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FRC issues guidance for auditors arising from the coronavirus pandemic

17 Mar 2020

The Financial Reporting Council (FRC) has issued updated guidance for auditors which may be facing practical difficulties in carrying out audits as a result of the COVID-19 pandemic (coronavirus).

Uncertainty about the immediate outlook for many companies has increased sharply. This has consequences for companies proposing to report results in the coming months, and for their auditors. 

Some companies and auditors are also facing practical difficulties in preparing accounts and carrying out audits. Given restrictions on travel, meetings and access to company sites in some jurisdictions, the FRC indicates that audit firms may need to consider developing alternative audit procedures to gather sufficient, appropriate audit evidence.

The FRC highlights that the current situation should not undermine the delivery of high-quality audits and indicates that in current circumstances, additional time may be require to complete audits.  The FRC notes that it is important that this additional time is taken even if this results in reporting deadlines being reconsidered or company reporting being delayed.

The updated guidance highlights that auditors will need to consider the impact of coronavirus on: 

  • how they gather sufficient, appropriate audit evidence, recognising that the planned audit approach may need to change and alternative procedures developed;
  • how the group auditor proposes to review the work of component auditors;
  • the auditor's assessment of going concern and the prospects of an audited company;
  • the adequacy of disclosures made by management about the impact of COVID-19 on the company; and
  • the need for the auditor to reassess key aspects of their audit as a result of the fast-changing situation, which may require management to provide further evidence.

The updated guidance also indicates that auditors will need to engage with the entities they audit to ensure they set clear expectations as to the level of disclosure they expect to see in annual reports to communicate the impact and risk of COVID-19 on the company.  It emphasises the importance of communication with companies, especially their audit committee regarding reporting deadlines and support to carry out their work to a high standard. 

The updated guidance follows previous guidance issued by the FRC on disclosure of risks and other reporting consequences arising from the emergence and spread of Coronavirus. 

A press release and the updated guidance is available on the FRC website. 

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IASB votes on IFRS 17 effective date

17 Mar 2020

At its meeting held today, the IASB discussed and voted on the remaining issues resulting from the feedback received on the exposure draft ED/2019/4 'Amendments to IFRS 17' which were the effective date of IFRS 17 and the expiry date of the IFRS 9 temporary exemption in IFRS 4.

On the effective date, which originally was set at 1 January 2021 and which ED/2019/4 proposed to move to 1 January 2022, the Board now decided to:

  • a) defer the effective date of IFRS 17 (incorporating the amendments) to annual reporting periods beginning on or after 1 January 2023; and
  • b) extend the fixed expiry date of the temporary exemption from applying IFRS 9 in IFRS 4 to annual reporting periods beginning on or after 1 January 2023.

Although, several Board members expressed doubt or concerns, the final vote on a) was 12 in favour, 1 against, 1 absent (the one absent Board member had lost connection but later stated that he would also have voted in favour). On question b) the final vote was 12 in favour, 2 against.

The Board then proceeded to discuss questions around the balloting process. All Board members agreed that there is no need to re-expose the amendments to IFRS 17, no Board member intends to dissent from the issuance of the final amendments, and all Board members gave permission to start the balloting process. 

The staff will therefore begin to draft the amendments to IFRS 17 and bring any sweep issues identified during the balloting of the amendments for discussion at a future meeting. The staff expect that the amendments will be issued in the second quarter of 2020, in line with the Board’s plan as stated in the exposure draft.

The IASB has published a press release announcing the deferral.

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2020 IFRS XBRL taxonomy issued

17 Mar 2020

The IFRS Foundation has issued its 2020 IFRS Taxonomy. The IFRS Taxonomy is a translation of IFRS Standards into XBRL (eXtensible Business Reporting Language).

The IFRS Taxonomy 2020 is consistent with IFRSs as issued by the IASB at 1 January 2020, including those issued but not yet effective.

The IFRS Foundation has also published IFRS Taxonomy 2019 — Update 1 Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7). The IFRS Taxonomy 2020 incorporates the changes resulting from this update.

For more information, see the press release and the IFRS Taxonomy 2020 page on the IASB's website.

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Agenda for the March 2020 CMAC meeting

17 Mar 2020

Representatives from the International Accounting Standards Board (IASB) will meet with the Capital Markets Advisory Council (CMAC) by video conference on 26 March 2020. The agenda for the meeting has been released.

The full agenda for the meeting is summarised below:

Thursday, 26 March 2020 (10:00-14:25)

  • Welcome and introduction of new members
  • Primary financial statements: Exposure Draft General Presentation and Disclosures
    • Overview of the Exposure Draft
    • Preliminary feedback from members
  • Financial instruments with characteristics of equity
    • Outreach with users of financial statements to help the Board refine and further develop the disclosure proposals explored in the 2018 Discussion Paper
  • IBOR reform and its effects on financial reporting — Phase 2
    • Outreach with users of financial statements to help the Board obtain feedback on the disclosures proposed for this phase of the project
  • Management commentary
    • CMAC members input on what users need to understand for each distinct area of content in management commentary and how they use that information
    • CMAC members input on the proposed disclosure objectives for each area of content

Agenda papers for this meeting are available on the IASB's website.

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Recent sustainability and integrated reporting developments

17 Mar 2020

A summary of recent developments at CDSB, CDSB/CDP, SASB, IRC, ICAI, Deloitte, and IAASB.

The Climate Disclosure Standards Board (CDSB) is following the review of the EU Non-Financial Reporting Directive closely and proposes eight changes to ensure that the Directive is fit for purpose to achieve Europe’s ambitious sustainable finance goals. Please click for further information on the CDSB website.

The CDSB and the Carbon Disclosure Project (CDP) have jointly released an environmental reporting handbook to help companies improve their disclosure in line with the EU Non-Financial Reporting Directive. The EU Environmental Reporting Handbook helps companies learn from their peers to better understand how to report in line with the Directive. Please click for further information on the CDSB website

The Sustainability Accounting Standards Board (SASB) has launched the SASB Implementation Primer, an online resource for companies seeking to incorporate SASB standards into their core communications with investors. Please click to access the press release and the implementation primer on the SASB website.

The Integrated Reporting Committee (IRC) of South Africa has updated its starter’s guide initially published in 2014, to provide organisations with practical suggestions on preparing an integrated report. The guide is aligned with the King IV Report on Corporate Governance for South Africa and presents updated examples five years after publication of the International <IR> Framework. Please click to access Preparing an Integrated Report – A Starter’s Guide (Updated) on the IRC website.

The Institute of Chartered Accountants of India (ICAI) has set up a Sustainability Accounting Standards Board to help companies in achieving sustainable development goals. The Board will set standards that will establish disclosure requirements in line with the sustainable development goals of the United Nations. The initial composition of the Board is available here.

Deloitte Norway studied the annual and sustainability reports of the 50 largest companies headquartered in the country, analysing their maturity in terms of integrated reporting and sustainability reporting. Greenwashing or measurable results? can be accessed here.

Deloitte UK has commented on Advancing Nature-related Financial Disclosures and use of the CDSB Framework published by the CDSB. Deloitte encourages the CDSB to work with others to push with urgency for consolidation and harmonisation of standards and frameworks, in order to have one definitive global standard on climate reporting. Please click to access the comment letter here.

The International Auditing and Assurance Standards Board (IAASB) is consulting on proposed guidance Extended External Reporting Assurance. The purpose of the guidance is to promote consistent high-quality application of ISAE 3000 so as to strengthen the influence of EER assurance engagements on the quality of EER reports, enhance user trust in the resulting assurance reports, and engender greater confidence in the credibility of, trust in and reliance upon EER reports by their intended users. Please click for more information on the IAASB website.

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Consultation launched to assist trustees on aligning their pension scheme to the TCFD recommendations

17 Mar 2020

A new consultation has been launched which sets out non-statutory guidance for the trustees of occupational pension schemes on assessing, managing and reporting climate-related risks in line with the Taskforce on Climate-Related Financial Disclosures (TCFD).

The draft guidance has been drawn up by the Pensions Climate Risk Industry Group (PCRIG), a group set up last summer by the Department of Work and Pensions, TPR and other pension representatives.

The draft guidance is split into three parts:

  • Part 1 - introduces climate risk as a financial risk to pension schemes, trustees’ legal requirements and the TCFD recommendations.
  • Part 2 - sets out a suggested approach for the integration and disclosure of climate risk within the typical governance and decision-making processes of pension trustee boards, including defining investment beliefs, setting investment strategy, manager selection, and monitoring.
  • Part 3 - contains technical details on recommended scenario analysis and metrics that trustees may wish to consider using to record and report their findings.

The consultation closes at 11.45pm on 7 May 2020. PCRIG intends to publish the final guidance in the autumn.

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

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IASB reduces the March 2020 meeting agenda

13 Mar 2020

Due to concerns with the coronavirus, the IASB has reduced the agenda for the March 2020 meeting and has made it remote access only. The reduced agenda will only include discussions on amendments to IFRS 17, rate-regulated activities, and management commentary.

Our pre-meeting summaries are available on our March meeting notes page and will be supplemented with our popular meeting notes after the meeting.

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European Lab seeks members for its second task force

13 Mar 2020

The European Financial Reporting Advisory Group (EFRAG) has published a call for candidates for members of a new project task force on reporting of non-financial risks and opportunities and linkage to the business model.

The aim of the new project of the European Corporate Reporting Lab is to identify good practices on the reporting of non-financial risks and opportunities and their linkage to the business model from a sustainability perspective and addressing what is commonly known as ESG factors. The project is expected to consider the information needs and expectations of a wide range of users and other stakeholders, the extent to which they are addressed by current reporting practices, and the challenges faced by companies in providing that information.

The deadline for applications is 10 April 2020.

Please click for more information in the press release on the EFRAG website.

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Accounting considerations related to coronavirus disease 2019

12 Mar 2020

Global responses to the coronavirus disease 2019 (COVID-19) outbreak continue to rapidly evolve. COVID-19 has already had a significant impact on global financial markets, and it may have accounting implications for many entities.

Some of the key impacts include, but are not limited to:

  • Interruptions of production.
  • Supply chain disruptions.
  • Unavailability of personnel.
  • Reductions in sales, earnings, or productivity.
  • Closure of facilities and stores.
  • Delays in planned business expansions.
  • Inability to raise financing.
  • Increased volatility in the value of financial instruments.
  • Reduced tourism, disruptions in nonessential travel and sports, cultural and other leisure activities.

In addition, entities should consider the increasingly broad effects of COVID-19 as a result of its negative impact on the global economy and major financial markets.

Entities must carefully consider their unique circumstances and risk exposures when analysing how recent events may affect their financial reporting. Specifically, financial reporting and related financial statement disclosures need to convey all material effects of COVID-19.

The FRC has recently issued advice on this matter which is available here.

Read more in Deloitte's Need to know newsletter.

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IFRS Foundation Coronavirus update

12 Mar 2020

The IFRS Foundation has provided updated operational information related to the Coronavirus. The inforation regards the March CMAC meeting, the March IASB meeting, and general information about visits to the IFRS Foundation offices.

The March CMAC meeting (26 March 2020) will be remote access only for observers. CMAC members will only attend if they are based in London and meet the criteria for visits to the IFRS Foundation offices.

The March IASB meeting (17 and 19 March 2020) is currently expected to proceed as planned, however, observers are reminded that digital access is available. Should the IFRS Foundation offices need to be closed, the meeting will be held by video conference and will feature a reduced agenda.

All visitors to the IFRS Foundation offices will need to confirm before arrival that they haven't been to a category 1 or 2 hotspot in the past 14 days and have not experienced any flu-like symptoms in the past seven days.

Please click for the full update on the IASB website.

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