In March 2024, the DBT published a summary of responses to its non-financial reporting review call for evidence, and also an impact assessment which set out the first stage of planned measures to reform the UK non-financial reporting framework.  At that time, the government also committed to consulting later in the year on further proposals to reduce the reporting burden on medium-sized companies.

This consultation marks the next phase of the government’s non-financial reporting review and concentrates on medium-sized companies.  This is a limited consultation with two proposals to:

• exempt medium-sized companies from producing a Strategic Report; and
• uplift the medium-sized companies employee threshold from 250 up to 500 employees.

Comments on the consultation are requested by 27 June 2024.

The full consultation is available on the government website.

This updates on the commitments in the 2023 Green Finance Strategy and includes an update on UK adoption of IFRS Sustainability Disclosure Standards, transition plan disclosures, progress on SDR and investment labels, plans for introducing a UK green taxonomy, and developments relating to nature-related disclosures.

IFRS Sustainability Disclosure Standards

The UK Government has outlined its aim to make UK-endorsed ISSB standards available in Q1 2025. These would be known as UK Sustainability Reporting Standards. Subject to a positive endorsement decision, the Financial Conduct Authority (FCA), as set out in its Primary Market Bulletin 49, will then consult on plans to introduce requirements for UK-listed companies to disclose sustainability-related information using UK Sustainability Reporting Standards.

The UK Government will consult separately on plans to introduce disclosure requirements against UK Sustainability Reporting Standards for those companies outside the scope of the FCA’s rules. It is anticipated that any changes arising from this consultation would be effective no earlier than accounting periods beginning on or after 1 January 2026.

Separate to the update, the Department for Business and Trade (DBT) has published a document which summarises the overall framework that has been established within the UK for assessing IFRS Sustainability Disclosure Standards and the terms of reference for the development of UK Sustainability Reporting Standards.

Transition Plan Disclosures

In light of the overlap between the ISSB’s IFRS S2 Climate-related Disclosures and the Transition Plan Taskforce (TPT) Disclosure Framework, the FCA’s planned consultation on implementing UK-endorsed ISSB standards will also consider strengthening its expectations for transition plan disclosures with reference to the TPT Disclosure Framework.  The UK Government is also planning to consult shortly on how the UK’s largest companies can most effectively disclose their transition plans.

SDR & Investment Labels

The FCA has finalised its SDR and investment labels regime for funds based in the UK, including measures for investment labels, naming and marketing rules, an anti-greenwashing rule for all FCA-authorised firms, and disclosure rules. The most recent update outlines how the FCA is currently consulting on plans to extend the SDR and labelling regime to portfolio managers based in the UK. The Government is also planning to consult in 2024 on whether to broaden the scope of SDR to include funds under the Overseas Funds Regime.

UK Green Taxonomy

The Government has reiterated plans to consult on a proposed UK Green Taxonomy in due course. It has noted that once finalised, there will be a period of testing for voluntary disclosures and use for at least two reporting years before exploring the possibility of mandating disclosures

Nature-Related Disclosures

Although the Government has not outlined any firm plans in relation to nature-related disclosures, it welcomed the work of the Taskforce on Nature-related Financial Disclosures (TNFD) and the ISSB’s commitment to research and develop future additional standards, which could include reporting on nature-related risks and opportunities.

The implementation update can be found on the government website here.  The DBT summary document is available on the DBT website.  The FCA's Primary Market Bulletin 49 is available on the FCA website.

The first report, 'Accounting for Intangibles: A Quantitative Analysis of UK Financial Reports', provides an overview of the nature and extent of current reporting of intangibles by UK listed companies. The report:

• analyses the current reporting practice among listed companies, to examine how they account for intangibles (including capitalisation and expensing), together with any associated disclosure;
• looks at the relationship between acquisitions and intangible assets recognition, providing evidence on the extent to which intangible assets are recognised, predominantly as a result of business combinations; and
• provides an estimate of intangibles expenditure potentially not recognised as assets by UK listed companies.

The findings of the report provide evidence on the current reporting practices, some of their limitations, and the prevalence of intangibles beyond the information found on the face of the financial statements in the UK.

The second report, ‘Accounting for Intangibles: A survey of users’ views’, explores, by means of a survey, users’ perspectives on the accounting for and reporting of intangibles in financial statements. The survey addressed the economic importance of intangibles before examining in detail users’ views of the current IFRS accounting for, and reporting of, intangibles. It also examined possible future accounting by presenting respondents with a range of different types of intangibles and considering possible future accounting treatments and disclosures.  The findings provide evidence about the views of investors and other users of financial statements.

These reports follow the UKEB's first report, 'Accounting for Intangibles: UK Stakeholders’ Views', published in March 2023, which set out stakeholder views on the accounting for intangibles under International Accounting Standards within the context of the wider economic impact of intangibles in the UK. 

All three reports are part of the UKEB's research project on intangibles and the findings will be used by the UKEB as an evidence base in its future work on intangibles, as it develops its own views on accounting for intangibles.

Please click to access the reports on the UKEB website.  Also available on the UKEB website is a short video introducing the reports and a summary brochure which provides an overview of the key findings.

The following topics are on the agenda:

Post-implementation review (PIR) of IFRS 9—Impairment: The IASB will deliberate on the feedback received in response to its Request for Information Post-implementation Review—IFRS 9 Financial Instruments—Impairment with regard to credit risk disclosures and other matters. The staff recommends that the IASB classify as medium priority the matters raised by stakeholders about credit risk disclosures and add a project to its research pipeline to make targeted improvements to the disclosure requirements in IFRS 7 about credit risk. The staff also recommends that the IASB classify as medium priority and add to its research pipeline the matter relating to additional illustrative examples for financial instruments with particular features (such as between related parties). Finally, the staff recommends that the IASB concludes the PIR.

Financial instruments with characteristics of equity: The staff will provide a high-level summary of the feedback and key themes emerging from comment letters that have been received in response to the Exposure Draft (ED) Financial Instruments with Characteristics of Equity and from investor outreach activities. No decisions will be requested from the IASB in this meeting.

Second comprehensive review of the IFRS for SMEs Accounting Standard: The IASB will continue the redeliberations of its proposals in the ED Third edition of the IFRS for SMEs Accounting Standard. The IASB will make decisions with regard to Section 9 Consolidated and Separate Financial Statements, Section 23 Revenue from Contracts with Customers, differences between the ED and IFRS 19, and transition requirements.

Proposed IFRS Taxonomy Update—Contracts for Renewable Electricity: The IASB will receive an oral update about how the recent ED Contracts for Renewable Electricity affects the IFRS Accounting Taxonomy.

Rate-regulated activities: The IASB will continue the redeliberations of its proposals in the ED Regulatory Assets and Regulatory Liabilities. In particular, the staff recommends that the final standard should clarify that the income tax consequences of a regulatory asset or regulatory liability may give rise to a separate regulatory asset or regulatory liability. The staff also recommends that the final standard retain the proposal to delete the temporary exception in IAS 8:54G.

PIR of IFRS 15 Revenue from Contracts with Customers: The IASB will analyse the feedback related to matters not discussed in previous meetings. The staff recommends that the IASB take no further action on application matters related to allocating the transaction price to performance obligations and other aspects of applying IFRS 15 raised by respondents.

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

The updated guide provides a phased approach for implementing the Integrated Reporting (IR) Framework and is intended to help preparers to understand how the ISSB standards can be taken into account for their reporting.

The guide suggests that those preparers who are new to integrated reporting could begin by adopting the principles and concepts specified in the IR Framework over one, two or three reporting cycles. For experienced integrated reporters, the guide can help to embed IFRS S1 and IFRS S2 disclosures in their reports and hence, improve comparability of those reports.

Please click to access the updated guide via the press release on the IFRS Foundation website.

The amendments add disclosure requirements, and ‘signposts’ within existing disclosure requirements, that ask entities to provide qualitative and quantitative information about supplier finance arrangements.

The Commission Regulation amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council was published in the Official Journal of the European Union on 16 May 2024.  EFRAG has also updated its endorsement status report to reflect the endorsements of the amendments.

CSRD Essentials simplifies key aspects of the CSRD and is addressed to policymakers and sustainability reporters. There will be eleven editions of the publication series that explain the CSRD in accessible language.

The CSRD Essentials series focuses on:

• Scope, timing and interactions with existing standards
• Reporting format
• Legal interconnections, auditing rules and internal supervision
• Small and Medium Enterprises (SMEs), implementation procedures and penalties

Please click here for more information, including access to the first edition of CSRD Essentials, on the GRI website.

The ICAS report is titled Materiality assessments in corporate sustainability and financial reporting: Connectivity, practices, processes, and challenges and:

• explores to what extent and how sustainability and financial reporting are becoming connected and overlapping;
• examines the processes followed and challenges faced by preparers when adopting the different concepts of materiality;
• addresses how entities can best identify the relevant material information to be included within both financial and sustainability reporting; and
• questions whether there is one singular conceptualisation of materiality or multiple interpretations that should be applied across different types of information.

The IRC document is titled FAQ — Explaining Materiality in Corporate Reporting. It includes a high-level explanation of the materiality definitions and terms used in some of the standards and frameworks commonly applied in corporate reporting.

Please click to access the following:

• Materiality assessments in corporate sustainability and financial reporting: Connectivity, practices, processes, and challenges and key findings from the report on the ICAS website.
• FAQ — Explaining Materiality in Corporate Reporting on the IRC website.

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

The agenda for the meeting is sum­marised below:

Agenda papers for this meeting are available on the IFRS Foundation website.