EFRAG launches consultation on draft sustainability standards

30 Apr 2022

The European Financial Reporting Advisory Group (EFRAG) has published its draft European Sustainability Reporting Standards (ESRS). Comments are requested by 8 August 2022.

According to the draft Corporate Sustainability Reporting Directive (CSRD) proposed by the European Commission in April 2021, the purpose of the standards is to specify the new sustainability reporting requirements of the amended Accounting Directive. While working papers on the standards have been published by EFRAG since January 2022, these are now the final drafts and comments are invited on them. The thirteen exposure drafts correspond to the first set of standards required under the CSRD proposal and cover the following areas of sustainability reporting:

  • Cross-cutting Exposure Drafts (ESRS 1 and ESRS 2)
  • Topical standards – Environment (ESRS E1 to ESRS E5)
  • Topical standards – Social (ESRS S1 to ESRS S4)
  • Topical standards – Governance (ESRS G1 and ESRS G2)

Further accompanying papers, such as a cover note including appendices, are part of the consultation package as well. Constituents are invited to provide their views online via a comprehensive multiple choice/multiple response survey tool which addresses the individual disclosure requirements in addition to higher-level questions (e.g., on the architecture of the standards). In addition, the survey tool provides for additional comments to be uploaded that deal with aspects other than those addressed in the questionnaire.

The EFRAG Sustainability Reporting Board and its Technical Experts Group will consider the exposure drafts in parallel with the public consultation. Together with the input and results from the public consultation, they will agree the final first set of draft ESRS to be submitted to the European Commission by November 2022.

Please click to access the exposure drafts and press release on the EFRAG website.

Deloitte's iGAAP in Focus outlines the background, proposed architecture of ESRS, proposed cross-cutting standards and proposed topical standards.

Recordings of recent webinars on ISSB’s exposure drafts now available

29 Apr 2022

The IFRS Foundation has posted the recording of its recent webinars on the ISSB’s proposed IFRS Sustainability Disclosure Standards.

The webinars lasted ap­prox­i­mately 60 minutes and discuss the following:

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

Updated IASB and ISSB work plan — Analysis (April 2022)

29 Apr 2022

Following the IASB's April 2022 meeting, we have analysed the work plan on the IFRS Foundation website to see what changes have resulted from the meeting and other developments since the work plan was last revised in March 2022. The work plan now also lists the projects of the ISSB.

Below is an analysis of all changes made to the work plan since our last analysis on 28 March 2022.

Standard-setting projects

  • Climate-related disclosures An ISSB project newly added to the workplan; feedback on the exposure draft will be discussed in H2 2022
  • Disclosure initiative — Subsidiaries without public accountability: Disclosures — The IASB has now discussed the feedback to the exposure draft; the next project step will be a decision on the project direction expected in June 2022
  • General sustainability-related disclosures An ISSB project newly added to the workplan; feedback on the exposure draft will be discussed in H2 2022
  • Management commentary — The IASB has now discussed the feedback to the exposure draft; the next project step will be a decision on the project direction (no date given)
  • Second comprehensive review of the IFRS for SMEs An exposure draft is now expected in Q3 2022 (previously H2 2022)

Maintenance projects

  • Lease liability in a sale and leaseback Final amendments are now expected in Q3 2022 (previously H2 2022)
  • Non-current liabilities with covenants Exposure draft feedback is now expected in June 2022 (previously Q2 2022)
  • Supplier finance arrangements Exposure draft feedback is now expected in June 2022 (previously Q2 2022)

Research projects

  • Pension benefits that depend on asset returns — A concluding project summary has been published and the project has, therefore, been removed from the work plan
  • Post implementation review of IFRS 10, IFRS 11, and IFRS 12 — A feedback statement is now expected in June 2022 (previously Q2 2022)

Other projects

  • no changes

The above is a faithful comparison of the IASB and ISSB work plan at 28 March 2022 and 29 April 2022. For access to the current work plan at any time, please click here.

Feedback on EFRAG's crypto-assets DP and recommendations for the IASB

29 Apr 2022

In July 2020, the European Financial Reporting Advisory Group (EFRAG) published a discussion paper (DP) 'Accounting for Crypto-Assets (Liabilities): Holder and Issuer Perspective'. The DP provided possible approaches to address the gaps in crypto-assets (liabilities) requirements. EFRAG has now reviewed the feedback received and derives recommendations for the IASB.

Based on the feedback received, EFRAG recommends clarifying or amending existing standards using a two-step approach. As a first step, EFRAG recommends addressing the accounting requirements for holders of crypto-assets by amending IAS 38 Intangible Assets to allow measuring crypto-assets or other intangibles within the scope of the standard at fair value through profit and loss and to develop disclosure requirements for issuers. As a second step EFRAG considers that it is important to also address issuer accounting in more detail and determine the appropriate accounting requirements for issuers, given the challenges that arise from the ambiguity on the nature of rights and obligations associated with the issuance of the novel and fast-moving crypto transactions. 

Please click to access the Recommendations and Feedback Statement on the EFRAG website.


ISSB forms working group to enhance compatibility between global baseline and jurisdictional initiatives

27 Apr 2022

The ISSB has formed a working group comprised of several jurisdictions to enhance the compatibility between the ISSB’s exposure drafts on sustainability disclosures and jurisdictional initiatives.

Specifically, the working group will “discuss compatibility of those initiatives to establish how the global baseline, fully responding to the needs of global market participants, can contribute to optimising reporting efficiency for companies in those jurisdictions and how those jurisdictions can build upon the global baseline according to their needs.”

The working group consists of members from the Chinese Ministry of Finance, the European Commission, the European Financial Reporting Advisory Group, the Japanese Financial Services Authority, the Sustainability Standards Board of Japan Preparation Committee, the United Kingdom Financial Conduct Authority and the US Securities and Exchange Commission.

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

IASB issues project summary on pension benefits that depend on asset returns project

26 Apr 2022

The IASB has published its project summary 'Pension Benefits that Depend on Asset Returns'. The project summary provides an overview of research and deliberations on the project.

Following the 2015 Agenda Consultation, the Board has been considering whether to propose amendments to IAS 19 for pension benefits that depend on the return on a specified pool of assets (reference assets). The pension benefits to be paid to employees reflect the variability inherent in the reference assets, yet IAS 19 requires a discount rate that reflects high-quality corporate bonds. Applying the IAS 19 discount rate can overstate the pension liability, producing information that is not relevant to users of financial statements. At the IASB meeting in October 2021, the staff recommended the Board propose that an entity estimate the ultimate cost of providing pension benefits that vary with asset returns applying the IAS 19 discount rate, but only when the IAS 19 discount rate is lower than the expected rate of return on the reference assets. Only 5 IASB members voted to continue the project and therefore the project will be stopped. All Board members supported the staff recommendation to consider any further work as part of the Third Agenda Consultation.

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

Hyperinflationary economies - updated information on Turkey

26 Apr 2022

The International Practices Task Force (IPTF) of the Centre for Audit Quality (CAQ) that monitors the status of 'highly inflationary' countries has published an update on the situation in Turkey.

The addendum to the list, dated 16 March 2022, reflects significant changes to the inflation rates in Turkey since the latest overall list was published on 6 November 2021.

Please also note our recent iGAAP in Focus addressing issues that arise in connection with the inflationary situation in Turkey and providing guidance on how to apply IAS 29 Financial Reporting in Hyperinflationary Economies in that context.

Accountancy Europe sends letter to Commissioner McGuinness on European sustainability reporting standards

25 Apr 2022

Accountancy Europe has written a letter to the European Commission's Commissioner Mairead McGuinness on the development of purposeful and effective European sustainability reporting standards (ESRS) providing some important comments that need to be addressed in order for the ESRS to be a successful tool for the EU and its ambitious plan to to turn Europe into the first climate neutral continent by 2050.

Beginning with the strong statement that the ESRS disclosure requirements, as currently appearing in the European Financial Reporting Advisory Group’s (EFRAG) Project Task Force (PTF) Working Papers will not help meet the European Commission's Green Deal’s objectives, the letter then explains why:

  • Too complex or burdensome reporting systems risk generating unhelpful pushback and slowing down adoption. However, the ESRS requirements are very prescriptive and include hundreds of data points. 
  • Adhering to a robust due process is essential for creating support for future adoption even while the time pressure for the EU to follow its commitment is understandable. Allowing sufficient time to respond to the exposure drafts will, among other points, ensure stakeholder inclusiveness and public acceptance and therefore legitimise the standards.
  • Developing ESRSs needs to follow a principles-based approach as such an approach will support the connectivity between sustainability reporting and financial reporting, which follows an principles-based approach (including endorsed IFRSs).
  • To build standards that would result in transforming companies’ business models and meeting the Green Deal’s objectives, a phased-in approach is needed.
  • ESRS need to be clear and efficient reporting standards to enable assurance and to avoid risks of green washing.
  • ESRSs need to be globally aligned and build on what exists, which would also help EU companies that need to comply with other foreign climate-related disclosures that would allow the use of international ones. Different terminology, definitions and concepts and not using internationally recognised terms as well as different disclosure requirements objectives and structure will impair global compatibility.

The letter concludes by stating that:

[T]he proposed ESRS might need to follow an iterative process of improvement at an early stage to ensure they facilitate meeting the European Green Deal objectives, as well as align with the upcoming international sustainability reporting standards.

Please click to access the full letter on the Accountancy Europe website.

Pre-meeting summaries for the April 2022 IASB meeting

22 Apr 2022

The IASB met in London over four days, from Monday 25 to Thursday 28 April 2022. We have posted our pre-meeting summaries for the meeting that allow you to follow the IASB’s decision making more closely. We summarised 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.

The following topics are on the agenda:

Management Commentary

At this meeting, the IASB will continue discussing feedback on its proposals for a revised Practice Statement on management commentary, as set out in the ED/2021/6 Management Commentary. No decisions will be asked from the IASB in this session.

Primary Financial Statements

The IASB will continue discussing the proposal in the ED that would require an entity that presents an analysis of operating expenses by function in the statement of profit or loss to disclose, in a single note, an analysis of its total operating expenses by nature. The IASB will consider a partial matrix approach and is asking for feedback on the proposed scope for future papers on the topic. The staff do not make any recommendations or ask the IASB to make any decisions.

Third Agenda Consultation

The staff recommend that the IASB add a maintenance and consistent application project on climate-related risks and research pipeline projects on intangible assets and statement of cash flows and related matters. They also recommend a reserve list of projects: operating segments and pollutant pricing mechanisms and not add to its work plan projects on cryptocurrencies and related transactions or going concern disclosures.

Maintenance and consistent application

At its March 2022 meeting, the IFRS Interpretations Committee decided to finalise an agenda decision in response to a submission about a demand deposits with restrictions on use. IASB members will be asked if they object to the agenda decision.

Post-implementation Review of IFRS 9

At this meeting, the IASB will discuss feedback on assessing a financial asset’s contractual cash flow characteristics. Most respondents shared the view that generally the contractual cash flow characteristics assessment works as intended.

Second Comprehensive Review of the IFRS for SMEs Standard

At its March 2022 meeting, the IASB decided on an approach to develop proposed amendments to the disclosure requirements in the IFRS for SMEs Accounting Standard that would result in consistency between these disclosure requirements and ED/2021/7 Subsidiaries without Public Accountability: Disclosures. At this meeting the IASB will deliberate the exceptions to that approach. 

Goodwill and Impairment

The staff have performed further research on the practical concerns raised by stakeholders on the IASB’s preliminary views to require entities to disclose information about the subsequent performance of business combinations and quantitative information about synergies expected from business combinations. The purpose of this meeting is to provide the IASB with a summary of the staff research. The agenda paper also provides information about the project plan and how this research is relevant to that plan. The IASB will not be asked to make any decisions during this session.

Equity Method

In October 2020, the IASB discussed and decided on the objective and approach of the Equity Method project. The IASB last discussed this project in October 2021. At this meeting, the IASB will discuss the staff analysis on purchases of an additional interest in an associate without a change in significant influence and to present a summary of the research findings on changes made to IFRS Accounting Standards arising from the Conceptual Framework, the Business Combinations and the Joint Arrangements project.

Disclosure Initiative—Subsidiaries without Public Accountability: Disclosures

The IASB published ED/2021/7 Subsidiaries without Public Accountability: Disclosures in July 2021, setting out proposed reduced disclosure requirements. At this meeting, the IASB will discuss the feedback from comment letters and outreach events on the ED. The IASB will not be asked to make any decisions. While most respondents agreed with the objective of the draft Standard, there were mixed views on the proposed scope and whether the IASB should have started with IFRS Accounting Standards rather than the IFRS for SMEs Accounting Standard. 

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

IFRS Interpretations Committee holds April 2022 meeting

21 Apr 2022

The IFRS Interpretations Committee (Committee) met on 20 April 2022. The Committee discussed the comment letters received on a tentative agenda decision.

Comment letters on tentative agenda decision

IFRS 15 Revenue from Contracts with Customers—Principal versus Agent: Software Reseller: In its November 2021 meeting, the Committee issued a tentative agenda decision on whether a reseller of software licences is a principal or agent in respect of the standard software licences provided to the customer. Most respondents agreed with the Committee's analysis and conclusions but provided comments on various aspects of the tentative agenda decision. All Committee members agreed with the staff recommendation to finalise the agenda decision with some edits.

Administrative matters

Work in progress: The following new matters have not yet been presented to the Committee:

  • Consolidation of a non-hyperinflationary subsidiary by a hyperinflationary parent (IAS 29 & IAS 21)
  • Group of insurance contracts that generate cash flows in a foreign currency (IFRS 17 & IAS 21)

More In­for­ma­tion

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

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