for companies at either a foundational or advanced stage. Companies at the foundational stage should focus on providing a simple and clear understanding of their commitment, including high-level targets, timelines and impacts. While companies that are more advanced in their net zero reporting should now be providing updates on progress and any refined goals, with more detail on impact and accountability.

The report acknowledges that both investor and company understanding in this area is evolving, and that measuring impact and reporting net zero targets, and supporting information, is an iterative process.

The report is accompanied by a separate example bank which provides some practical examples of current good practice to help companies improve their disclosures.

Further information, the full report and the examples bank are available on the FRC website.

The two main topics for the meeting will be:

• Review of practical implementation of international standards of accounting and reporting in the private and public sectors; and
• Good practices in and approaches to the practical implementation of sustainability reporting requirements.

The background papers for these two topics are available in Arabic, Chinese, English, French, Spanish, and Russian and can be accessed here.

The list of speakers includes Jingdong Hua, Vice-Chair of the International Sustainability Standards Board (ISSB).

The workshop before the ISAR meeting this year (31 October 2022) will focus on "Regional Partnerships for the promotion of sustainability and SDG reporting".