In particular, the G20 concluded that flexibility will contribute to a global solution in sustainability reporting. The declaration notes:

We welcome the finalization of the sustainability and climate-related disclosure standards published by the International Sustainability Standards Board (ISSB) in June 2023, which provide the mechanisms that address proportionality and promote interoperability. It is important that flexibility, to take into account country-specific circumstances, is preserved in the implementation of those standards. When put into practice as above, those standards will help support globally comparable and reliable disclosures.

For more information, see the full final declaration.

Mr Barckow began his speech with a thought experiment inviting attendees to imagine a world without international accounting standards. Company reporting would be a patchwork around the world, not comparable and not transparent at all. And investors desiring to invest overseas would first have to figure out several different reporting languages.

However, as Mr Barckow pointed out, luckily international accounting standards do exist and provide comparability, transparency and trust. And he thanked national standard setters for helping to bring this about, beginning in 1973 when accountancy bodies from nine jurisdiction signed an agreement to form the IASB's predecessor body, the IASC. Nevertheless, Mr Barckow also warned:

We need to protect what we have collectively achieved, by continuing working together to ensure requirements capture market developments and ensuring the standards are used in a consistent manner globally.

Mr Barckow then turned to consistent application of the standards, application questions, addressing those questions, and the role national standard setters can play in all of these. He returned to his 2021 WSS address where he had called the national standard setters the IASB's "ears and eyes on the ground".

So if national standard setters identify inconsistent application, a submission can be sent to the IFRS Interpretations Committee and it will then be determined whether standard setting is required, whether an interpretation should be developed, or whether an agenda decision should be published. In all of these processes national standard setters can help as well by contributing comment letters.

In concluding his speech, Mr Barckow briefly commented on the development of new standards (he chose the standard on primary financial statements that is expected to be published in the second quarter of next year as an example) and the post-implementation review process where again national standard setters can play an important contributing role.

Please click to access a transcript of Mr Barckow's full speech on the IFRS Foundation website.

Highlights of the podcast include discussions on:

• the project on climate-related risks in the financial statements that has been re-calibrated to also include "other uncertainties";
• the conclusion of technical discussions in the project on goodwill and impairment;
• the rate-regulated activities project;
• key takeaways from the equity method project;
• decisions made in the second comprehensive review of the IFRS for SMEs;
• the direction of the project looking at business combinations under common control; and
• decisions on the extractive activities project.

The podcast can be accessed here on the IFRS Foundation website.

An analysis of changes to the work plan resulting from the IASB discussions can be found here.

Background

In March 2022, the OECD released technical guidance on its 15% global minimum tax agreed as the second ‘pillar’ of a project to address the tax challenges arising from digitalisation of the economy. This guidance elaborates on the application and operation of the Global Anti-Base Erosion (GloBE) Rules agreed and released in December 2021 which lay out a co-ordinated system to ensure that multinational enterprises with revenues above €750 million pay tax of at least 15% on the income arising in each of the jurisdictions in which they operate.

The IASB took up a maintenance project and released final amendments to IAS 12 to respond to stakeholders’ concerns about the potential implications of the imminent implementation of these rules on the accounting for income taxes.

Subsequently, the IASB came to the conclusion that the pillar two model rules (and the amendments to IAS 12) are also relevant to entities applying the IFRS for SMEs and added to its work plan a narrow-scope standard-setting project to amend Section 29 Income Tax of the IFRS for SMEs. 

Changes

The amendments in International Tax Reform — Pillar Two Model Rules (Amendments to the 'IFRS for SMEs' Standard):

• introduce a temporary exception to the requirements in the IFRS for SMEs that an SME does not recognise and does not disclose information about deferred tax assets and liabilities related to the OECD pillar two income taxes; an SME discloses that it has applied the exception;
• clarify that ‘other events’ in the disclosure objective in section 29 of the standard include enacted or substantively enacted tax rates and tax laws, such as pillar two legislation;
• require an SME to disclose separately its current tax expense (income) related to pillar two income taxes when pillar two legislation is in effect.

Effective date and transition

An SME applies the exception immediately upon issuance of the amendments retrospectively (and discloses immediately that it has done so) and the requirement to disclose separately its current tax expense (income) related to pillar two income taxes for annual reporting periods beginning on or after 1 January 2023.

Additional information

Please click for:

• IASB press release (link to IFRS Foundation website)
• Our related Need to know publication
• Our UK Accounting Plus project page on IFRS for SMEs — OECD pillar two model rules

The corrections relate to Lack of Exchangeability (Amendments to IAS 21).

Editorial corrections do not change the meaning or application of pronouncements, but instead correct inadvertent errors. The editorial corrections can be viewed on the editorial corrections page of the IASB's website.

The IASB uses the annual improvements process to make necessary, but non-urgent, amendments to IFRSs that will not be included as part of another major project.

The exposure draft proposes the following amendments:

IASB/AI/ED/2023/1 Annual Improvements to IFRS Accounting Standards — Volume 11 does not contain proposed effective dates for the proposed amendments as the intention is to decide on these after the exposure period. However, early application of the amendments is proposed to be permitted. 

Please click for the following additional information:

• Press release on the IFRS Foundation website
• Access to the exposure draft on the IFRS Foundation website
• Deloitte's Need to know newsletter
• Our UK Accounting Plus project page on Annual improvements — Volume 11

The IASB heard in recent years that climate-related risks are often perceived as remote, long-term risks and may not be appropriately considered in the financial statements and that users need better qualitative and quantitative information about the effect of climate-related risks on the carrying amounts of assets and liabilities reported in the financial statements.

The IASB reacted by publishing an article by Board member Nick Anderson in November 2019 discussing how existing requirements within IFRSs relate to climate change risks and other emerging risks and by releasing educational material on applying IFRSs to climate-related matters in November 2020 (updated and republished in July 2023).

In March 2023, the IASB added a project "Climate-related Risks in the Financial Statements" to its agenda with the first discussions of the project taking place this week. In September 2023, the IASB determined that possible actions resulting from the project would include development of educational materials, illustrative examples and targeted amendments to IFRS Accounting Standards to improve application of existing requirements. The staff will work closely with ISSB staff to facilitate connections in the Boards’ work. The IASB will also continue to monitor developments to determine whether to take further action.

Finally, the IASB has also decided to rename the project to "Climate-related and Other Uncertainties in the Financial Statements" to stress that the principles-based IASB standards apply to any risk an entity incurs.

Please click to access the press release on the IFRS Foundation website.

Generally, the IFAC response to the request for information notes that IFAC supports the ISSB’s focus on high-quality implementation of IFRS S1 and IFRS S2 so that jurisdictions will more readily adopt ISSB requirements. IFAC also urges the ISSB and the IFRS Foundation to secure the resources necessary (funding, staff, volunteer expertise, etc.) to continue to move with pace in new research and standard-setting activities related to the sustainability topic areas identified in the consultation. IFAC also believes that interoperability with GRI, ESRS of the European Union, climate disclosures in the U.S. is an important starting point for a truly global system that is built upon the ISSB’s global baseline.

On the topic of integration in reporting the response states:

IFAC believes that now is the time for the ISSB and IASB to jointly develop the global baseline for a holistic, narrative analysis of how reporting entities create, preserve or erode value over time, including how sustainability disclosures are connected to financial position and performance. This framework should combine key Framework principles, concepts and content elements with the IASB’s work on Management Commentary. Based on our analysis, companies need guidance on how best to provide such narrative information in a concise, comparable and consistent manner that reinforces connectivity with the financial statements — all part of a coherent and comprehensive system of investor-focused, general purpose financial reporting that includes both sustainability-related financial information and financial statements, and addresses the drivers of value creation in the context of the external business environment, purpose, strategy, governance, business model and performance.

Please click to access the full comment letter on the IFRS Foundation website.

The new report, The State of Play: Beyond the G20, focuses on the Global South with data from three jurisdictions from Latin America, six in Africa and Middle East, and four in the Asia-Pacific region, as well as six smaller-sized economies within the European Economic Area and Switzerland.

The results show that both sustainability disclosure and assurance are improving in these new jurisdictions. Disclosure rates grew from 84% in 2019 to 89% in 2021, and assurance rates grew from 37% in 2019 to 48% in 2021.

Some of the key highlights of the report are:

• Sustainability information was more likely to be included with financial disclosures — in annual reports or integrated reports — than stand-alone sustainability reports.
• Most companies reviewed in the report (84%) used a mix of standards and frameworks to disclose sustainability information.  Using the Sustainable Development Goals and Global Reporting Initiative (GRI) Standards was most common.  About half of the companies used the Taskforce on Climate-related Financial Disclosure (TCFD) Framework and a third used the Sustainability Accounting Standards Board (SASB) Standards.
• While assurance rates have risen from 37% to 48%, engagements are covering a narrower set of topics. 
• Most assurance engagements were conducted by audit firms and 81% of these assurance engagements applied the IAASB’s International Standard on Assurance Engagement 3000.

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

The new guidance, International Non-Profit Accounting Guidance (INPAG), seeks to improve clarity and consistency of Non-Profit Organisation (NPO) financial reports, resulting in greater credibility and trust in the sector globally.

The exposure draft is the second of three parts, each followed by a 4-6-month consultation period. While ED1 addressed the framing for financial reporting of NPOs, ED2 is devoted to the accounting itself. It covers 12 sections:

1. Section 11 — Financial instruments
2. Section 13 — Inventories
3. Section 21 — Provisions and contingencies
4. Section 23 Part I — Revenue — Grants and donations
5. Section 23 Part II — Revenue — Contracts with customers
6. Section 24 Part I — Expenses — Grants and donations
7. Section 25 — Borrowing costs
8. Section 28 — Employee benefits
9. Section 29 — Income tax
10. Section 30 — Foreign currency translation
11. Section 31 — Hyperinflation
12. Section 32 — Events after the end of the reporting period

The remaining sections will be covered in ED3 expected in the first quarter of 2024. Final guidance will be published in mid-2025.

Please click for access to the ED and supporting material on the IFR4NPO website. Comments on the ED are requested by 15 March 2024.