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IOSCO (International Organization of Securities Commissions) (dark gray) Image
Leaf - sustainability (green) Image

Chair of the IOSCO Task Force on Sustainable Finance reconfirms that IOSCO stands ready to support global sustainability reporting standards

29 Oct 2020

As reported earlier, the CDP, Climate Disclosure Standards Board, Global Reporting Initiative, International Integrated Reporting Council and Sustainability Accounting Standards Board sent an open letter to Erik Thedéen, Chair of the Sustainable Finance Task Force of the International Organization of Securities Commissions, on the need to work together to meet the needs of the capital markets as regards global sustainability reporting standards. Mr Thedéen already acknowledged the letter and responded to it in a speech in September, however, he has now released an open response.

In his response, Mr Thedéen repeats the April 2020 IOSCO statement that IOSCO is looking to play an important role in the area of sustainability reporting. Commenting once more on the IFRS Foundation sustainability reporting consultation and the statement of intent of CDP, CDSB, GRI, IIRC, and SASB, he notes again that while these initiatives are currently running in parallel, IOSCO is keen to see them come together.

On IOSCO's role and the path forward, Mr Thedéen reconfirms that IOSCO stands ready to offer support and help. He writes:

As noted, we agree that there is an urgent need to improve the completeness, consistency and comparability of sustainability reporting. Together your joint initiative and that of the IFRS Foundation [...] can set the foundations of a global system architecture that will deliver a more coherent and comprehensive corporate reporting system. [...] We believe that IOSCO is in a unique position to help in this process - just as we did 20 years ago when we endorsed IFRS for use in cross-border offerings and listings and set the foundations of the current three-tier governance structure that the IFRS Foundation enjoys today. We look forward to continuing and deepening our collaboration with your organisations and the IFRS Foundation.

Please click to access the full letter on the IOSCO website.

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New TCFD status report, additional guidance, public consultation

29 Oct 2020

The Task Force on Climate-related Financial Disclosures (TCFD) set up by the Financial Stability Board (FSB) to develop voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to lenders, insurers, investors and other stakeholders has published a third status report providing an overview of the extent to which companies in their 2019 reports included information aligned with the core TCFD recommendations published in June 2017.

The TCFD surveyed disclosures of around 1,700 firms from diverse sectors with broad geographical representation (69 countries). It found that:

  • Nearly 60% of the world’s 100 largest public companies support the TCFD, report in line with the TCFD recommendations, or both.
  • Disclosure of climate-related financial information has increased since 2017, but continuing progress is needed.
  • Energy companies and materials and buildings companies lead on disclosure.
  • One in 15 companies reviewed disclosed information on the resilience of its strategy.
  • Asset manager and asset owner reporting to their clients and beneficiaries, respectively, is likely insufficient.

The report also notes that expert users find the impact of climate change on a company’s business and strategy as the “most useful” for decision-making, an insight which might provide a road map for preparers.

The TCFD also published guidance on climate-related scenario analysis for non-financial firms and on integrating climate-related risks into existing risk management processes. Additionally, the TCFD published a public consultation on forward-looking climate metrics for financial firms (with responses due by 27 January 2021).

Please click for the following additional information on the FSB website:

IASB (International Accounting Standards Board) (blue) Image
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Article on the impact COVID-19 might have on applying IFRSs

28 Oct 2020

IASB Board member Mary Tokar and technical staff member Sid Kumar have released an article that provides an overview of the key financial reporting considerations associated with COVID-19.

The article builds on a panel discussion at the IFRS Foundation Virtual Conference on 28 September 2020, which focused on what entities need to consider when developing assumptions in preparing financial statements in times of heightened uncertainty and what information to disclose about the assumptions used.

Please click to access In Brief: Applying IFRS Standards in 2020 — impact of covid-19 on the IASB website.

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ESMA announces enforcement priorities for 2020 financial statements

28 Oct 2020

The European Securities and Markets Authority (ESMA) has announced the priority issues that the assessment of listed companies' 2020 financial statements will focus on. A special focus is on COVID-related matters.

The common enforcement priorities related to 2020 IFRS financial statements include:

  • the application of IAS 1 Presentation of Financial Statements with a focus on going concern, significant judgements and estimation uncertainty and the presentation of COVID-related items in the financial statements;
  • the application of IAS 36 Impairment of Assets, where the recoverable amount of goodwill, intangible assets and tangible assets may be impacted by the deterioration of the economic outlook of various sectors;
  • the application of IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures, including general considerations relating to risks arising from financial instruments, focusing on liquidity risk, and specific considerations related to the application of IFRS 9 for credit institutions when measuring expected credit losses; and
  • specific issues related to the application of IFRS 16 Leases, including explicit disclosures by lessees which have applied the IASB’s amendment providing relief to lessees when accounting for rent concessions.

ESMA also highlights key non-financial information issues and alternative performance measures with regard to the impact of COVID-19, social and employee matters, business model and value creation, and risks relating to climate change.

ESMA also highlights the importance of disclosures analysing the possible impacts of the decision of the United Kingdom to leave the European Union.

ESMA and European national enforcers will monitor and supervise the application of the IFRS requirements outlined in the priorities, with national authorities incorporating them into their reviews and taking corrective actions where appropriate. ESMA will collect data on how European listed entities have applied the priorities and will publish its findings in a separate report.

Please click for the following documents on the ESMA website:

EFRAG (European Financial Reporting Advisory Group) (dk green) Image

EFRAG early-stage analysis of rate regulation proposals

28 Oct 2020

The European Financial Reporting Advisory Group (EFRAG) is inviting users to participate in an early-stage analysis of the likely impacts of possible changes to IFRS requirements as a result of the IASB project on the accounting for regulatory assets and regulatory liabilities. The IASB is expected to issue an exposure draft in early 2021.

The EFRAG analysis aims at assessing possible impacts of the new accounting model under consideration based on an understanding of users' current information needs and approaches towards analysing rate-regulated entities.

Please click for more information on the EFRAG website.

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FRC invites comments on its draft UK Endorsement Criteria Assessment on the Amendments to IFRS 4 - extension to IFRS 9 deferral

27 Oct 2020

The Financial Reporting Council (FRC) has published a draft UK Endorsement Criteria Assessment on the International Accounting Standards Board's (IASB’s) 'Amendments to IFRS 4 - Extension of the Temporary Exemption from Applying IFRS 9' (the Amendments).

As part of the preparation for the end of the Transition Period, work is being undertaken to ensure the UK is ready to undertake adoption of the Amendments if EU adoption does not occur in December 2020 (as the UK leaves the EU at the end of the transition period on 31 December 2020).

The FRC welcomes stakeholders’ views to inform its recommendation to the BEIS Secretary of State to adopt the Amendments in the UK.

The FRCs initial assessment is that:

  • the Amendments meet the criterion of relevance, reliability, comparability and understandability required of the financial information needed for making economic decisions and assessing the stewardship of management, as required by SI 2019/685 (see Regulation 7(1)(c)); and
  • application of the Amendments are not contrary to the principle that an entity’s accounts/consolidated accounts must give a true and fair view as required by SI 2019/685 (see Regulation 7(1)(a)).

Additionally the FRC initially concludes that the Amendments will improve the quality of financial reporting, that the benefits of the Amendments are likely to outweigh the costs and that users are likely to benefit from the Amendments.

The press release, Invitation to Comment and the draft UK Endorsement Criteria Assessment are available on the FRC website.

Comments are requested by close of business on Tuesday 10 November 2020. 

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ECON briefing paper on IFRS 17

27 Oct 2020

A briefing paper prepared for a meeting of the Committee on Economic and Monetary Affairs (ECON) of the European Parliament discussing the current situation as regards adoption of IFRS 17 'Insurance Contracts' is publicly available.

The briefing paper describes the positive draft endorsement advice of the European Financial Reporting Advisory Group (EFRAG) on IFRS 17 that notes that the Board achieved consensus on all issues with the exception of annual cohorts, with nine Board members voting in favour of the cohorts meeting the endorsement criteria and seven members disagreeing. The briefing paper also cites an article by IASB Chair Hans Hoogervorst explaining the reasons supporting the IASB’s recent decision to uphold the annual cohort requirement in IFRS 17 for grouping insurance contracts to measure and recognise profit.

Please click to access the briefing paper on the website of the European Parliament.

Deloitte document (mid gray) Image

We comment on the comprehensive review of the IFRS for SMEs

23 Oct 2020

We have published our comment letter on the IASB’s Request for Information ‘Comprehensive Review of the IFRS for SMEs Standard’, which was published by the IASB on 28 January 2020.

We support the proposed alignment of the IFRS for SMEs Standard with full IFRS Standards, which includes the alignment of principles and important definitions; however, we suggest the Board should assess which principles and definitions are relevant to the users of the IFRS for SMEs Standard. In addition, we agree with the Board’s proposal to use the principles of relevance, simplification and faithful representation to provide a framework that assists in determining whether and how the IFRS for SMEs and the suggestions by the Board in Part B of the RFI on the specific sections of the IFRS for SMEs Standard that should be aligned with full IFRS Standards except for the proposed alignment with IFRS 16 Leases. Lastly, we note that the IFRS for SMEs Standard does not provide guidance on how SMEs should account for assets held for sale and discontinued operations. We believe that the Board should consider alignment with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations with simplifications, where appropriate.

Click to view the comment letter.

ICAEW (Institute of Chartered Accountants in England and Wales) (lt green) Image

ICAEW publishes going concern considerations guide for FRS 105 reporters

23 Oct 2020

The Institute of Chartered Accountants in England and Wales (ICAEW) has published a guide on going concern considerations for FRS 105 reporters.

The publication summarises management's responsibilities for assessing going concern and the associated implications for financial reporting in light of COVID-19. 

The guide is available on teh ICAEW website.

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Pre-meeting summaries for the October IASB meeting

23 Oct 2020

The IASB will meet via video conference on 27–29 October 2020 for its regular meeting. We have posted our pre-meeting summaries for the meetings that allow you to follow the IASB’s decision making more closely. For each topic to be discussed, we summarise the agenda papers made available by the IASB staff and point out the main issues to be discussed by the IASB and the staff recommendations.

Board work plan update: This is the first periodical update of the work plan, replacing the research update. The staff have been reviewing the timing of consultation documents and recommend some changes to the timing of consultations (such as delaying the management commentary ED until May 2021) and extending some comment periods (such as for the DP on BCUCC). The work plan on the IFRS Foundation website will be updated after the meeting.

2020 Agenda Consultation: The IASB is preparing to issue a Request for Information (RFI) in the first quarter of 2021, as part of the public consultation on its work plan that it is required to undertake every five years. The staff has completed its work and recommend that the RFI describe 27 potential projects identified from outreach undertaken.

Maintenance and Consistent Application—Deferred Tax related to Assets and Liabilities arising from a Single Transaction: In July 2019, the Board published an ED proposing amendments to IAS 12. The staff recommend that the Board confirm the proposal to narrow the scope of the recognition exemption so that it would not apply to transactions that give rise to equal amounts of taxable and deductible temporary differences. The papers include recommendations about the capping proposal, the extent of application guidance and illustrative examples and transition.

Management Commentary: This is the last decision-making meeting for the ED. The staff are asking for permission to begin the formal drafting and balloting processes. The staff papers include the working draft of their guidance on the provision of information about matters that could affect an entity’s long-term prospects, intangible resources and relationships, and ESG matters, but this is to elicit feedback rather than seeking any formal decisions. The ED is expected to be published in May 2021, if the IASB approves the revised work plan.

Extractive activities: The staff will present findings on the diversity of accounting policies applied to exploration and evaluation expenditure within the scope of IFRS 6. The staff’s research indicates that diversity is primarily due to the extent to which an entity recognises exploration and evaluation expenditure incurred during the reporting period as an asset and the unit of account that an entity decides to apply to its exploration and evaluation expenditure asset. Most of the entities in the sample use ‘area of interest’ accounting.  The ‘full cost’ and ‘successful efforts’ methods are the most common accounting policies for oil and gas companies not applying ‘area of interest’ accounting. The Board is not being asked to make any decisions.

Equity Method: Work on reviewing aspects of IAS 28 began in May. The staff recommend that the objective of this review be to assess whether application problems with the equity method for associates and joint ventures can be addressed by identifying and explaining the principles of IAS 28. They recommend that the Board not consider whether the equity method is a one-line consolidation method or a measurement method, whether it should be replaced by one of the measurement bases in the Conceptual Framework or whether significant influence should be the basis for when to apply the equity method.

Disclosure Initiative, Subsidiaries that are SMEs: The IASB is developing a Standard setting out reduced disclosure requirements for subsidiaries that apply IFRS Standards but meet the definition of an SME. At this meeting the IASB will discuss whether the compliance statement required by IAS 1 should differentiate the entities that have applied the reduced disclosure requirements and whether the disclosure requirements of IAS 8 should be applied by these entities.

Oral Updates: The staff will give oral updates on Dynamic Risk Management and the IFRS Taxonomy.

More information

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

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