The ITCG will discuss the following topics:

• Review of common reporting practice
• Digital reporting implications for the Exposure Draft Management Commentary
• Technology update

The agenda papers for this meeting are available on the IASB website.

The Board will discuss the following:

• Board work plan update
• Goodwill and impairment
• Post implementation review of IFRS 9
• Primary financial statements
• Dynamic risk management
• Extractive activities
• Financial instruments with characteristics of equity

The full agenda for the meeting can be found here. We will post any updates to the agenda, our com­pre­hen­sive pre-meet­ing summaries, as well as observer notes from the meeting on this page as they become available.

EFRAG is looking for a holistic assessment of IFRSs (strengths, weaknesses, long-term considerations, topics still to be addressed and European needs and requirements). Applications are welcome by 15 October 2021.

Please click for more information on the EFRAG website.

Last year the Financial Conduct Authority (FCA) delayed, by one year, the mandation of Disclosure and Transparency Rule 4.1.14, which introduced a requirement for companies on a regulated market to publish annual reports in XHTML format.  These requirements now apply for financial years beginning on or after 1 January 2021.    

The survey had 46 respondents and show that UK companies have begun to put the right steps in place to meet the requirements with many having undertaken an analysis of the requirements and identified service providers.  Some remeining actions still remain such as running tests and engagement with the board.

The Lab has also published a list of resources to help companies understand and implement the requirements.  It is also reviewing a set of UK and EU ESEF filings with the aim of publishing a best practice report in autumn.

A press release, the results of the survey and a list of resources are available at the FRC website.

The ongoing work of the IFRS Foundation is expected to result in first standards in June 2022, including the ISSB climate standard. Jurisdictions that begin engaging with policymakers now will be able to capitalise on the forthcoming standards as soon as they are finalised. IFAC, therefore, urges its member organisations to continue their support for the IFRS initiative, to engage now with local policymakers, and to provide feedback on the framework for making global sustainability standards local.

Please click for more information on the IFAC website.

A summary of the agenda is set out below:

Agenda papers for the meeting are available on the IASB website.

A sample of 27 entities across a cross-section of industries was selected for review.

The report identified that:

• Those entities sampled largely complied with the minimum statutory disclosure requirements with all disclosing emissions and the majority disclosing energy use. A number of entity-specific disclosure errors or omissions were identified such as not providing separate sub-totals for scope 1 and 2 emissions or not reporting the proportion of emissions or energy use in the UK and offshore.
• More needs to be done to make the disclosures understandable and relevant for users. The FRC found that:
  • Reports did not always provide sufficient information about the methodologies used to calculate the emissions and energy use information. In particular, it was not always clear which entities were included in groups’ SECR disclosures.
  • More thought is needed about how to integrate these disclosures with narrative reporting on climate change, where relevant, and make them easier for users to navigate.
  • It was sometimes unclear whether the ratios selected were the most appropriate for the entities’ operations. It was also often not possible to recalculate emissions ratios by reference to other disclosures in the report, for example, emissions per £m revenue.
  • The extent of third party assurance obtained over the SECR information was not adequately explained in most cases.
  • Disclosures about energy efficiency measures did not always clearly describe the ‘principal measures’ taken by the entity in the current year.
• There were some examples of emerging good practice such as:
  • the disclosure of Scope 3 emissions, information about the use of renewable energy and reporting of both location-based and market-based emissions.
  • Disclosure of emissions reduction targets with better disclosures explaining ‘net zero’/other emission-reduction commitments and strategies with inclusion of details on pathways and interim targets.
  • Reporting in a format consistent with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD) or stating an intention to adopt in the future.

With regards to future reporting the FRC expects preparers to:

• Present all the required information in a form which is clear, understandable, and easy for users to navigate, using cross-references where relevant information is provided across several parts of the annual report.
• Provide an adequate explanation of the methodologies used to calculate emissions and energy use. This would include:
  • Which entities have been included in group disclosures.
  • Any other significant policy choices about which emissions are included.
  • Any significant changes in methodology, or any other matters which may affect the comparability of the information disclosed.
• Provide an explanation or reconciliation where ratios provided cannot be recalculated from, or are apparently inconsistent with, other disclosures in the annual report and accounts.
• Describe the extent of any due diligence or assurance over emissions and energy use metrics.
• Provide an adequate description of energy efficiency initiatives in the current and comparative period, focussing on those ‘principal measures’ with the most significant impact.
• Consider whether any other disclosures, such as Scope 3 emissions, would be helpful to investors or other users.
• Provide clear explanations which help users to understand and compare major commitments, such as ‘net zero emissions’ targets or ‘Paris-aligned’ strategies, including which activities and emissions are included in the scope of these commitments. This may require the disclosure of additional emissions-related information, beyond the minimum required by SECR.

A press release and the full report are available on the FRC website.  A webinar to discuss the report will be held on October 20.  A press release including details of how to register for the webinar is available on the FRC website.  

The Code is voluntary and sets an aspirational standard beyond minimum regulatory requirements in the UK. The Code comprises 12 ‘apply and explain’ Principles for asset owners and asset managers, with reporting expectations relevant to their role. In addition, there are six, separate ‘apply and explain’ Principles for service providers with reporting expectations.

An organisation applying to become a signatory to the Code will need to provide a Stewardship Report that sets out how they have applied the Code Principles in the preceding 12 months. This must include reporting on the activities they have undertaken, and the outcomes achieved.  For the organisation to be listed as a signatory on the FRC’s website, the Report will need to meet the reporting expectations set out in the Code.

The review process considered organisations’ investment styles, sizes and types.  Two-thirds of all applications (125) have been included in the signatories list.  The FRC was pleased to see investors better integrating stewardship, and environmental, social and governance (ESG) factors into their investment decision-making, reporting on asset classes other than listed equity and identifying the outcomes of their efforts. There was also strong reporting on underpinning governance activities.

The organisations whose applications were not successful commonly did not address all the Principles or sufficiently evidence their approach and instead relied too heavily on policy statements. Other areas of weakness included reporting on the approaches to review and assurance, and monitoring service providers. The FRC would also like to see more focus on identifying areas for improvement.

To remain signatories, organisations will need to continue to improve their reporting as market practice and expectations evolve.

Further information is available on the FRC website. 

Please click to access the interview on the IASB website.

Comments on tentative agenda decisions

IFRS 16 Leases—Non-refundable VAT on Lease Payments: In March 2021, the Committee discussed a submission about whether a lessee includes non-refundable VAT as part of the lease payments. In the meeting, the Committee members generally agreed with the accounting conclusion but a number of them were not convinced that the matter is not material or widespread based on the limited outreach performed by the staff. The responses from the comment letters reflect similar views and some respondents requested explaining the accounting treatment of the non-refundable VAT in the agenda decision.

IAS 32 Financial Instruments: Presentation—Accounting for Warrants that are initially classified as Liabilities: In March 2021, the Committee discussed a submission asking whether the issuer reclassifies the warrant (which is classified as a financial liability at initial recognition) as equity when the exercise price is subsequently fixed. The staff concluded that the matter, in isolation, is too narrow to be answered and recommended publishing a tentative agenda decision to explain this. On the other hand, they believe that the broader issues of reclassifying financial instruments are better addressed as part of the Board’s Financial Instruments with Characteristics of Equity (FICE) project. In the meeting, the Committee members generally agreed with the staff's recommendations as did most respondents to the tentative agenda decision.

The staff recommend that the tentative agenda decisions be finalised with minor editorial changes or no change at all.

Input on Board project

Proposed amendments to IFRS 16 Leases—Lease Liability in a Sale and Leaseback: In November 2020, the Board published ED/2020/4 Lease liability in a Sale and Leaseback, which proposed an amendment to IFRS 16. The comment period ended in March 2021 and the Board discussed the feedback on the ED at its meeting. The staff analysed the feedback and provided recommendations on the project direction in the agenda paper.

The staff are seeking Committee members' views on the possible project direction.

Initial consideration

IAS 7 Statement of Cash Flows—Demand Deposits with Restrictions on Use: The Committee received a submission asking whether an entity includes demand deposits with restrictions on use as a component of cash and cash equivalents ("C&CE"). The terms and conditions of the demand deposit do not prevent the entity from accessing amounts held in the demand deposit but the entity cannot use the cash other than the purpose specified in the agreement. The staff analysed that such demand deposits should be included in C&CE in the statement of cash flows and could be presented as C&CE in the statement of financial position, unless presenting it separately in an additional line item is relevant to an understanding of the entity's financial position. The information about the restrictions is required to be disclosed under various IFRS Standards.

The staff recommended not to add a standard-setting project and instead publish a tentative agenda decision on this issue.

IFRS 9 Financial Instruments—Cash Received via Electronic Transfer as Settlement for a Financial Asset: The Committee received a submission asking the timing of recognition of cash received via Bacs, a formal automated settlement process, as settlement for a financial asset. The submitter asked whether it is acceptable for the entity to derecognise the trade receivable and recognise the cash on transfer initiation date, rather than the transfer settlement date. The staff concluded that the trade receivable is generally derecognised on the settlement date, the date when the contractual right to the cash flows from the trade receivable expires. Also, cash should be recognised on the transfer settlement date because the entity has a right to obtain cash from the bank only when cash is deposited in its bank account.

The staff recommended not to add a standard-setting project and instead publish a tentative agenda decision on this issue.

Work in progress: The staff are in the process of analysing three matters:

• Principal versus agent-IT resellers (IFRS 15)
• Deficits in low/new energy vehicle credits (IAS 37)
• Rent Concessions-lessors and lessees (IFRS 16 and IFRS 9)

The full agenda for the meeting and our com­pre­hen­sive pre-meet­ing summaries can be found here.