Technical

UPCOMING WEBINARS

How accountants can save the world

Speakers: Peter Ellington, CEO, Triple Bottom Line Accounting; Fran Ellington, ESG Director, Triple Bottom Line Accounting; Andrea Finegan, Visiting Fellow, University of East Anglia AIA is pleased to launch the Sustainability Workshop Series. The three-part series, which begins on 14 November, will examine the impacts on the accountancy sector, climate change and ESG, whilst providing guidance on transforming accounting for a sustainable future.

14 November 2022: | Time: 12.30 – 13.30 What does sustainability mean for accountants?

5 December 2022: | Time: 12.30 – 13.30 Climate change – Net zero and carbon accounting

9 January 2022: | Time: 12.30 – 13.30 Why ESG values are integral to future sustainability

How digitalisation can enhance skills in your accounting firm and team

2 November 2022 Time: 10:30 - 11:30 Speaker: Gavin Spencer, Managing Director, Beach Accountants Limited Learn how digitalisation can help develop your team and get them more prepared for the new change in the accountancy world, following the introduction of MTD.

AML update: client verification, suspicious activity and discrepancy reporting

8 November 2022 Time: 12.30am – 13.30pm Speaker: David Potts, Potts Financial Training The Money Laundering Regulations require accountancy firms to take appropriate steps to identify and verify their clients and the ultimate beneficial owners of entities. This process helps to assess the risk that the firm could be used for money laundering, including terrorist financing, and supports a robust risk-based approach.

This webinar explores practical approaches that firms can take to efficiently identify and verify their clients, spot and report suspicious activity and ensure compliance with key regulatory requirements, such as reporting discrepancies to the register or providing verification services related to the recently launched Register of Overseas Entities. It will help supervised firms to ensure that they maintain policies and procedures which meet regulatory requirements and best practice, appropriate and proportionate for their size and activities.

CPD ON DEMAND

Have you missed out on AIA’s recent CPD Webinars?

Our on demand content is delivered by industry experts and leading professionals, giving you the flexibility to learn and develop your skills where and when suits you best.

Each webinar is worth one verifiable CPD unit and can be purchased through the AIA shop. The following content is available now: ● Balancing climate, energy and development ● Empowering the individual professional ● Capital allowance ● Living and working with change ● Regulation around cryptocurrency (UK) ● Environmental accounting (Malaysia)

FRS update: key current issues for SMEs

23 November 2022 Time: 10.30 – 11.30 Speaker: David Potts, Potts Financial Training David will outline the current state of play with IFRS – IFRS and IFRIC currently in force and most recent changes and new Standards issued. He will also update on key IFRS projects and changes required for 2022 year ends and beyond, and discuss common problems and issues as identified by regulatory bodies.

A review of beneficial ownership of companies and IPS & the RBO | Ireland

29 November 2022 Time: 10:30 - 12:00 Speaker: Sinead Gortland, Corporate Consultant, Omnipro An informative webinar which will ensure information on the Register of Beneficial Owners (RBO) is up to date and accurate before a Company is in breach of their statutory duty to file.

Digital transformation: digital tools to accelerate productivity

2 December 2022 Time: 10.30 – 11.30 Speaker: Samuel Ellis, Head of Finance, InterWorks Using technology to accelerate productivity and drive value is becoming ubiquitous with the accountant’s role right through from the ground level to management and the executive team.

You can find further information and register for these events at www.aiaworldwide.com/events

● Tax implications for cryptocurrency (UK) ● Creativity: how to survive in an uncertain world ● Digitising your practice: regardless of MTD ● How do businesses ride the current storm

Login to your AIA online account and choose ‘Shop’ from the MyAIA menu.

INTERNATIONAL

Companies, investors and professional accountants add their voices to the call for global alignment between sustainability reporting standard setters and frameworks

Sixty-five companies, investors and professional accounting firms from across the world add their voices to the call for major standard-setting efforts to more closely align with and support a global baseline for reporting sustainability-related information.

The endorsed statement was developed jointly by the World Business Council for Sustainable Development (WBCSD), the Principles for Responsible Investment (PRI), and the International Federation of Accountants (IFAC). In addition to formal consultation responses, this public statement makes clear the momentum and encouragement behind stronger alignment between sustainability standard-setting efforts.

Significant efforts by the International Sustainability Standards Board (ISSB), the US Securities and Exchange Commission (SEC), and the European Commission together with the European Financial Reporting Advisory Group (EFRAG), all aim to address the need to enhance and evolve corporate reporting to include and consider sustainability information. However, current draft standards and initiatives are not technically compatible in terms of concepts, terminologies, and metrics.

As these proposed sustainabilityrelated disclosure requirements are refined and finalised, leading financial market participants are asking financial market regulators to avoid regulatory and standard setting fragmentation by aligning on key concepts, terminologies and metrics on which disclosure requirements are built.

A comprehensive global baseline of sustainability disclosures is required for reporting entities to avoid undue burden and for investors to make investment decisions that truly contribute to sustainable outcomes. A globally consistent, comparable, reliable and assurable corporate reporting system is indispensable in providing all stakeholders with a clear and accurate picture of an organisation’s ability to create sustainable value over time.

The Principles for Responsible Investment (PRI) is the world’s leading proponent of responsible investment. Supported by the United Nations, it works to understand the investment implications of environmental, social and governance (ESG) factors and to support its international network of investor signatories in incorporating these factors into their investment and ownership decisions. The PRI acts in the long-term interests of its signatories, of the financial markets and economies in which they operate and ultimately of the environment and society as a whole. Launched in New York in 2006, the PRI has grown to more than 5,000 signatories, managing over US$121 trillion.For more information visit www.unpri.org

INTERNATIONAL

Views on corruption drive attitude to tax systems across the globe

Taxpayers’ attitudes about paying taxes correlate closely with perceived levels of corruption, according to a major new study, ‘Public Trust in Tax’, by the International Federation of Accountants (IFAC) and Association of Chartered Certified Accountants (ACCA).

A survey of 5,900 people across 14 countries – many in developing economies – found that trust in tax systems is lower when taxpayers perceive higher levels of corruption and diversion of public funds.

Helen Brand, chief executive ACCA, says: ‘Fighting corruption is such a central priority for the global accountancy profession because corruption has such negative implications for trust, tax morale and sustainable development more broadly. We know from research by the IMF that economic growth goes hand in hand with a consistent stream of tax revenues.’

This year’s survey builds on previous research, and for the first time includes data from developing countries outside of the G20. With the UN predicting that the highest population growth up to 2050 is set to happen in non-G20 countries, this edition of ‘Public Trust in Tax’ looks at issues impacting an increasing share of the global population. The survey was backed up by a series of roundtables to explore attitudes further.

Kevin Dancey, chief executive IFAC, says: ‘The relationship between taxpayers and governments, and between businesses, society and tax systems is fundamental to the sustainability – and survival – of the economies that support us all, in both the short and long term. Our Trust in Tax surveys provide crucial insight into these relationships and can help global policymakers as they consider the best way forward.’ IFAC recently released its ‘Action Plan for Fighting Corruption and Economic Crime’, with broad support from the global accountancy profession. The plan outlines specific actions that members of the profession can take, individually and in concert, to engage in a meaningful way in the fight against corruption. ‘Given the correlation between perceived levels of corruption and citizens’ willingness to pay taxes, this plan is an important effort to help ensure that citizens see the benefits of their tax dollars,’ said Mr. Dancey. The survey key findings are set out below:

Trust and corruption Politicians are widely distrusted with a net trust deficit of -25%. In contrast, professional tax accountants and lawyers are trusted (67.1% and 64.6% respectively). Attitudes to tax authorities are split with a significant minority – 27.9% – distrusting or highly distrusting them.

Roundtable participants saw lack of trust in politicians as a major barrier to tax engagement with the systems. Citizens don’t object to paying tax – they object to misappropriation.

Tax minimisation In the survey, 46.4% agreed that multinationals were paying a reasonable amount of tax. This contrasts with Public Trust in Tax surveys in G20 countries showing only 22.4% agreed.

Attitudes towards tax minimisation are more relaxed in developing countries with respondents more likely to agree that specific taxpayer groups were paying a reasonable amount of tax.

Incentives People strongly support the use of tax incentives to target megatrends such as climate change (73.8%) and ageing population (72.8%).

Tax incentives were seen as way of attracting multinational businesses to invest (73.9%) and build a more coherent international tax system through co-operation between countries (69.3%).

IFAC Launches new resource centre to elevate professional accountants’ contributions as business leaders and value partners

A new webpage by the International Federation of Accountants (IFAC) collates useful IFAC resources on how professional accountants can be futureready for a rewarding career in business or the public sector.

As key enablers of successful organisations, the career paths open to professional accountants span business and the public sector in a variety of finance and commercialfacing roles. As digital and sustainability transformations progress internationally, professional accountants have an opportunity to elevate their strategic contributions as leaders and value partners.

IFAC’s new collection of resources, ‘Professional accountants as business leaders and value partners’, explores how professional accountants can be future ready, data-savvy leaders who drive sustainability. These materials aim to help in understanding and navigating challenges and opportunities across various roles as finance and business leaders, risk managers and analysts, and in broader commercial roles including in procurement and supply chain management.

Components of the new resource center include: ● mainstreaming sustainability in business; ● future-ready CFO and finance function; ● data and digitalization; ● case studies from a variety of entities around the world. including Olam Agri, Reliance Industries, Standard Chartered Bank, Sime Darby Berhad, OMRON, Prudential Financial, Pakistan International Airlines, and more.

IESBA and IAASB welcome IOSCO Statement of Support for developing standards relating to assurance of sustainability-related information

The International Ethics Standards Board for Accountants (IESBA) and International Auditing and Assurance Standards Board (IAASB) welcome the announcement from the International Organisation of Securities Commissions (IOSCO) of its support and encouragement for the IAASB’s and IESBA’s work on developing standards relating to assurance of sustainabilityrelated information. The IAASB and IESBA acknowledge that stakeholders are increasingly seeking assurance of sustainabilityrelated information and that it is important to respond to market demands with robust standards applicable to all sustainability assurance providers. IAASB Chair Tom Seidenstein said: ‘There is a clear need for ongoing dialogue and collaboration to ensure sustainability reporting, assurance and regulation develop in a cohesive manner to provide decision-useful information to stakeholders. We are pleased to have IOSCO’s support for our ongoing work to enhance sustainability assurance standards and look forward to continuing our strong, fruitful relationship with IOSCO and others.’ IESBA Chair Gabriela Figueiredo Dias said: ‘Ethics standards, including independence requirements, are foundational to public trust in the assurance of sustainability-related information. It is crucial and in the public interest that all assurance providers, whether or not they are from the accountancy profession, adhere to the same high bar of ethical behaviour and independence when engaged in such assurance work. We have given high priority to bringing to market fit-forpurpose ethics and independence standards in this area and look forward to close coordination with IOSCO and IAASB on this journey.’ The IESBA will meet to consider possible approaches to standard setting in relation to sustainability assurance and sustainability reporting, recognising that professional accountants in business play a ‘first line of defence’ role in preparing and presenting trustworthy sustainability information. The IESBA will also consider the applicability of its standards to assurance providers outside of the accountancy profession. The IESBA anticipates approving a project plan by December 2022. The IAASB and IESBA will continue to closely collaborate with IOSCO and other regulatory and standard-setting bodies to inform the development of robust standards that foster independent, high-quality engagements and globally consistent practices.

UK AND IRELAND

FRC report on lessons learnt from the first year of mandatory structured digital reporting

The Financial Reporting Council (FRC) Lab has published a report that identifies lessons learnt from the first

year of mandatory structured digital reporting under the Transparency Directive on European Single Electronic Format (ESEF) regulation.

The Lab’s review found that many companies have risen to the challenge of producing an annual financial report in the new digital format. However, there is still much to be done as data quality and usability remain below the level expected for companies in a leading capital market.

The report sets out some actions to improve companies’ processes, the usability and design of the reports and XBRL tagging.

Mark Babington, Executive Director of Regulatory Standards at the FRC, said: ‘It’s really encouraging that so many seem to have taken on board the tips from last year’s early implementation review. There is, of course, room for improvement and the actions in this report will help companies to make their reporting fit for increasing digital consumption. A focus on data quality and usability will be key to achieve this.’

Clare Cole, Director of Market Oversight at the Financial Conduct Authority, said: ‘We welcome the FRC Lab’s valuable work to help companies produce high-quality structured reports. This report is an important step to help unlock the full benefits of structured digital reporting for all participants in the UK’s capital markets.’

Taskforce on Disclosures about Expected Credit Losses (DECL) hasupdated its guidance

The Taskforce on Disclosures about Expected Credit Losses (‘the DECL Taskforce’) has published updated guidance on a complete set of high quality IFRS 9 Expected Credit Loss accounting (ECL) disclosures.

The guidance is aimed primarily at the biggest UK-headquartered banks and building societies, but is also likely to be relevant to a much wider group of preparers. Since the beginning of 2018, banks and building societies preparing IFRS accounts have been required to provide for credit losses using ECL. The complexity and judgement involved in estimating ECL means that high quality, comparable disclosures are essential in enabling users of financial reports to understand, analyse and compare the ECL numbers.

In order to help guide the ECL disclosure practice, the FCA, FRC and the PRA set up a Taskforce of preparers and users and asked it to work together – under the leadership of Simon Samuels of Veritum Partners and David Joyce of Lloyds Banking Group – to determine and describe what a complete set of high quality ECL disclosures might look like. That work formed the basis of the Taskforce’s first and second reports, issued in November 2018 and December 2019, respectively.

This third report from the Taskforce includes the results of assessments made by Taskforce members of the progress made by preparers in the adoption of certain of the disclosure recommendations, which demonstrated very high levels of adoption. It also includes good practice examples drawn from banks’ and building societies’ financial statements, and other amendments to address gaps, deficiencies or to otherwise improve existing material.

Almost all the original recommendations and guidance remain, but this third report introduces updates to encourage consistency and comparability, and further guidance on the ‘judgemental adjustments’ (such as post-model adjustments and overlays) that banks and building societies make to modelled numbers in estimating ECL.

EUROPE

ESMA reminds firms of the impact of inflation in the context of investment services to retail clients

The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has published a statement reminding firms to consider inflation and inflation risk when applying relevant MiFID II requirements in the interest of investor protection. Over the past months, inflation rates have risen in the EU, as in the rest of the world, and this growth in inflation has impacted households both in their daily lives and in their investments and investment decisions. ESMA notes that from an investor protection perspective, this trend poses a risk for retail investors, as some of them will not fully appreciate the link between inflation and financial markets and may not fully understand how considerations on inflation should be factored in when they make saving and investment decisions. ESMA has therefore issued its Statement to remind firms of relevant MiFID II requirements, as it believes that investment firms may play a role in considering inflation and inflation risk, both when manufacturing and distributing investment products and when providing investment services to retail clients. Investment firms can also help in raising clients’ awareness of inflation risk.

ESMA publishes final guidelines on MiFID II suitability requirements

The European Securities and Markets Authority (ESMA) has published its Final Report on Guidelines on certain aspects of the Markets in Financial Instruments (MiFID) II suitability requirements.

The assessment of suitability is one of the most important requirements for investor protection in the MiFID framework. It applies to the provision of any type of investment advice, whether independent or not, and to portfolio management.

The main amendments introduced to the MiFID II Delegated Regulation and reflected in the guidelines on the topic of sustainability are: ● Information to clients on the sustainability preferences: Firms will need to help clients understand the concept of sustainability preferences and explain the difference between products with and without sustainability features in a clear manner and avoiding technical language. ● Collection of information

from clients on sustainability

preferences: Firms will need to

collect information from clients on their preferences in relation to the different types of sustainable investment products and to what extent they want to invest in these products. ● Assessment of sustainability preferences: Once the firm has identified a range of suitable products for their client, in accordance with the criteria of knowledge and experience, financial situation and other investment objectives, the firm shall identify the product(s) that fulfil the client’s sustainability preferences. ● Organisational requirements: Firms will need to give staff appropriate training on sustainability topics and keep appropriate records of the sustainability preferences of the client (if any) and of any updates of these preferences.

By pursuing the objective of ensuring a consistent and harmonised application of the requirements in the area of suitability, including on the topic of sustainability, the guidelines will contribute to the achievement of the objectives of MiFID II.

UNITED STATES

FASB seeks input on proposal to improve accounting for investments in tax credit structures

The Financial Accounting Standards Board (FASB) has issued a proposed Accounting Standards Update (ASU) intended to improve the accounting and disclosures for investments in tax credit structures. Stakeholders are encouraged to review and provide comments on the proposed ASU by 6 October 2022. The proposed ASU is a consensus-for-exposure of the FASB’s Emerging Issues Task Force (EITF) In 2014, the FASB issued a standard that introduced an option allowing reporting entities to elect to apply the proportional amortisation method to account for investments made primarily for the purpose of receiving income tax credits and other income tax benefits. The guidance limited the proportional amortisation method to investments in low-income housing tax credit (LIHTC) structures.

Under the mothod of proportional amortisation, an entity amortises the initial cost of the investment in proportion to the income tax credits and other income tax benefits received and recognises the net amortisation and income tax credits and other income tax benefits in the income statement as a component of income tax expense (benefit).

Investments in other tax credit structures are typically accounted for using the equity or cost method, which results in investment gains and losses and tax credits being presented gross on the income statement in their respective line items.

In recent years, stakeholders have asked the FASB to allow reporting entities to elect to apply the proportional amortisation method to tax equity investments that generate tax credits through other programmes, such as the New Markets Tax Credit (NMTC) programme, the Historic Rehabilitation Tax Credit (HTC) programme, and the Renewable Energy Tax Credit (RETC) programme.

These stakeholders noted that the proportional amortisation method provides financial statement users with a better understanding of the returns from investments that are made primarily for the purpose of receiving income tax credits and other income tax benefits than the equity or cost methods.

The amendments in this proposed ASU would allow reporting entities to elect to account for their tax equity investments using the proportional amortisation method if certain conditions are met, regardless of the programme from which the income tax credits are received.

The election would be on a programme-by-programme basis. The proposed amendments would also require disclosures to enable financial statement users to better understand the nature and effects of the entity’s investments that generate income tax credits and other income tax benefits. ASIA PACIFIC

MAS and IFSCA to pursue crossborder FinTech innovations

The Monetary Authority of Singapore (MAS) and the International Financial Services Centres Authority (IFSCA) have signed a FinTech Co-operation Agreement to facilitate regulatory collaboration and partnership in FinTech. MAS and IFSCA will leverage existing regulatory sandboxes in their respective jurisdictions to support experimentation of technology innovations. This includes referral of companies to each other’s regulatory sandboxes and enable innovative cross-border experiments in both jurisdictions. The Co-operation Agreement will also allow MAS and IFSCA to evaluate the suitability of use cases which could benefit from collaboration across multiple jurisdictions, and invite relevant jurisdictions to participate in a Global Regulatory Sandbox. MAS and IFSCA will also share non-supervisory related information and developments on innovation in financial products and services, facilitate discussions on emerging FinTech issues and participate in joint innovation projects. Sopnendu Mohanty, the Chief Technology Officer of IFSCA, said: ‘This Co-operation Agreement builds on the Memorandum of Understanding on Supervisory Co-operation signed between MAS and IFSCA in July 2022. The cross-border testing of use cases between Singapore and India will pave the way for operationalising a broader collaboration framework for FinTech use cases involving multiple jurisdictions.’ IFSCA Chief Technology Officer Joseph Joshy said: ‘This agreement is a watershed moment that ushers in a FinTech Bridge to serve as a launch pad for Indian FinTechs to Singapore and landing pad for Singapore FinTechs to India, leveraging the Regulatory Sandboxes. The possibility of global collaboration on suitable use cases through a Global Regulatory Sandbox is an exciting opportunity for the FinTech ecosystem.’