The revisions to the Standards were drawn from feedback collected from Exposure Draft Methodology for Enhancing the International Applicability of the SASB Standards and SASB Standards Taxonomy Updates. No comments are being sought on the blackline documents and their purpose is to provide a comprehensive overview of the proposed revisions, allowing stakeholders time to acquaint themselves with the impending changes. The blackline documents will be available until 10 November 2023 and are not considered final until they are officially ratified and issued by the ISSB. It is anticipated that the ratification will occur in December 2023.

For more information, see the press release on the IFRS Foundation’s website.

The bills, SB-253—Climate Corporate Data Accountability Act and SB-261—Greenhouse Gases: Climate-Related Financial Risk, will establish the first industry-agnostic US regulations that mandate the corporate reporting of greenhouse gas (GHG) emissions and climate risks in the United States.

Requirements

The bills apply to both public and private US-based companies, depending on their total annual revenue. In addition, companies subject to the bills must provide Scope 3 GHG emission disclosures regardless of materiality as well as limited assurance for Scope 1 and Scope 2 GHG emissions in their first year of reporting. Limited assurance for Scope 3 GHG emissions may be required starting in 2030.

The requirements introduced by the bills can be summarised as follows:

• SB-253: Leveraging the GHG Protocol reporting guidance, SB-253 will require companies within its scope to provide annual quantitative disclosures of Scope 1, Scope 2 and Scope 3 GHG emissions applying the GHG Protocol reporting guidance, with limited assurance required initially for disclosures of Scope 1 and Scope 2 GHG emissions. Scope 3 GHG emission reporting, reasonable assurance for Scope 1 and Scope 2 GHG emission disclosures, and potential limited assurance for Scope 3 GHG emission disclosures will be phased-in between 2027 and 2030 (see ‘Effective date’ below).
• SB-261: Leveraging the frameworks and disclosure guidance established by the Task Force on Climate-related Financial Disclosures (TCFD), SB-261 will require companies to prepare and make publicly available on their company websites biennial (i.e. every two years) qualitative reporting on climate-related financial risk and measures taken to reduce and adapt to that risk applying the frameworks and disclosure guidance established by the Task Force on Climate-related Financial Disclosures (TCFD). No assurance is required for this qualitative reporting. Successor or equivalent reporting standards, including the IFRS Sustainability Disclosure Standards issued by the International Sustainability Standards Board (ISSB), are also an acceptable framework for reporting under SB-261.

Scope

Application of the California legislation depends on a US-based company’s total annual revenue, regardless of whether the company is publicly or privately held. Therefore, private companies could be required to provide disclosures under the California regulations if they meet the revenue thresholds outlined in the bills and do business in California. The bills, as written, do not clearly define what “doing business in California” means. However, on the basis of the “doing business in California” concept under California tax law, early indications are that the threshold for doing business in the state might be quite low.

In addition, both bills apply to US-based companies doing business in California. There is no specific exception for groups with non-US parents, and therefore foreign companies with US-based subsidiaries doing business in California would fall within the scope of the requirements.

Effective date

Entities are required to apply the bills for initial requirements for disclosure as follows:

• 2026—By 1 January, the first biennial climate risk report will be required for companies with revenue exceeding $500m
• 2026—Disclosure of Scope 1 and Scope 2 GHG emissions for 2025 with limited assurance will be required for companies with revenue exceeding $1b
• 2027—Scope 3 GHG emissions for 2026 will be required for companies with revenue exceeding $1b up to 180 days after the 2027 reporting of Scope 1 and Scope 2 GHG emissions
• 2030—Reasonable assurance for Scope 1 and Scope 2 GHG emissions (with possible limited assurance for Scope 3 GHG emissions) will be required for companies with revenue exceeding $1b

Additional information

Please click for:

• SB-253—Climate Corporate Data Accountability Act
• SB-261—Greenhouse Gases: Climate-Related Financial Risk
• Our Need to know newsletter explaining the content of the two bills

EFRAG considers that the impairment requirements in IFRS 9 generally work as intended and that the use of a forward-looking expected credit loss model results in more timely recognition of credit losses than applying IAS 39 Financial Instruments: Recognition and Measurement.

Nevertheless, EFRAG identifies some issues of application or diversity in practice with different levels of priority that should be further considered by the IASB in the context of this project.  These include:

• cash shortfalls used to measure expected credit losses; and 
• the interaction between modification, impairment, and derecognition requirements.

EFRAG also considers that more guidance in the form of illustrative examples and/or educational material would enhance the quality and comparability of credit risk disclosures.

Finally EFRAG recommends that the IASB considers other areas with a medium priority such as intra-group loans and guarantees, collective assessment of significant increases in credit risk, loan commitments, financial guarantees and other credit enhancements and purchased or originated credit impaired asset requirements.

The press release and the final comment letter are available on the EFRAG website.

EFRAG recommends the endorsement of the Amendments. EFRAG’s initial assessment is that the Amendments meet the technical requirements of the Regulation (EC) No 1606/2002 of the European Parliament and of the Council on the application of international accounting standards.

EFRAG recommends the endorsement of the Amendments. EFRAG’s assessment is that the Amendments meet the technical requirements of the Regulation (EC) No 1606/2002 of the European Parliament and of the Council on the application of international accounting standards.

The update reports on the EFRAG Financial Reporting Board (EFRAG FRB) webcast meeting on 11 September 2023, the EFRAG Financial Reporting Technical Expert Group (FR TEG) webcast meetings on 15 September 2023, 21 September 2023 and 25 September 2023 and the EFRAG FR TEG and EFRAG Consultative Forum of Standard Setters (EFRAG CFSS) webcast meeting on 14 September 2023. 

The update also lists EFRAG publications issued in September including: 

• EFRAG's Draft Endorsement Advice on the Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability
• EFRAG's Final Comment Letter in response to the IASB's Request for Information as a part of the Post-implementation Review (‘PIR’) of the impairment requirements in IFRS 9 Financial Instruments
• EFRAG's Secretariat Briefing Summary on the IASB project on Climate-related Risks in the Financial Statements.

The update also covers EFRAG's sustainability reporting and related activities.

Please click to download the September 2023 EFRAG Update from the EFRAG website.

 The discussion will focus on the objectives and uses of the statement of cash flows, and issues with how the statement of cash flows is currently prepared under the requirements of IAS 7 Statement of Cash Flows.

As part of its research project on the statement of cash flows, EFRAG will issue a Discussion Paper for public comments that will:

1. List, and briefly discuss, different alternative objectives/uses of the statement of cash flows. Considerations on whether the statement should reflect changes in cash, changes in cash and cash equivalents or changes in working capital or net debt will be included.
2. Highlight the issues with current requirements/practice. 
3. Discuss whether the IASB could consider the issues by targeted amendments to IAS 7, or a comprehensive review.

The roundtable discussions are intended to receive input for (1) and (2) listed above.

These online roundtables will focus on preparers and auditors of corporates.

Further details, including the project details and details of how to register, are available on the EFRAG website. 

The motion did not argue the global baseline argument that would seek alignment with the sustainability disclosure standards issued by the International Sustainability Standards Board (ISSB), but rather argued that the European Commission delegated regulation adopted earlier this year:

• introduces a high administrative burden for companies due to the high complexity of sustainability reporting standards and that most ESRS standards fall short of usable key performance indicators and thus do not serve the Commission’s goal of creating measurable and comparable standards;
• requires significant resources by companies, which is a burden especially to smaller undertakings, as the sustainability reporting standards are complex and of high quantity; and
• jeopardises the Commission’s intention to reduce red tape and reporting obligations by 25 % in the light of intra-EU and extra-EU competitiveness issues.

The vote witnessed 359 parliamentary members supporting upholding the standards, while 261 supported the motion that sought to delay or withdraw the ESRSs

Please click to access the proposed motion for a resolution on the website of the European Parliament.

The common enforcement priorities related to financial reporting include:

• Insurance Contracts (IFRS 17)
• Amendments to IAS 12: International tax reform pillar two model rules

The common enforcement priorities related to sustainability reporting include:

• Preparations for the entry into force of the Corporate Sustainability Reporting Directive
• European Commission’s recommendation on transition finance

Special focus will be placed on:

• Impact of climate matters in IFRS financial statements
• Macroeconomic environment
• Refinancing and other financial risks
• Fair-value measurement and disclosures 
• Disclosures relating to article 8 of the Taxonomy Regulation
• Disclosures of climate-related targets, actions and progress
• Scope 3 emissions

Please click for the public statement on enforcement priorities on the ESMA website, providing more background on each of the focus areas.

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 2017 to December 2022, include:

Click for access to the full report and a list of all decisions published so far (links to ESMA website).