This issue features:

• In profile — Dr Kenneth Lee, Associate Professorial Lecturer at the London School of Economics and Political Science, member of the Capital Markets Advisory Committee
• We need your views — IFRS Sustainability Disclosure Standards
• Stay up to date
• Resources for investors

The Investor Update newslet­ter is available on the IFRS Foundation’s website.

The statement highlights the importance of issuers accompanying users of their financial statements, so that they understand the expected accounting implications of the new standard’s application.

ESMA’s recommendations cover the disclosures of expected impacts of the initial application of IFRS 17 in the interim and annual financial statements for 2022.

Where the impact is expected to be significant, ESMA expects issuers to:

• provide information about the significant accounting policy choices to be taken upon initial application of IFRS 17 such as methods to calculate the discount rate, how the level of aggregation requirements will be applied;
• disaggregate the expected impact in a way that is useful to users of financial statements; and
• explain the nature of the impacts (on recognition, measurement and presentation) so that users of the financial statements can understand the changes and their key drivers when compared to the accounting principles on classification applied under IFRS 4.

ESMA also encourages issuers to explain the impact, if any, of the application of IFRS 17 on alternative performance measures that the issuer may use.

Please click to access the full statement on the ESMA website.

The statement notes the significant challenges to business activities and effects on the global economic and financial system posed by the invasion and provides overarching messages to issuers and auditors including:

• A reminder of the main IFRS requirements which may be applicable in the context of Russia’s invasion of Ukraine e.g., impairment of non-financial and financial assets, and loss of control;
• ESMA’s expectations regarding disclosures in financial statements e.g., judgements made, significant uncertainties, and going concern risks;
• ESMA’s expectations regarding disclosures in interim management reports e.g., direct and indirect impact of Russia’s invasion of Ukraine and imposed sanctions on issuers’ strategic orientation and targets, operations, financial performance, financial position and cash-flows, measures taken to mitigate the impacts, and cybersecurity risks; and
• A reminder of issuers' obligations vis-à-vis the Market Abuse Regulation.

Please click to access the statement on the ESMA website.

The proposals intend to address issues raised by auditors in relation to the derecognition of parts of infrastructure assets when replacement expenditure is undertaken. The issue arises principally because of difficulties in generating decision-useful information in relation to these types of assets which meets the needs of accounting standards. There are also related issues for the reporting of gross historical cost and accumulated depreciation.

CIPFA LASAAC and CIFPA's Accounting and Financial Reporting Forum have established a Task and Finish Group to assist with the resolution of this issue.  Upon the advice of the Task and Finish Group, CIPFA LASAAC has proposed a temporary solution, with changes to the code for the reporting including proposals to:

• confirm the accounting consequences of derecognition, i.e. that the effect on the carrying amount is nil (on the presumption that replaced parts are fully depreciated)
• temporarily adapt the code to remove the reporting requirements for gross historical cost and accumulated depreciation
• provide extra guidance on how depreciation may be applied for infrastructure assets

This proposal is a temporary solution which will allow CIPFA LASAAC to consult on a longer-term solution later in the year.  

Comments are requested by 14 June 2022.

A press release, the Invitation to comment and a copy of the exposure draft are available on the CIPFA website.

Whilst the Government set out its commitment to reform with the draft bill announced, uncertainty remains as to the detail and timing of the bill. Some commentators have noted that it is highly unlikely for the bill to feature within the 2022/23 Parliamentary sessions but its trailing will enable some consultation and pre-legislative scrutiny to commence.

The main elements of the Draft Audit Reform Bill were described in the supporting papers as being:

• Establishing a new statutory regulator, the Audit, Reporting and Governance Authority, that will protect and promote the interests of investors, other users of corporate reporting and the wider public interest.
• Providing new measures to open up the market, including a new approach of managed shared audit in which challenger firms undertake a share of the work on large-scale audits. This will improve the quality and usefulness of audit; and boost resilience, competition, and choice in the audit market.
• Bringing the largest private companies in scope of regulation in the definition of ‘public interest entities’, recognising the public interest in companies of this size.
• Giving the new regulator effective powers to enforce directors’ financial reporting duties, to supervise corporate reporting, and to oversee and regulate the accountancy and actuarial professions.
• Reforming the regulation of Insolvency Practitioners to give greater confidence to creditors and strengthening corporate governance of firms in or approaching insolvency so that ‘asset stripping’ can be more effectively tackled.

As per the documentation issued on 10th May, the Government’s Response to the consultation on the BEIS White Paper is expected to be published shortly. 

For the full text of the Queen’s Speech and the supporting narrative click here.

The Board will discuss the following:

• Second Comprehensive Review of the IFRS for SMEs Accounting Standard
• Disclosure Initiative — Subsidiaries without public accountability: Disclosures
• Dynamic Risk Management
• Maintenance and Consistent Application
• Board work plan update
• Post-implementation review of IFRS 9
• Primary financial statements
• Disclosure Initiative — Targeted Standards-level Review of Disclosures
• Rate-regulated activities
• Goodwill and impairment

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 agenda items for discussion are as follows:

• Endorsement of 2021 NSA – Approval of PIP
• ISSB Exposure Drafts – Draft Comment Letter
• Research Project: Intangibles – Update 
• Ongoing monitoring of IASB Projects: Primary Financial Statements
• IFRS 17 – Response to IFRS Interpretations Committee’s Tentative Agenda Decision

The meeting agenda and papers and details of how to register are available on the UKEB website.

The meeting recording can be found on the UKEB website here. 

The agenda for the DPOC meeting is sum­marised below.

The agenda item on improving the communications around post-implementation reviews concerns addressing an expectation gap that seems to have arisen around what post- implementation reviews (PIRs) are about and what to expect as an outcome. In an attempt to more clearly communicate to stakeholders PIR objectives, process and possible outcomes, the staff is in the process of drafting an updated description of PIRs for the IFRS Foundation website. The description is derived from the Due Process Handbook but tries to more clearly articulate key points. The paper for the meeting sets out the main clarifications to the description in the Due Process Handbook. It also notes that the DPOC plans to update the Due Process Handbook for the creation of the International Sustainability Standards Board (ISSB), which the staff thinks might be a good point of time to improve the description of PIRs in the Due Process Handbook in line with the clarifications currently being developed for the IFRS Foundation website.

Agenda papers for the meeting are available on the IFRS Foundation website.

The introduction to the consultation paper argues that while there has recently been significant progress towards the development of a global baseline for sustainability reporting in the private sector, public sector sustainability reporting has yet to move forward in the same way. At the same time, the paper goes on to state, governments are significant in expenditure and employment terms in all jurisdictions, as well as in the global bond market. How and where they spend the money they raise through the taxes everyone pays will therefore be critical in successfully delivering the United Nation’s Sustainable Development Goals.

The consultation paper now released proposes the IPSASB:

• serve as the standard setter for global public sector specific sustainability guidance, drawing upon its experience, processes, and global relationships;
• develop initial guidance focused on general disclosure requirements for sustainability-related information and climate-related disclosures; and
• approach guidance development at an accelerated pace, with a potential for releasing initial guidance by the end of 2023.

Comments on the consultation paper are requested by 9 September 2022.

Please see the IPSASB website for a press release as well as an access page for a video introduction, the consultation paper, a consultation overview, and an At a Glance summary.

Update - 23 September 2022 - The IPSASB has received strong overall engagement and feedback from stakeholders globally on the proposals in the consultation paper.  Further detail is provided in the IPSASB press release on the IPSASB website.

The meeting focused on an approach to ‘how the IASB might respond to feedback on its proposals on the accounting for regulatory assets and regulatory liabilities arising from differences between the recovery pace of the regulatory asset base and the assets’ useful lives’.

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