The bills, SB-253—Climate Corporate Data Accountability Act and SB-261—Greenhouse Gases: Climate-Related Financial Risk, will establish the first industry-agnostic US regulations that mandate the corporate reporting of greenhouse gas (GHG) emissions and climate risks in the United States.

Requirements

The bills apply to both public and private US-based companies, depending on their total annual revenue. In addition, companies subject to the bills must provide Scope 3 GHG emission disclosures regardless of materiality as well as limited assurance for Scope 1 and Scope 2 GHG emissions in their first year of reporting. Limited assurance for Scope 3 GHG emissions may be required starting in 2030.

The requirements introduced by the bills can be summarised as follows:

• SB-253: Leveraging the GHG Protocol reporting guidance, SB-253 will require companies within its scope to provide annual quantitative disclosures of Scope 1, Scope 2 and Scope 3 GHG emissions applying the GHG Protocol reporting guidance, with limited assurance required initially for disclosures of Scope 1 and Scope 2 GHG emissions. Scope 3 GHG emission reporting, reasonable assurance for Scope 1 and Scope 2 GHG emission disclosures, and potential limited assurance for Scope 3 GHG emission disclosures will be phased-in between 2027 and 2030 (see ‘Effective date’ below).
• SB-261: Leveraging the frameworks and disclosure guidance established by the Task Force on Climate-related Financial Disclosures (TCFD), SB-261 will require companies to prepare and make publicly available on their company websites biennial (i.e. every two years) qualitative reporting on climate-related financial risk and measures taken to reduce and adapt to that risk applying the frameworks and disclosure guidance established by the Task Force on Climate-related Financial Disclosures (TCFD). No assurance is required for this qualitative reporting. Successor or equivalent reporting standards, including the IFRS Sustainability Disclosure Standards issued by the International Sustainability Standards Board (ISSB), are also an acceptable framework for reporting under SB-261.

Scope

Application of the California legislation depends on a US-based company’s total annual revenue, regardless of whether the company is publicly or privately held. Therefore, private companies could be required to provide disclosures under the California regulations if they meet the revenue thresholds outlined in the bills and do business in California. The bills, as written, do not clearly define what “doing business in California” means. However, on the basis of the “doing business in California” concept under California tax law, early indications are that the threshold for doing business in the state might be quite low.

In addition, both bills apply to US-based companies doing business in California. There is no specific exception for groups with non-US parents, and therefore foreign companies with US-based subsidiaries doing business in California would fall within the scope of the requirements.

Effective date

Entities are required to apply the bills for initial requirements for disclosure as follows:

• 2026—By 1 January, the first biennial climate risk report will be required for companies with revenue exceeding $500m
• 2026—Disclosure of Scope 1 and Scope 2 GHG emissions for 2025 with limited assurance will be required for companies with revenue exceeding $1b
• 2027—Scope 3 GHG emissions for 2026 will be required for companies with revenue exceeding $1b up to 180 days after the 2027 reporting of Scope 1 and Scope 2 GHG emissions
• 2030—Reasonable assurance for Scope 1 and Scope 2 GHG emissions (with possible limited assurance for Scope 3 GHG emissions) will be required for companies with revenue exceeding $1b

Additional information

Please click for:

• SB-253—Climate Corporate Data Accountability Act
• SB-261—Greenhouse Gases: Climate-Related Financial Risk
• Our iGAAP in Focus newsletter explaining the content of the two bills
• US Heads Up—#DeloitteESGNow—The Sweeping Impacts of California’s Climate Legislation

The SCC will discuss:

• ISSB progress since last meeting.
• Agenda consultation feedback and next steps.
• COP28.
• Planning for future workplan of SCC.

Please click for the agenda and meeting paper on the IFRS Foun­da­tion website.

In May 2023, the IASB introduced new requirements to improve transparency in supplier finance arrangements which aimed to assist investors in evaluating changes in a company’s debt, whether they are cash-related or non-cash related, by providing more comprehensive and transparent information.

For more in­for­ma­tion, see the press release and Investor Per­spec­tives article on the IFRS Foundation’s website.

The agenda for the meeting is sum­marised below.

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

The full agenda for the meeting is sum­marised below:

Agenda papers for this meeting are available on the IFRS Foun­da­tion's 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 December 2017 to December 2022, include:

Click for access to the full report and a list of all decisions published so far (links to ESMA website).

In addition, the current IFRS Foundation Trustees Masamichi Kono, Robert Pozen, Kenneth Robinson, and Erhard Schipporeit have been reappointed to serve a second three-year term.

As an exceptional step, Vice-Chair Teresa Ko has also been re-appointed for a further year in light of her role as Chair of the Due Process Oversight Committee and the need to provide continuity in the Committee’s work to reflect the establishment of the ISSB.

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

The existing guidelines were introduced in 2019, which mandated PLCs to submit sustainability reports on a “comply or explain” approach.

The revision will consider, among other global frameworks, IFRS S1 and IFRS S2, which are fully aligned with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

Under the revised guidelines, PLCs would be required to submit a narrative report, which will be submitted in conjunction with the company’s annual report. They will also have to provide disclosures on sustainability and climate-related opportunities and risks exposures, cross-industry standard metrics, and industry-specific metrics.

For more information, please click to access the press release on the SEC Philippines website.

The following topics were discussed:

Performance reporting

FASB: Disaggregation—Income statement expenses 

The boards discussed the FASB project on disaggregation which is aimed to improve the disclosures about a public business entity’s expenses by providing more detailed information about certain types of expenses (such as employee compensation) that are included in expense captions commonly presented on the income statement (such as cost of sales).

IASB: Primary Financial Statements — Disaggregation and management-defined performance measures

The boards discussed the IASB’s project on primary financial statements that aims at improving the quality of financial reporting, including digital reporting, through presentation of defined subtotals in statement of profit or loss to improve comparability, disclosures about management-defined performance measures (MPMs) to provide transparency, and enhanced requirements for aggregation and disaggregation to provide useful information.

FASB and IASB: Financial KPIs for business entities

The boards discussed research activities to explore standardising the definitions of financial key performance indicators. The research will be informed by the progress of the FASB’s Disaggregation — Income Statement Expenses project and considers interactions with the regulatory framework.

Other Disclosure Projects

FASB: Improvements to income tax disclosures

The boards discussed the FASB project that aims to improve the transparency and decision usefulness of income tax disclosures. The project focuses primarily on the rate reconciliation table and disclosures on income taxes paid.

IASB: International Tax Reform—Pillar Two Model Rules

The boards discussed the recent amendments of the IASB titled International Tax Reform—Pillar Two Model Rules, which amended IAS 12. The amendments introduced a temporary exception to the accounting for deferred taxes arising from the implementation of the Pillar Two model rules and targeted disclosure requirements.

FASB: Segment Reporting — Improvements to reportable segment disclosures

The boards discussed the FASB project on segment reporting that aims to improve the reportable segment disclosures.

Business Combinations/Equity Method of Accounting

IASB: Business Combinations—Disclosures, Goodwill and Impairment

The boards discussed the IASB’s project on Business Combinations — Disclosures, Goodwill and Impairment that aims at improving the information entities provide about their acquisitions at a reasonable cost. The IASB decided to focus on a package of disclosure requirements about business combinations and changes to the impairment test of cash-generating units containing goodwill in IAS 36. An Exposure Draft is expected in the first half of 2024.

FASB: Purchased financial assets under CECL

The boards discussed the FASB project on purchased financial assets under current expected credit losses (CECL). The project was initiated after the issuance of Accounting Standards Update 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, on which the FASB received feedback that the accounting for acquired financial assets is complex and the understandability and decision-usefulness of the information is questionable.

IASB: Equity Method—Project update—Including a comparison of the IASB's tentative decisions with US GAAP

The boards discussed the IASB’s Equity Method project which aims at developing answers to application questions about the equity method, as set out in IAS 28, using the principles derived from IAS 28, where possible. Tentative decisions have been made on applications questions for associates. As a next step, the IASB will discuss the implications of applying its tentative decisions to joint ventures and subsidiaries in separate financial statements.

Accounting for Sustainability-related Matters in the Financial Statements

IASB: Classification and Measurement of Financial Instruments—ESG-Linked Financial Instruments

The boards discussed the IASB’s Exposure Draft (ED) Amendments to the Classification and Measurement of Financial Instruments published in March 2023. In the ED, the IASB proposed for financial assets to:

• Clarify the definition of a 'basic lending arrangement'
• Clarify how to assess terms that change the timing or amount of contractual cash flows
• Provide examples to illustrate the application of these principles to assets with ESG-linked features
• Introduce disclosure requirements for instruments with changes in cash flows linked to a contingent event specific to the debtor

For financial liabilities the IASB did not propose amendments to the classification and measurement requirements. However, the disclosure requirements proposed for financial assets are also applicable to financial liabilities.

IASB: Power Purchase Agreements

The boards discussed the IASB’s project on power purchase agreements (PPAs) that was initiated after the IFRS Interpretations Committee (IFRS IC) discussed a submission asking about applying paragraph 2.4 of IFRS 9 (the ‘own-use’ exception) to physical-delivery contracts to buy renewable energy (physical PPAs). As a result of the discussion, the IFRS IC recommended that the IASB consider undertaking a narrow-scope standard-setting project to clarify how entities apply the own-use exception to some physical PPAs.

The IASB discussed the IFRS IC’s recommendation and tentatively decided to add a project to the work plan to research whether narrow-scope amendments could be made to IFRS 9. The IASB’s research will focus on applying the own-use exception to physical PPAs and applying the hedge accounting requirements in IFRS 9 using a virtual PPA as the hedging instrument.

FASB: Definition of a derivative

The boards discussed the FASB’s project on the definition of a derivative, in which the FASB will consider potential refinements to the scope of Topic 815, Derivatives and Hedging, including certain aspects of the definition of a derivative and derivative scope exceptions, and the application to certain arrangements. The project will also consider whether to address related areas such as the bifurcation criteria for an embedded derivative and the accounting for derivative contract modifications.

FASB: Accounting for environmental credit programs

The boards discussed the FASB’s project on accounting for environmental credit programmes, that aims to provide recognition, measurement, presentation and disclosure requirements for:

• Credits obtained for compliance programmes
• Credits obtained for voluntary use
• Non-governmental creators of environmental credits
• Obligations arising from regulatory compliance programmes

IASB: Climate-related Risks in the Financial Statements

The boards discussed the IASB’s project on climate-related risks in the financial statements that will explore whether and how financial statements can better communicate information about climate-related risks. The project will also explore the nature and causes of stakeholder concerns about reporting on the effects of climate-related risks in the financial statements. The IASB will consider possible courses of action, if any.

The IASB decided that the project will not seek to:

• Develop an Accounting Standard on climate-related risks, or extensive application guidance on how to consider the effects of such risks when applying Accounting Standards
• Broaden the objective of financial statements or change the definitions of assets and liabilities
• Develop accounting requirements for pollutant pricing mechanisms

Intangibles

FASB: Accounting for and disclosure of crypto assets

The boards discussed the FASB’s proposed update on accounting for and disclosure of crypto assets. The proposed updated focuses on:

• Crypro assets in scope
• Improved accounting guidance
• Transition guidance for implementing the proposed amendments
• Enhanced disclosure requirements

FASB: Accounting for and disclosure of software costs

The boards discussed the FASB’s project on recognition, measurement, presentation and disclosure of costs to internally develop or acquire software, which encompasses all of the software costs currently subject to the guidance in Subtopics 350-40 and 985-20. The objective of the project is to modernise the accounting for software costs and to enhance the transparency about an entity’s software costs.

Other projects

IASB: Rate-regulated Activities

The boards discussed the IASB’s project on rate-regulated activities. The project aims to provide information about the effects of regulatory income, regulatory expense, regulatory assets and regulatory liabilities on companies’ financial performance and financial position.

FASB: Statement of cash flows

The boards discussed the FASB’s research project on statement of cash flows, which will explore improvements to the statement of cash flows in order to provide additional decision-useful information for investors and other allocators of capital.

FASB: Accounting for government grants

The boards discussed the FASB’s Invitation to Comment (ITC), Accounting for Government Grants by Business Entities: Potential Incorporation of IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, into Generally Accepted Accounting Principles, with a comment letter due date of 12 September 2022.

The proposed changes reflect four recent amendments to IFRS Accounting Standards:

• International Tax Reform — Pillar Two Model Rules (Amendments to IAS 12),
• Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7),
• Lack of Exchangeability (Amendments to IAS 21), and
• International Tax Reform — Pillar Two Model Rules (Amendments to the 'IFRS for SMEs' Standard).

Details on the proposed changes are available in the press release on the IFRS Foundation website and in proposed update itself. Comments are requested by 4 December 2023.