Season's greetings

24 Dec, 2023

We wish all our readers a healthy and happy festive season and all the best for the New Year!

We look forward to seeing you again after the holidays and to continue to be your preferred accounting website in 2024.

EFRAG proposes implementation guidance for ESRS

22 Dec, 2023

The European Financial Reporting Advisory Group (EFRAG) has published three draft documents that propose implementation guidance for the European Sustainability Reporting Standards (ESRS). The comment period for the draft implementation guidance ends on 2 February 2024.

The press release states that these documents cover the most challenging aspects regarding the implementation of ESRS, which were adopted by the European Commission in July 2023. They are as follows:

The documents are proposed to be non-authoritative.

For more information, including on how to provide feedback on the documents, please see the press release on the EFRAG website.

Hyperinflationary economies - updated IPTF watch list available

22 Dec, 2023

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 2023 meeting is now available and states the following view of the Task Force:

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

  • Argentina
  • Ethiopia
  • Ghana
  • Iran
  • Lebanon
  • Sierra Leone
  • Sudan
  • Suriname
  • Turkey
  • Venezuela
  • Yemen
  • Zimbabwe

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

  • Haiti

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

    • South Sudan

    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
    • Burundi
    • Egypt
    • Lao P.D.R
    • Malawi
    • Moldova
    • Nigeria (new entry)
    • Pakistan
    • Sao Tome and Principe
    • Sri Lanka
    • Ukraine

    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 Eritrea, Syria, and Afghanistan.

    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.

    FCA issues proposals to finalise new “commercial companies” listing category

    22 Dec, 2023

    As part of a plan to strengthen the UK’s position in global wholesale markets, the Financial Conduct Authority (FCA) has published a new consultation paper (CP23/31 'Primary Markets Effectiveness Review: Feedback to CP23/10 and detailed proposals for listing rules reforms') which also includes the feedback statement from its previous consultation on replacing the existing standard and premium listing share categories with a single listing category (CP23/10 'Primary Markets Effectiveness Review: Feedback to DP22/2 and proposed equity listing rule reforms').

    The plans continue to propose replacing the existing premium and standard listing share categories with a single listing category for commercial company issuers of equity shares (termed “commercial companies” in the consultation). This seeks to balance flexibility and accessibility for issuers, with appropriate disclosure and safeguards to preserve market integrity and support investors’ decision-making both at initial public offering (IPO) and once listed.  

    Further to the feedback received to CP23/10, the FCA now proposes additional categories: a “transition category” for existing standard listed companies with a proportionate transfer process should those companies wish to move to the commercial companies category and a category for non-UK incorporated companies with a primary listing on another exchange. It is proposed that for both of these categories the existing standard listing rules are retained which would, therefore, not require annual reporting against the UK Corporate Governance Code.

    The FCA proposes to issue a completely new UK Listing Rules sourcebook to re-order and restructure the Listing Rules with the aim of making them more accessible and less complex. The first tranche of the draft rules has been published to accompany CP23/31, with the second tranche due to be published during Q1 2024.

    Other proposals in relation to equity listing reform are as follows:

    • The removal of eligibility rules requiring a three-year financial and revenue earning track record as a condition for listing, and no longer requiring a ‘clean’ working capital statement, although prospectuses will still require disclosure of a financial track record and working capital statement.
    • Removing eligibility and ongoing rules requiring that a company has an independent business and has operational control over its main activities, to create a more permissive approach to accommodate a range of business models and corporate structures.
    • Following feedback, retaining the requirement for independence from controlling shareholder via written controlling shareholder agreements and maintaining certain related voting controls (modification had previously been proposed).
    • Permitting issuers to have dual/multiple class share structures at admission.
    • Moving towards a disclosure-based regime rather than a shareholder voting regime for significant transactions and related-party transactions
    • Incorporating the rules for Sovereign Controlled Commercial Companies into the commercial companies category for equity shares, subject to alleviations equivalent to the existing regime.
    • A new category for shell companies largely maintaining the existing standard listing rules.
    • A single, updated set of Listing Principles and related provisions, including new provisions to strengthen FCA ability to access records and serve notices to issuers.
    • With regard to sponsors, the FCA is focusing on the value and benefits of the sponsor role for all parties involved, and recalibrating supervisory and compliance expectations. The FCA proposes allowing wider factors to demonstrate sponsor competence (for instance, employee experience providing relevant advice) and to extend the look-back period for relevant experience from 3 years to 5 years.

    The consultation closes on 22 March 2024.

    Comments on proposals regarding sponsor competence are however requested by 16 February 2024.

    The FCA anticipates publishing a Policy Statement alongside the finalised UK Listing Rules sourcebook by the start of H2 2024, with a two-week implementation period before the new Listing Rules come into effect.

    A press release and the full consultation are available on the FCA website.  Deloitte's previous news item on CP 23/10 is available here.

    HM Treasury publishes exposure draft of phase 2 of its TCFD-aligned disclosure application guidance

    22 Dec, 2023

    HM Treasury has published an exposure draft of phase 2 of its guidance on applying the Task Force on Climate-related Financial Disclosure (TCFD) recommendations in central government and, where appropriate, the wider public sector.

    HM Treasury has set out a three-year phased approach to implement the TCFD recommendations in central government annual reports and accounts.  In July 2023 it published its phase 1 guidance which addressed the recommended disclosures for the governance pillar applying to in-scope central government bodies' annual reports and accounts from 2023-24.

    The exposure draft for Phase 2 sets out the disclosure requirements in the second year of disclosure and covers the risk management and metrics and targets pillars of the TCFD framework.  Phase 2 requirements will apply to reporting periods from 2024-25 (proposed effective date 1 April 2024) and expand upon the existing reporting requirements in Phase 1.  

    The guidance will apply to all departments (ministerial and non-ministerial), as well as some central government and wider public sector bodies that meet certain criteria, or where they have been directed/instructed to follow the guidance by their respective relevant authority. Other central government and public sector bodies may voluntarily choose to follow the guidance in full or in part. 

    Application guidance for Phase 3 will be issued in due course. 

    Comments on the exposure draft are requested by 26 February 2024.  

    A press release and the exposure draft are available on HM Treasury website.

    EC adopts FAQs on environmental performance reporting under the EU taxonomy

    21 Dec, 2023

    The EU Commission (EC) has published a frequently asked questions (FAQ) document to assist financial entities with their reporting about environmental performance of activities under the EU taxonomy.

    The document aims to support financial entities in meeting their reporting obligations by addressing FAQs arising from the interpretation and implementation of the Taxonomy Disclosures Delegated Act.  

    The FAQs include guidance on which entities will be in scope of the reporting obligations and assists with the taxonomy assessment of specific exposures. They also consider the rules with regard to the verification and evidence of compliance with the EU taxonomy, as well as questions specifically targeted at credit institutions, insurers and asset managers. 

    For more information and to access the FAQ document, please see the press release on the EC website. 

    EFRAG and TNFD sign cooperation agreement

    21 Dec, 2023

    The European Financial Reporting Advisory Group (EFRAG) and the Taskforce on Nature-related Financial Disclosures (TNFD) have signed a cooperation agreement to further advance nature-related reporting.

    The agreement highlights the importance of addressing nature-related matters to advance corporate sustainability. It reflects a shared commitment between EFRAG and TNFD to enhance transparency on biodiversity and ecosystems matters.

    The agreement builds on a long-standing collaboration between EFRAG and TNFD, which resulted in alignment of the European Sustainability Reporting Standards (ESRS) with the TNFD’s recommended disclosures. The ESRS have been developed by EFRAG and were adopted by the European Commission in July 2023.

    As a next step, EFRAG and TNFD will publish a detailed interoperability mapping table illustrating the alignment of ESRS with the TNFD recommendations. The table is expected to be published early in 2024.

    For more information, please click to see the press release on the EFRAG website.

    Summary of the November 2023 CGRR meeting

    21 Dec, 2023

    The Consultative Group for Rate Regulation (CGRR) held a virtual meeting on 30 November 2023. The meeting summary of the meeting has now been released.

    The meeting focused on the proposed disclosure requirements in the exposure draft and potential new disclosure requirements arising from the IASB’s redeliberations on the exposure draft.

    The meeting summary is available on the IFRS Foundation website.

    European Union formally adopts amendments to IAS 1

    21 Dec, 2023

    The European Union has published a Commission Regulation endorsing three amendments to IAS 1 issued by the IASB in 2020 and 2022.

    The amendments to IAS 1 Presentation of Financial Statements are:

    • Classification of Liabilities as Current or Non-current (issued on 23 January 2020);
    • Classification of Liabilities as Current or Non-current - Deferral of Effective Date (issued on 15 July 2020); and
    • Non-current Liabilities with Covenants (issued on 31 October 2022).

    The Commission Regulation amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council was published in the Official Journal of the European Union on 20 December 2023.

    December 2023 IASB meeting notes posted

    20 Dec, 2023

    The IASB met in London on 12-14 December 2023. We have posted our comprehensive Deloitte observer notes for all projects discussed during the meeting.

    The following topics were discussed:

    Power Purchase Agreements: In this meeting, the staff presented the research on how to address accounting issues related to power purchase agreements. Based on the findings of the research and other input received from stakeholders the IASB decided to undertake narrow-scope standard-setting to amend IFRS 9 to better reflect power purchase agreements in the financial statements with the next project milestone to be an exposure draft, exploring amending the ‘own use’ and hedge accounting requirements in IFRS 9.

    Work plan: The IASB received an update on its work plan. In addition, the IASB decided to begin the post-implementation review (PIR) of IFRS 16 in the second quarter of 2024 and to consider when to begin the PIR of the hedge accounting requirements of IFRS 9 after the IASB concludes its work on power purchase agreements.

    Rate-regulated Activities: The IASB made decisions on the proposals in the Exposure Draft Regulatory Assets and Regulatory Liabilities, in particular with regard to unit of account and offsetting, presentation and items affecting regulated rates only when related cash is paid or received.

    Maintenance and consistent application: The IASB decided to propose amendments to IAS 21 to require an entity to translate all items (assets, liabilities, equity items, income and expenses, including comparatives) at the most recent closing rate if the entity has a non-hyperinflationary functional currency and presents its financial statements in a hyperinflationary presentation currency; or translates the results and financial position of a foreign operation that has a non-hyperinflationary functional currency into a hyperinflationary presentation currency.

    Climate-related and Other Uncertainties in Financial Statements: The staff informed the IASB about current initiatives in progress to address issues related to the reporting of climate-related and other uncertainties in financial statements, including their status and upcoming steps. No decisions were made.

    Management Commentary: The IASB received an update on the project. Potential next steps could include collaborating with the ISSB in advancing the project; proceeding with the IASB project and drawing on input from the ISSB where necessary; or pausing the project until the new reporting landscape becomes more settled. The IASB will discuss these options in a joint meeting with the ISSB in January.

    Provisions—Targeted Improvements: The IASB decided to continue developing proposed amendments to IAS 37 and make the next project milestone the publication of an exposure draft for stakeholder comment.

    Addendum to the Exposure Draft Third edition of the IFRS for SMEs Accounting Standard: The IASB decided to publish an addendum exposure draft that proposes amendments to the IFRS for SMEs Standard to align Section 7 Statement of Cash Flows with Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7) and Section 30 Foreign Currency Translation with Lack of Exchangeability (Amendments to IAS 21).

    Second Comprehensive Review of the IFRS for SMEs Accounting Standard: The IASB decided to finalise the proposals for the new Section 12 Fair Value Measurement without significant amendments to its overall content; not to amend Section 9 Consolidated and Separate Financial Statements to include requirements for investment entities; and to remove the requirement from Section 22 Liabilities and Equity to present the amount receivable as an offset to equity in its statement of financial position if the equity instruments are issued before the entity receives the cash or other resources.

    Disclosure Initiative—Subsidiaries without Public Accountability: Disclosures: The IASB decided to update the Exposure Draft Subsidiaries without Public Accountability: Disclosures for disclosure requirements in the forthcoming IFRS 18 Presentation and Disclosure in Financial Statements.

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

    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.