Submissions hould be made by 10 April 2023.  For more information, please see the press release on the EFRAG website.

EFRAG has now produced a series of 20 educational videos dedicated to the first set of draft ESRS. Ten of them, the "Glimpses", offer an overview of the standards and the other ten, the "Educational sessions" cover the draft standards in more details.

Click to access the videos on the EFRAG website.

The European national enforcers of financial information monitor and review financial statements published by issuers with securities traded on a regulated European market and who prepare their financial statements in accordance with International Financial Reporting Standards (IFRS) and consider whether they comply with IFRS and other applicable reporting requirements, including relevant national law.

ESMA has developed a confidential database of enforcement decisions taken by individual European enforcers as a source of information to foster appropriate application of IFRS.

The publication of enforcement decisions is designed to inform market participants about which accounting treatments European national enforcers may consider as complying with IFRS, i.e. whether the treatments are considered as being within the accepted range of those permitted by IFRS. ESMA considers the publication of the decisions, together with the rationale behind them, will contribute to a consistent application of IFRS in the European Union.

Topics covered in the latest batch of extracts, covering the period from December 2020 to January 2023, include:

Click for access to the full report (link to ESMA website).

The new rules, which were contained in Policy Statement (PS) 22/3, apply to financial years starting on or after 1 April 2022 and require:

• In Listing Rule 9.8.6R(9) and LR 14.3.33R(1), as an ongoing obligation, in scope companies to include a statement in their annual financial report setting out whether the listed company has met specific board diversity targets on a 'comply or explain' basis, as at a chosen reference date within their accounting period and, if they have not met the targets, why not.
• In Listing Rule 9.8.6R (10) and LR 14.3.33R (2)) in scope companies to publish numerical data on the sex or gender identity and ethnic diversity of their board, senior board positions (Chair, CEO, SID and CFO) and executive management in a standardised table format. Issuers are also required to explain their approach to collecting the data. 
• In scope companies to expand reporting, in an amended Disclosure Guidance and Transparency Rule (DTR) 7.2.8AR, to cover the diversity policies of key board committees and to consider wider diversity characteristics such as ethnicity, sexual orientation, disability and socio-economic background when reporting against this rule.
• In scope companies to retain records to support both the statement and numerical data disclosed in the annual financial report.

The above measures apply to UK and overseas issuers with equity shares, or certificates representing equity shares, admitted to the premium or standard segment of the FCA's Official List, including closed-ended investment funds and sovereign controlled companies, but excluding open-ended investment companies, and ‘shell companies’ as defined in LR5.6.5AR.  The rules also do not apply to issuers of listed debt and debt-like securities, securitised derivatives or miscellaneous securities.

The FCA will be conducting periodic reviews of annual financial reports to determine whether listed companies are meeting their disclosure requirements under the new Listing Rules and amended DTR.  As part of these reviews it will seek to highlight areas of concern and identify areas of better practice.  If a listed company’s disclosures do not appear to meet the requirements, the FCA may ask the company to take corrective action, for instance enhancing their disclosures in subsequent annual financial reports.  The Financial Reporting Council (FRC), as part of its periodic assessment of board diversity reporting under the UK Corporate Governance Code, may also review how the requirements in DTR 7.2.8AR are being met. 

Where a listed company fails to disclose diversity-related information or fails to provide a clear explanation in their annual financial report as required under the Listing Rules and amended DTR, the FCA will request that the listed company publishes that information via a Regulatory Information Service (RIS) in line with the rules as soon as possible after discovery. 

The Primary Market Bulletin is available on the FCA website.

During the meetings the FRC will seeks views to help contribute to different projects and consultations run by the FRC.

Furher information and details of how to register are available on the FRC website.

This resource will provide an overview of the FRC's work in this area, including how that work fits into the wider FRC strategy, links to its publications, and information on how stakeholders can get involved.

Further information, including a podcast on the new group, is available on the FRC website.

The plan reflects the delay of anticipated legislation to create the Audit, Reporting and Governance Authority (ARGA), which has had an impact on the associated increase in capacity, cost and headcount previously expected to occur in 2023.  

The plan details how each of the FRC's four divisions (Regulatory Standards, Supervision, Enforcement and Corporate Services), intend to organise their work and the associated deliverables across the three year period of the plan.  It also sets out the FRC's strategic priorities and deliverables for 2023/24 in these areas as follows:

Regulatory Standards

• Development and maintenance of standards and codes, including completion of the periodic review of FRS 102, adoption of a revised International Standard on Auditing (ISA) (UK) 500 Audit Evidence, post-implementation reviews of UK auditing standards, in particular ISA (UK) 540 Accounting Estimates and Related Disclosures, review of the UK Corporate Governance Code, and post-implementation review and revision of technical actuarial standards (TAS).
• International influencing of auditing, assurance and ethical standards, and significant contribution to non-financial reporting developments in the UK and internationally (especially sustainability reporting).
• Policy support for ARGA’s local audit systems leader role.
• Activities focused on improvements and innovation to support high-quality reporting and audit including Lab publications and use of the new ‘Audit Sandbox’.
• Promoting the use of technology throughout its policy areas, through digital reporting and the implications for data and data governance, and commencing the Company and Organisational Data Explorer (CODEx) project.

Supervision

• Delivering a full programme of high-quality AQR inspections, CRR reviews and the FRC’s statutory professional oversight functions and publish associated reporting, including thematic reviews.
• Increase activities focused on improvements and innovation to support improved audit quality and resilience in the market, including implementation of the FRC Scalebox.
• Approval and registration of audit firms and responsible individuals who undertake Public Interest Entity (PIE) audit work.
• Assessing the effectiveness of the firms’ implementation of new auditing and quality management standards.
• Developing a supervisory approach for audit committees.
• Developing the supervisory oversight strategy for the professional bodies.
• Developing the local audit system leader role and team in shadow form ahead of ARGA implementation.
• Reporting on implementation of operational separation.
• Developing market monitoring function.
• Delivering projects on developing AQR and Improving the Quality of Auditor Education and Training.

Enforcement

• Fair, robust, and timely case closures, or conclusion through focus of investigations, prioritisation, training, and recruitment.
• Upskilling and training to respond to changes in AEP from January 2022 and to intended changes to procedural published guidance.
• Collaboration with the Department for Business and Trade (DBT) on planned legislative change to reach the best achievable outcomes as they pertain to enforcement and the FRC’s stated purpose and objectives.
• Upskilling to enable full implementation of future powers arising from proposed regulatory reform in 2024 onwards.
• Publication of the Annual Enforcement Review, delivering transparency and driving improved behaviours through messaging case outcomes.

Corporate services

• Developing a statutory funding model for ARGA.
• Developing and implementing an integrated information management strategy, including a medium-term IT strategy and enhanced cybersecurity risk management.
• Data analytics and reporting, economic advice and impact assessment – supporting enhanced market monitoring, the implementation of the FRC position paper, and transition to ARGA.
• Appropriate workforce planning, aligned with its business planning cycle and designed to incentivise, reward, and retain key skills and accommodate any re-location plans.
• Strengthening its support infrastructure, including in finance and procurement systems, internal controls, and IT.
• Enhancing the level of assurance activity, against internal policies and controls.
• Legal support for all FRC activities and legal and operational support for the UKEB.
• Embedding its contingency planning processes and testing regime. 

The 3-year plan also covers other areas such as risks and challenges and KPIs. The FRC also sets out its budget for 2023/24 for expenditure and funding.

The press release and 3-year Plan and Budget 2023-26 are available from the FRC website.

In December 2021, the Organisation for Economic Co-operation and Development (OECD) published its Pillar Two model rules. The rules are part of a two-pillar solution to address the tax challenges arising from the digitalisation of the economy. The Pillar Two model rules:

• aim to ensure that large multinational groups pay a minimum amount of tax on income arising in each jurisdiction in which they operate; and
• would achieve that aim by applying a system of top-up taxes that results in the total amount of taxes payable on excess profit in each jurisdiction representing at least the minimum rate of 15%.

The International Accounting Standards Board (IASB) issued Exposure Draft IASB/ED/2023/1 International Tax Reform—Pillar Two Model Rules – Proposed amendments to IAS 12 in January 2023.  The proposals in that Exposure Draft would introduce a temporary exception to the accounting for deferred taxes arising from the implementation of the Pillar Two model rules, alongside targeted disclosure requirements

The FRC has considered whether similar proposals are required in relation to Section 29 Income Tax of FRS 102 and has developed FRED 83 which is based upon the IASB's proposals.

The FRC has also considered whether to provide disclosure exemptions for qualifying entities, as defined in FRS 102 or FRS 101.  The proposals in FRED 83 would introduce an exemption for qualifying entities from certain proposed disclosures that are primarily relevant to the consolidated financial statements of a group, provided that equivalent disclosures are included in the consolidated financial statements in which the qualifying entity is included.

In deciding whether to proceed with the proposed amendments the FRC will consider:

• further statements made by the UK and Irish governments about the approaches taken to incorporate the Pillar Two model rules into domestic legislation;
• the comments it receives on FRED 83; and
• the final amendments issued by the IASB in its project International Tax Reform—Pillar Two Model Rules.

Subject to the above, the FRC plans to finalise any resulting amendments in summer 2023. Comments on FRED 83 are requested by 24 May 2023.

A press release, including links to the consultation, are available on the FRC website.  Our comment letter is available here.

ISQM (UK) 1 and ISQM (UK) 2 have been reissued with updated footnotes to reflect this guidance.

A press release and the guidance are available on the FRC website.

Following its predecessors, the Hampton-Alexander and Davies Reviews, the report tracks the progress for women in roles on the board and women in two layers of senior management below the board, in some of the UK's largest companies, spanning the FTSE 350 and also, for the first time in 2022, the largest 50 private companes by sales.  

The Review indicates that 40.2% (2021: 37.6%) of FTSE 350 board positions are now held by women and highlights that there has been a growth in the number of women SiDs and more progress in the Chair role where almost one in five FTSE 350 boards have a women Chair.    

For FTSE 100 companies, the number of women in leadership, that is the combined executive committee & direct reports, has increased to 34.3%, up from 32.5% last year. The FTSE 250 has also seen an increase in the representation of women in the executive committee and their direct reports rising to 33.0% (2021: 30.7%), with slightly more progress on the executive committee up to 24.4% from 21.7% from last year.  The target is to achieve 40% women representation in FTSE 350 leadership teams before 2025 - currently just over half of FTSE 100 and FTSE 250 leadership teams have met this or are well on their way to meeting it.  The report also indicates that there has been a rise in the representation of women on FTSE 350 executive committees although it highlights that there is still more to do in this area.  

With respect to the top 50 companies, the report highlights that progress has been 'encouraging in terms of willingness to participate in the review and actual progress'.  Combined women's representation in leadership is already at 34.3% and similar to FTSE 350 companies.

The full report can be found here.