The following topic was discussed:

• GSSB Work Program 2023-2025: Carol Adams, Global Sustainability Standards Board (GSSB) Chair, and Bastian Buck, GSSB Chief of Standards presented an overview of the GSSB work programme over the next two years.
• International Applicability of the SASB Standards: The staff presented the feedback the ISSB received with regard to the Exposure Draft Methodology for Enhancing the International Applicability of the SASB Standards and SASB Standards Taxonomy Updates (Methodology ED). The staff also informed the ISSB about recommendations it made to the SASB Standards Board Advisor Group (SASB Standards Board Advisors) in response to the Methodology ED feedback and the decisions taken by the SASB Standards Board Advisors.
• Supporting implementation of IFRS S1 and IFRS S2: The staff provided an update on the development of educational material on IFRS S1 and IFRS S2. The staff intends to develop educational material that is anchored in and informed by stakeholder feedback. At the same time, the staff thinks it is necessary to find a balance between being proactive and responsive, while also developing a systematic approach to monitor, evaluate and respond to questions being raised by stakeholders. The ISSB was not asked to make any decisions.

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

The UKEB welcomes the opportunity to provide comments on the IASB’s Request for Information.

The final comment letter considers that IFRS 15 is generally working as intended and does not identify any fatal flaws in the standard.  However it does suggest a number of areas where the standard could be improved to reduce diversity in application based upon the UKEB's analysis and stakeholder outreach.

The full comment letter and feedback statement are available on the UKEB website.

The Taxonomy Regulation requires, in its Article 8, in-scope companies to include in their non-financial statements or consolidated non-financial statements information on how, and to what extent, their activities are associated with economic activities that qualify as environmentally sustainable under Articles 3 and 9 of the Regulation.  Information to be disclosed as well as timing is specified in the Disclosures Delegated Act.

As part of its objective to coordinate European supervision and enforecement activities related to disclosures under Taxonomy Regulation, ESMA collected information from national enforcers with respect to the Fiscal Year 2022 non-financial statements published by European non-financial undertakings listed in regulated markets. The focus of the fact-finding exercise was to evaluate the quality of the disclosures with which issuers have responded to the new requirements. ESMA, in particular, was keen to understand the extent to which companies had responded to points it had made in its 2022 European Common Enforcement Priorities.

The key findings identified by ESMA were:

• Disclosure of mandatory Key Performance Indicators (KPIs): Almost all issuers (96% of the sample), disclosed the required Taxonomy alignment KPIs.
• Use and completeness of the mandatory reporting templates: The reporting templates were generally used, but for 30% of the sample they were either modified or not fully completed.  ESMA reminds issuers that full reporting using the complete templates is mandatory.
• Disclosure of mandatory qualitative information: At least some of the mandatory qualitative information regarding the issuers’ assessment of their compliance with transparency requirements in relation to the nature of their activities, the technical screening criteria, the Do No Significant Harm – DNSH criteria, and the minimum safeguards was missing or insufficient for more than 40% of the assessed issuers. In addition, only 40% of the sample provided comments on their eligibility or alignment rates.
• Materiality exemption: The OpEx alignment KPI was the KPI most often not reported (4% of the sample) or reported as zero (26% of the sample). Subject to conditions and specific disclosures, the Disclosures Delegated Act makes it possible to claim a materiality exemption for the OpEx KPI. In the cases where such claim was made, ESMA found that information did not in general allow an external reader to assess whether the conditions for applying the exemption were met and/or some of the criteria attached to it were applied appropriately.
• Other areas of incorrect application:  Additional areas of incorrect application were identified in relation to the transparency on the avoidance of double counting, the screening of activities against one climate objective only or the reconciliation with financial reporting.
• Good reporting practices were also encountered, such as detailed explanations on the nature of activities or compliance tests, as well as links to the corporate sustainability strategy.

ESMA reminds issuers of the importance of providing all quantitative and qualitative disclosures required by the Disclosures Delegated Act and ‘strongly encourages’ issuers to use guidance and tools published by the European Commission too assist them in their reporting.  Its latest Statement on European common enforcement priorities, provides ESMA’s expectations in this area.

ESMA notes that it may undertake further analysis on the areas of reporting which require more clarity or on those areas it has identified where there was material incorrect application of the requirements.

The full report is available on the ESMA website.

The topics covered during the meeting were the following (numbers in brackets are ref­er­ences to the cor­re­spond­ing para­graphs of the summary):

• Agenda planning and feedback from previous ASAF meeting (1): The ASAF members discussed topics for its next meeting to be held on 4–5 December 2023 and will include a dis­cus­sion on primary financial statements and climate-related and other uncertainties in the financial statements.
• Rate-reg­u­lated ac­tiv­i­ties (2–14): The ASAF members were updated on the re­de­lib­er­a­tions of the Exposure Draft Reg­u­la­tory Assets and Reg­u­la­tory Li­a­bil­i­tiesand provided comments on whether the IASB’s tentative decisions in Q1 and Q2 2023 on total allowed compensation, recognition, derecognition and measurement help to address stakeholders’ feedback.
• Power purchase agreements (15–26): The ASAF members provided views related to the timely and efficient standard-setting solution to challenges stakeholders have raised concerning power purchase agreements. In particular, they provided views on prevalence and scope.
• Equity method (27–36): The ASAF members discussed the implication of applying the IASB’s tentative decisions for investments in associates related to investments in subsidiaries in separate financial statements and investments in joint ventures.

• Primary financial state­ments (37–42): The ASAF members were updated on the project and provided feedback on whether their jurisdictions have laws or regulations that require entities to provide comparative information for more than one comparative period in their financial statements and whether those laws and regulations permit an entity to provide only one year of comparative information when a new IFRS Accounting Standard is applied.
• IAS 12 Pillar Two — Sharing information on implementation (43–44): The ASAF members provided views on the implementation of the Pillar Two model rules.

A full summary of the meeting is available on the IASB's website.

Specif­i­cally, the podcast discusses:

• Progress towards jurisdictional adoption of IFRS S1 and IFRS S2.
• Progress by partners.
• Update on capacity building and translations.
• Recent meetings with stakeholders.
• Update on October board week.
• Preliminary feedback on the agenda consultation.

For more information and access to the podcast, see the press release on the IFRS Foundation’s website.

The UKEB supports the proposals in the ED as they are expected to improve the consistency and understandability of the IFRS Accounting Standards concerned.

Comments on the draft comment letter are requested by 20 November 2023.

The draft comment letter and the invitation to comment are available on the UKEB website.

For more information, please see the consultation page on the European Commission website. The consultation is open for comments until 19 December 2023.

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 report, titled The Heat is On: Disclosures of Climate-Related Matters in the Financial Statements, aims to assist and to enhance the ability of issuers to provide more robust disclosures and create more consistency in how climate-related matters are accounted for in financial statements drawn up in accordance with IFRS. The report focuses on disclosures related to climate matters included in the 2022 annual financial statements of European non-financial corporate issuers.

Although ESMA considers that IFRSs are fit for purpose and provide sufficient basis for issuers to account for and to disclose climate-related matters in financial statements, ESMA also believes that real life illustrations of disclosures may assist issuers to better communicate such impacts and investors and other stakeholders to better understand them and take them into account when making informed decisions.

ESMA expects issuers and auditors to consider the illustrative examples of the report when considering how to assess and disclose the degree to which climate-related matters play a role into the preparation and auditing of IFRS financial statements. ESMA also stresses that the guidance addressing climate impacts is not exhaustive and is developing at a fast pace. Issuers should closely follow the developments of standard setters in this area, and their connection with sustainability reporting.

Please click to access the report on the ESMA website.

The EFRAG Secretariat collects the submissions and forwards them to the EFRAG technical bodies with the aim to publish non-authoritative clarifications to these issues. The publication of first clarifications is expected by the beginning of 2024. Legal interpretations or subsequent changes to the legal framework (CSRD or ESRS) remain in the remit of the European Commission.

Please see the press release on the EFRAG website for additional information.