In particular, the G7 communiqué comments on the establishment of the ISSB and its future work:

The G7 welcomes the inauguration of the International Sustainability Standards Board (ISSB) and its progress of work on the global baseline of sustainability reporting standards. We welcome the ISSB “path to global baseline” statement of 18 May 2022 and call on all relevant stakeholders to participate in the ongoing consultation on the proposed standards. We urge the ISSB and national and regional standard-setters as well as other reporting initiatives to actively cooperate in the process of elaborating the baseline with the aim of reaching standards that can be implemented globally. The baseline should be practical, flexible and proportionate and ultimately suitable for small- and medium-size enterprises and enable jurisdictions to implement the baseline and a more extensive approach to supplement the baseline. We encourage countries to prepare or continue to prepare the ground for usage of the baseline, aim to ensure interoperability of national and regional standards and the global baseline in order to minimise fragmentation of reporting requirements, reduce reporting burdens, and enable the availability of consistent sustainability information for users. We encourage the ISSB to continue its work on sustainability reporting standards beyond climate, such as nature and social issues.

For more information, see the communiqué on G7 Germany website.

The announcement highlights that the ISSB’s global baseline presents a unique opportunity to reduce the existing and further fragmentation of sustainability disclosure requirements and that widespread use of the baseline will reduce the costs for data preparers and improve information usability for data users. It also outlines the steps the ISSB has taken, and is taking, to have completed by the end of 2022 the necessary institutional and technical standard-setting work to establish the core elements of the global baseline. Nevertheless, the announcement also stresses that achieving this goal will require actions by others, in particular by jurisdictional authorities and market participants. It states:

Once in place, the future success of the global baseline will depend on combined action by public authorities to incorporate it into their jurisdictional reporting requirements, and market demand through investors and others encouraging use of the ISSB’s IFRS Sustainability Disclosure Standards. The ISSB reaffirmed its commitment to work collaboratively with jurisdictions and stakeholders in pursuit of this public interest objective and is poised to engage proactively as jurisdictions and other stakeholders begin their evaluation of the ISSB’s standards.

Please click to access the full announcement on the IFRS Foundation website.

The adoption of IFRS 17 is an important milestone for the UKEB. It is the first major standard adopted by the UKEB. The adoption is the first real test of the UKEB's adoption process. At the same time, it is of international importance, given the size of the UK insurance industry.

Please see the press release on the UKEB website for additional information.

The report notes that while discounted cash flows and discount rates are commonly used under IFRS, determining an appropriate discount rate is a complex area of financial reporting and can be an area of significant estimation uncertainty and a source of errors in financial reporting. 
 
The FRC’s review found:

• Assumptions used for discount rates and cash flows should be internally consistent, and care should be taken to avoid double-counting risks. When nominal rates are used, the effects of inflation on the cash flows should not be overlooked; particularly in the current interest rate environment of low nominal interest rates and relatively high inflation.
• There is general scope for improvement in the usefulness of the disclosures provided by many companies, with high quality disclosures including both the discount rate used, and an explanation of how it was determined.
• Companies may need to consider whether specialist third party advice is required when valuing a material item, and where there is no internal expertise.

The review includes some case studies, based on issues the FRC finds in its routine monitoring of corporate reporting, to illustrate some of the challenges which companies may face in this area.
 
To encourage improvement in the general quality of company disclosures, the review also includes examples of good practice where companies have clearly described the factors they considered in determining the discount rate; for example, explaining whether  risk and inflation were included in the cash flows or the discount rate.
 
The full review is available on the FRC website.

The European national enforcers of financial information monitor and review financial statements published by issuers with securities traded on a regulated European market and who prepare their financial statements in accordance with International Financial Reporting Standards (IFRS) and consider whether they comply with IFRS and other applicable reporting requirements, including relevant national law.

ESMA has developed a confidential database of enforcement decisions taken by individual European enforcers as a source of information to foster appropriate application of IFRS.

The publication of enforcement decisions is designed to inform market participants about which accounting treatments European national enforcers may consider as complying with IFRS, i.e. whether the treatments are considered as being within the accepted range of those permitted by IFRS. ESMA considers the publication of the decisions, together with the rationale behind them, will contribute to a consistent application of IFRS in the European Union.

Topics covered in the latest batch of extracts, covering the period from March 2020 to November 2021, include:

Click for access to the full report (link to ESMA website).

The introduction to the consultation paper notes that natural resources are generally understood to be resources such as sunlight, air, water and land that exist without the actions of humankind. They account for a significant proportion of the economic resources in many jurisdictions. However, governments often lack sufficient information on the monetary value of natural resources, and as a result, grant rights to these resources without regard to financial and environmental sustainability, or intergenerational fairness.

Currently, there is no explicit International Public Sector Accounting Standard (IPSAS) guidance on accounting for natural resources in their original state. Therefore, the IPSASB is now working to address this gap. The first phase of its work focuses on the financial reporting of tangible, naturally occurring resources, including subsoil resources, water, and living resources, which are in their natural state. This consultation paper is the first project output, and considers whether natural resources can be recognised as assets in general purpose financial statements or should be disclosed in broader financial reports.

Comments on the consultation paper are requested by 17 October 2022.

Please see the IPSASB website for a press release as well as an access page for a video introduction, the consultation paper, and an At a Glance summary.

This issue features:

• In profile — Dr Kenneth Lee, Associate Professorial Lecturer at the London School of Economics and Political Science, member of the Capital Markets Advisory Committee
• We need your views — IFRS Sustainability Disclosure Standards
• Stay up to date
• Resources for investors

The Investor Update newslet­ter is available on the IFRS Foundation’s website.

The statement highlights the importance of issuers accompanying users of their financial statements, so that they understand the expected accounting implications of the new standard’s application.

ESMA’s recommendations cover the disclosures of expected impacts of the initial application of IFRS 17 in the interim and annual financial statements for 2022.

Where the impact is expected to be significant, ESMA expects issuers to:

• provide information about the significant accounting policy choices to be taken upon initial application of IFRS 17 such as methods to calculate the discount rate, how the level of aggregation requirements will be applied;
• disaggregate the expected impact in a way that is useful to users of financial statements; and
• explain the nature of the impacts (on recognition, measurement and presentation) so that users of the financial statements can understand the changes and their key drivers when compared to the accounting principles on classification applied under IFRS 4.

ESMA also encourages issuers to explain the impact, if any, of the application of IFRS 17 on alternative performance measures that the issuer may use.

Please click to access the full statement on the ESMA website.

The statement notes the significant challenges to business activities and effects on the global economic and financial system posed by the invasion and provides overarching messages to issuers and auditors including:

• A reminder of the main IFRS requirements which may be applicable in the context of Russia’s invasion of Ukraine e.g., impairment of non-financial and financial assets, and loss of control;
• ESMA’s expectations regarding disclosures in financial statements e.g., judgements made, significant uncertainties, and going concern risks;
• ESMA’s expectations regarding disclosures in interim management reports e.g., direct and indirect impact of Russia’s invasion of Ukraine and imposed sanctions on issuers’ strategic orientation and targets, operations, financial performance, financial position and cash-flows, measures taken to mitigate the impacts, and cybersecurity risks; and
• A reminder of issuers' obligations vis-à-vis the Market Abuse Regulation.

Please click to access the statement on the ESMA website.

The Board will discuss the following:

• Second Comprehensive Review of the IFRS for SMEs Accounting Standard
• Disclosure Initiative — Subsidiaries without public accountability: Disclosures
• Dynamic Risk Management
• Maintenance and Consistent Application
• Board work plan update
• Post-implementation review of IFRS 9
• Primary financial statements
• Disclosure Initiative — Targeted Standards-level Review of Disclosures
• Rate-regulated activities
• Goodwill and impairment

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.