The CSRD, adopted with 525 votes in favour, 60 votes against and 28 abstentions, will make businesses more publicly accountable by obliging them to regularly disclose information on their societal and environmental impact.

According to the European Parliament's communication, the Council of the European Union is expected to adopt the proposal on 28 November 2022.

It is also expected that the directive will enter into force at the beginning of next year at the latest.

The text of the CSRD adopted by the EU Parliament can be accessed here. There are no substantial changes compared to the text we analysed in our newsletter on the political agreement on the CSRD in June 2022.

General Sustainability-related Disclosures

The staff recommend that the ISSB clarify that the requirement to revise comparative information to reflect updated estimates applies to current period estimates that were disclosed in prior periods (historic estimates), and does not apply to forward-looking estimates. The staff also recommend that the ISSB confirm the proposed requirement for an entity to report its sustainability-related financial disclosures at the same time as its related financial statements but introduce transitional relief for a limited period of time to permit an entity to report sustainability-related financial disclosures up to three months after the publication of its financial statements. The staff will not ask the ISSB to make a decision at this meeting on how long the transitional relief should last.

Climate-related Disclosures

At this meeting, the ISSB will consider the proposed requirements for an entity to disclose information on strategy and decision-making (including transition planning) and climate-related targets. The staff recommend that the ISSB confirm, but clarify, that an entity would be required to disclose Information about its strategy and decision-making and information about its climate-related targets. The staff also recommend that the ISSB introduce additional disclosure requirements about the assumptions made, and dependencies identified, by the entity in developing its transition plan and the implications for the entity’s transition plan if the assumptions are not met. Furthermore, they also recommend the Standard include requirements to disclose information about the scope of the target to enable users to understand whether the target applies to the entity in its entirety or to only a part of the entity (for example, specific business units or specific geographic regions).

Cross-cutting

The proposed requirements in paragraph 22 of Exposure Draft IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information ([draft] S1) and the equivalent requirements in paragraph 14 of Exposure Draft IFRS S2 Climate-Related Disclosures ([draft] S2) would require entities to disclose the effects of its sustainability-related risks and opportunities on its financial position, financial performance and cash flows for the reporting period and the anticipated effects. The staff will present a summary of the feedback received and asks the ISSB to provide feedback on some illustrative examples they have prepared. 

ISSB Taxonomy

In May 2022, the IFRS Foundation published a staff draft of a taxonomy for digital reporting representing the disclosure proposals in the two ISSB exposure drafts. The staff draft was accompanied by a Request for Feedback soliciting public feedback on staff recommendations on fundamental matters that need to be considered early to enable the ISSB to develop a Taxonomy. The purpose of this meeting is to provide a summary of the feedback obtained during the feedback period.

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

In the first session the ISSB discussed climate resilience and the use of scenario analysis. The ISSB decided to confirm that entities will be required to use climate-related scenario analysis to conduct its climate resilience assessment. However, an entity will be able to use a method that is commensurate with its size, capabilities and level of exposure to climate-related risk. References to ‘alternative methods’ will be removed.

In the second session, the ISSB discussed the sources of guidance to identify sustainability-related risks and opportunities and disclosures. The ISSB decided to modify the requirements for considering sources of guidance to identify sustainability-related risks and opportunities and related disclosures. The ISSB also decided to clarify for each of the materials referenced, if a preparer is required to consider these materials or if consideration is permitted as an option. Due to mixed views within the Board, the ISSB did not vote on whether references to Global Reporting Initiative (GRI) Standards and European Sustainability Reporting Standards (ESRS) will be added.

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

On sustainability disclosures, IOSCO set out its expectations that both disclosures and assurance standards should be ready for use by corporates for their end-2024 accounts. IOSCO noted that once the ISSB standards are available it will move quickly on its endorsement decision:

In 2023, the ISSB will issue its standard for climate disclosures and general requirements. IOSCO will move promptly to decide on endorsement and will develop a support program for its members to assist them in moving forward immediately should IOSCO decide to endorse these standards. IOSCO also supports the efforts of the ISSB in seeking to be inclusive through its capacity building partnership initiative.

The IOSCO also highlighted the importance of maximizing interoperability of standards and aligning key climate disclosures and noted that interoperability across the world will be an important factor in IOSCO’s endorsement decision. IOSCO believes close alignment between the ISSB and those jurisdictions seeking to implement their own sets of standards is essential to ensure capital flows to where it is most needed.

Please click for the full statement on the IOSCO website

The announcement was contained in a communication sent to the Chairman of the International Sustainability Standards Board (ISSB) and stated that FRC is working in collaboration with the Federal Ministry of Finance and other relevant regulators and professional accounting organisations, to develop a strategy to raise awareness, engage stakeholders around the standards and develop a roadmap for timely implementation in the Nigerian market.

Please click for the announcement on the FRC website and a press release on the IFRS Foundation website welcoming the decision.

The topics discussed at the meeting included:

• IASB Update
• Primary financial statements
• Provisions — Targeted improvements
• Post-implementation review of IFRS 9 — Impairment
• Post-implementation review of IFRS 15

The meeting summary is available on the IASB website.

The next CMAC meeting will be held on 9 March 2023.

The meeting focused on the interaction between the IASB’s tentative decision on regulatory returns on an asset not yet available for use and an entity’s capitalization of its borrowing costs and how the IASB might respond to feedback on the proposed treatment of the inflation adjustment to the regulatory capital base, as set out in the IASB’s Exposure Draft Regulatory Assets and Regulatory Liabilities.

The meeting summary is available on the IFRS Foun­da­tion’s website.

The topics covered during the meeting were the following (numbers in brackets are ref­er­ences to the cor­re­spond­ing para­graphs of the summary):

• Agenda planning and feedback from previous ASAF meeting (1–3): The ASAF members discussed proposals for its next meeting on 8–9 December 2022.
• Subsidiaries without public accountability: Disclosures (4–17): The ASAF members were updated on the Disclosure Initiative — Subsidiaries without Public Accountability: Disclosures project and provided views on (1) parent’s consolidated financial statements be ‘available for public use’, (2) disclosure requirements, and (3) structure.
• Post-im­ple­men­ta­tion Review of IFRS 9 (18–23): The ASAF members provided views on applying the impairment requirements in IFRS 9 and decided which topics to include as part of the post-implementation review.
• Rate-regulated activities (24–31): The ASAF members were provided an update on feedback to Exposure Draft Regulatory Assets and Regulatory Liabilities and expressed their views on the IASB’s tentative decisions on scope and total allowed compensation.
• UKEB research on goodwill (32–35): The ASAF members presented with the UK Endorsement Board’s research on subsequent accounting for goodwill.

A full summary of the meeting is available on the IASB's website.

Details on the new Partnership Framework, which is designed to support preparers, investors and other capital market stakeholders as they prepare to use IFRS Sustainability Disclosure Standards, are already available on the IFRS Foundation website, including a timeline for the five-year, three-phase effort.

The announcement that CDP and the ISSB have agreed that CDP will incorporate the IFRS S2 requirements into its disclosure platform means that CDP’s 17,000+ voluntary users will disclose data structured to IFRS S2 in the 2024 disclosure cycle as a step towards delivering a global baseline for capital markets through the adoption of ISSB standards.

The Board will discuss the following:

• Sustainability disclosure taxonomy
• General requirements  
  
  • Comparative information and updated estimates
  • Timing of reporting
• Climate-related disclosures
  • Strategy and decision-making and climate-related targets
• Cross-cutting issues

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.