Technical

InTERnATIOnAL

IFAC supports the next steps and strategic direction of the IFRS Foundation’s work on sustainability

IFAC supports steps announced by the IFRS Foundation in its ongoing consideration of whether to establish a new Sustainability Standards Board (SSB) alongside the IASB and under the existing governance structure of the IFRS Foundation. IFAC welcomes the engagement of the International Organisation of Securities Commission (IOSCO) in this important initiative, as outlined in the IFRS Trustee statement, as well as in IOSCO’s February 24 media release.

IFAC agrees with the trustees’ strategic views that the new SSB should focus on information material to decisions of investors and other providers of capital; and that the new board would initially focus its efforts on climate-related reporting, while also working toward meeting the information needs of investors on other environmental, social and governance (ESG) matters.

Likewise, IFAC agrees that a “building blocks” approach facilitates both the use of existing standards and frameworks, including the Taskforce on Climate-related Financial Disclosures (TCFD), and the flexibility for coordination on reporting requirements that capture wider sustainability impacts, as IFAC articulated in its Way Forward roadmap.

IFAC CEO Kevin Dancey said: “IFAC continues to support the ongoing rationalisation of a coherent global system. The IFRS Foundation is uniquely qualified and positioned to lead here, including engagement with existing sustainability-related initiatives and standard setters from key jurisdictions. IFAC looks forward to providing input to the forthcoming IFRS Foundation Constitution consultation and encourages our member bodies and stakeholders to take an active interest in these next steps.”

InTERnATIOnAL

IFAC and IESBA reach a key milestone in delivering ethics and independence resource

IFAC has completed its inaugural series – Exploring the IESBA Code – a unique educational resource developed in collaboration with the staff of the International Ethics Standards Board for Accountants (IESBA).

Launched in November 2019, each instalment of the series highlights important concepts and topics in the International Code of Ethics for Professional Accountants (including International Independence Standards). The final instalment explains the “building blocks” structure of the Code and its interconnected nature. This is intended to help readers understand how to use and navigate the Code so that they can quickly identify and access the ethics and independence standards and guidance relevant to them. Other topics covered in the series include: ● the fundamental principles; ● the conceptual framework; ● auditor independence; ● conflicts of interest; ● inducements; ● non-compliance with laws and regulations (NOCLAR); ● pressure; and ● the role and mindset expected of the professional accountant with a focus on bias.

“The Exploring the IESBA Code series is a very useful tool to complement the IESBA eCode,” said Dr Stavros Thomadakis, IESBA Chairman.

“Each instalment provides a summary of important aspects of the Code with cues on how to read and apply its authoritative text. This final instalment spotlights the purpose of the Code, how it is structured, and how it should be used – by accountants in business (PAIBs) and public practice (PAPPs), including auditors. The successful completion of this initiative demonstrates once again how IESBA’s and IFAC’s partnership is valuable in supporting the global adoption and implementation of the Code.”

IFAC’s CEO, Kevin Dancey, said: “The ethical foundation of the accountancy profession is one of its most important features. The Exploring the IESBA Code series demonstrates IFAC’s commitment to this ethical foundation and our role in supporting the important work of IESBA, as well as the International Auditing and Assurance Standards Board (IAASB) and International Public Sector Accounting Standards Board (IPSASB).

“I encourage our members, professional accountancy organisations and national standard setters around the world to leverage this new resource – to help raise awareness of the Code and to help professional accountants uphold their public interest responsibility.” IFAC and IIRC set out a vision for accelerating integrated reporting assurance

As an increasing number of businesses around the world implement integrated reporting as a route to long-term value creation and sustainable development, the demand for assurance services on such reports is expected to rise accordingly. To help meet this demand, and to increase confidence in integrated reporting, the International Federation of Accountants (IFAC) and the International Integrated Reporting Council (IIRC) are launching a new joint initiative, Accelerating Integrated Reporting Assurance in the Public Interest (“the Initiative”).

The Initiative recognises that new thinking is required to determine what comprises integrated report assurance and how to best deliver it, given integrated reporting’s broad and forward-looking focus on value creation. The Initiative, which will be rolled out in instalments, is designed to heighten awareness of key issues, drive constructive conversation with and among key stakeholders, and encourage providers and users of assurance services in particular to lend their voices to the effort. The first instalment sets out what integrated reporting assurance involves for organisations, auditors and others. This instalment also addresses the difference between the two types of assurance – limited and reasonable – and what is required of auditors and

organisations to strive for reasonable integrated reporting assurance. Feedback on the Initiative and the first instalment can be sent to stathisgould@ ifac.org. All comments are welcome, especially those that address: ● perceived or actual opportunities and challenges for progressing integrated reporting assurance; and ● areas in which additional thought leadership and guidance would be useful for organisations, auditors and assurance providers.

Commenting on the initiative, Charles Tilley, Chief Executive Officer, IIRC said: “We believe the move toward assurance of integrated reports, particularly the move from limited to reasonable assurance, should lead to improvements in the quality of integrated reports and underlying business practices, and enable investors and other stakeholders to have more confidence in the information reported about the business and its resilience.”

Tjeerd Krumpelman, Global Head of Advisory, Reporting & Engagement, ABN AMRO N.V. said: “We decided a few years ago to obtain cover-to-cover independent assurance, based on the <IR> Framework, from our financial statements auditor, EY, on our 2017 Integrated Report. We were a ground breaker in this regard, and encourage all other integrated reporters to do the same. We believe this pathway has not only enhanced the credibility of our report and provided stakeholders with increased confidence, but we also received valuable reporting and process improvement recommendations. Our next step is to move from limited to reasonable assurance for parts of our integrated report, and to obtain assurance on other non-financial disclosures, such as our Human Rights report, because it makes good business sense.”

Kevin Dancey, Chief Executive Officer, IFAC, said: “Integrated reporting assurance, and indeed providing assurance on all non-financial (including sustainability) information, is a critical element in the future role of accountants, requiring them to apply their professional expertise to assurance engagements that enhance the credibility of corporate reporting. Practice needs to develop quickly in this immature part of the reporting and assurance world, particularly to provide confidence in narrative and forward-looking information. Professional accountants, as preparers and assurance providers, are uniquely qualified to help lead the way in this important area.” 30 Accounting Standards Advisory Forum: call for candidates

The IFRS Foundation invites nominations of suitable candidates for membership of the Accounting Standards Advisory Forum (ASAF). National standardsetters and regional bodies may nominate themselves or another eligible organisation.

The ASAF was established in 2013. The advice of its members helps the International Accounting Standards Board (IASB) to develop globally accepted and high-quality accounting standards. Resources about the ASAF, including the Terms of Reference and the Memorandum of Understanding that established the forum, are available on the ASAF page.

Candidates for membership The ASAF comprises 12 non-voting members, represented by 12 individuals, plus the Chair. The Chair or the Vice-Chair of the IASB acts as the Chair of the ASAF. In order to ensure a broad geographical representation and balance of the major economic regions in the world, the 12 members are from the following geographical regions: ● one member is from Africa; ● three members are from the Americas (North and South); ● three members are from the Asia-

Oceania region; ● three members are from Europe (including non EU); and ● two members are appointed from the world at large, subject to maintaining an overall geographical balance.

Membership of the ASAF is open to all recognised accounting standard-setters of jurisdictions and regional bodies. Existing ASAF members are eligible for reappointment.

Candidates for membership are asked to confirm that they would be willing to sign or reaffirm agreement to the Memorandum of Understanding with the Foundation; and, in particular, to provide the required commitments as set out in Section 2 of that document. For its part, the Foundation confirms that it will formally meet the commitments set out in Section 3 of the Memorandum of Understanding.

Criteria for membership Candidates should explain how they meet, or plan to meet, the criteria for membership in support of the commitments set out in the Memorandum of Understanding and any candidate should demonstrate: ● its technical competence: in other words, that it has the necessary technical resources, including human capital resources with standardsetting expertise, technical experience and practical knowledge of financial reporting issues, to enable it to contribute meaningfully and participate actively in substantive technical discussions; and ● the scale, degree and expertise of the resources available to the candidate that will enable it to participate as an active member of the ASAF, including an ability and willingness to fund the travel and accommodation costs of representatives and to devote sufficient time and other resources, where necessary, to the preparation of material for ASAF meetings.

Other factors Candidates are also invited to submit any additional material that they consider relevant to support their nomination to be a member of ASAF, including details of: ● the candidate’s knowledge and experience of IFRS Standards and their application; ● the candidate’s contribution to the activities of the Foundation and the

IASB’s standard-setting process; and its knowledge of the issues and concerns from its jurisdiction/region – together with examples; and ● the scale of the capital market in their jurisdiction/region; and, where relevant, how the candidate intends to seek input from and represent other perspectives of national standardsetters within its region.

nominations Nominations and applications are invited by 30 April 2021. They should be sent to Ms Katherine Maybin at kmaybin@ifrs.org. Membership will be on the basis of organisational representation.

Candidate organisations are required to select a single designated individual who will be their representative on the ASAF. The individuals should meet the criteria set out in paragraph 2.2.3 of the Terms of Reference.

Process for selection Candidates will be selected on the basis of a geographical balance, the membership criteria and other factors referred to above. The Foundation will consider all candidates for selection by taking these issues into account. The final selection of

members of the group will be made by the Trustees of the Foundation, having taken advice from the Board. The first ASAF meeting of the new membership will take place on 9–10 December 2021.

UK AnD IRELAnD

FRC encourages more transparency when reporting against the UK Corporate Governance Code

The Financial Reporting Council (FRC) has issued advice for companies on how to report transparently and effectively when departing from certain provisions of the UK Corporate Governance Code.

The Code sets high standards for Corporate Governance. It recognises that companies have differing circumstances and so offers flexibility through its “comply or explain” approach to reporting. The FRC encourages companies to embrace the flexibility offered by the Code so that investors and wider stakeholders benefit from reporting that clearly demonstrates a commitment to good governance, and clearly sets out a company’s circumstances.

It is important that companies: ● embrace the flexibility offered by the

Code and develop bespoke governance processes and practices which raise standards; ● make it easy for readers to find out which Provisions of the Code they have departed from in their annual report; and ● ensure that they provide full, clear and meaningful explanations for any such departures.

This new guidance builds on the findings of the FRC’s Review of Corporate Governance Reporting issued in November. These reports are part of the FRC’s ongoing drive to promote good practice and support companies to continually improve their reporting against the Code.

Call for feedback: FRC launches Technical Actuarial Standards post implementation review

The Financial Reporting Council (FRC) is carrying out a post implementation review of the Technical Actuarial Standards (TASs) and has issued a call for feedback for the current Framework for TASs, Technical Actuarial Standard 100 (TAS 100), and potential actuarial standards in relation to IFRS 17.

The post implementation review of the TASs and other actuarial standards is being carried out to ensure they continue to support the delivery of high-quality technical actuarial work and satisfy the Reliability Objective. The nature and extent of technical actuarial work and the environment in which actuaries operate has evolved considerably since the publication of the TASs in 2016. The call for feedback closes at 5pm on Friday 7 May 2021.

Expectations in respect of the European Single Electronic Format (ESEF) Regulation

Under the EU Transparency Directive and ESEF Regulation, annual financial reports of issuers which have securities listed on an EU regulated market must be published in accordance with the requirements of the European Single Electronic Format (ESEF) for financial years beginning on or after 1 January 2020. The ESEF requirements are designed to ensure that annual reporting takes place in a single, structured, electronic format so that the financial statements are machine-readable.

Recognising the challenges faced by issuers as a result of the Covid-19 crisis, political agreement was reached by the co-legislators permitting member states to delay ESEF obligations by one year, thus allowing issuers to apply the ESEF reporting requirements from financial years beginning on or after 1 January 2021 and not 1 January 2020, as set out in the original legislation. This postponement is included in the EU’s Capital Markets Recovery Package introduced to alleviate the negative effects of the Covid-19 pandemic.

The Department of Finance has advised that it will opt for postponement in Ireland following the agreement by the co-legislators. In light of this, the Central Bank wishes to clarify its expectations in relation to the ESEF Regulation taking into account the one-year postponement.

The Central Bank of Ireland will continue to accept annual financial reports from Irish issuers subject to the Transparency (Directive 2004/109/EC) Regulations 2007 (S.I. No. 277 of 2007) and ESEF Regulation in PDF format for financial years beginning between 1 January 2020 and 31 December 2020. Similarly, in examining the compliance of those financial reports from such issuers with the relevant financial reporting framework, the Irish Auditing and Accounting Supervisory Authority (IAASA) will also accept financial statements in PDF format.

Issuers who wish to publish their annual financial reports in accordance with the ESEF Regulation in 2021 (for financial years beginning between 1 January 2020 and 31 December 2020) will still be able to proceed. Where an issuer chooses to publish their annual financial reports in ESEF in 2021, all relevant requirements of the Transparency Regulations and the ESEF Regulation will need to be complied with.

Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC.

Article 4(7) of the Transparency Directive will be amended in order to grant member states the option to allow their issuers to apply the ESEF requirements starting from 1 January 2022, provided that they notify the European Commission of their duly motivated intention to do so. This amendment will most likely not enter into force before March 2021. Considering that the ESEF requirements have started applying on 1 January 2021, member states will be exceptionally allowed to opt for the ESEF postponement based on the above-mentioned political agreement.

EUROPE

ESMA supports increasing corporate transparency through the creation of ESAP

The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has submitted its response to the European Commission’s (EC) targeted consultation on the European Single Access Point (ESAP). ESMA recommends a phased approach, which should prioritise financial and nonfinancial information of public companies.

Steven Maijoor, Chair, said: “A single access point for information about companies is one of the key missing components of the Capital Markets Union. ESMA is fully supportive of the ambition to set up the ESAP, as it will increase investor trust in companies across the EU and lower the costs of capital.

“ESMA is ready to take up a central role in setting up and running the ESAP as 31

suggested by the CMU High Level Forum and the European Parliament.” ESMA believes that full benefit of the ESAP can be reaped only if information included in the single database is comparable in terms of content and rendered in a structured, machine readable format. ESMA supports an increased use of structured data formats. However, in light of the complexity of the project, ESMA encourages the EC to carefully weight the scope of the ESAP versus feasibility and operability considerations.

ESMA’s position is aligned with the Final recommendations of the High Level Forum on the Capital Markets Union on the ESAP and by the European Parliament Resolution on the CMU.

ESMA proposes rules for taxonomyalignment of non-financial undertakings and asset managers

The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has published its Final Report on advice under Article 8 of the Taxonomy Regulation, which covers the information to be provided by non-financial undertakings and asset managers to comply with their disclosure obligations under the Non-Financial Reporting Directive (NFRD). The recommendations define the Key Performance Indicators (KPIs) disclosing how, and to what extent, the activities of businesses that fall within the scope of the NFRD qualify as environmentally sustainable under the Taxonomy Regulation. The key recommendations relate to the definitions to be used by nonfinancial undertakings for the calculation of the turnover KPI, the CapEx KPI and the OpEx KPI, and the KPI that asset managers should disclose.

Steven Maijoor, Chair, said: “Today’s recommendations on the KPIs for nonfinancial undertakings and for asset managers provide a solid basis for the European Commission to adopt an important element of the EU Taxonomy framework. ESMA’s advice sets out in concrete terms how to comply with the disclosure obligations under the Taxonomy framework, balancing investors’ demand for high quality information and avoiding undue burdens on market participants.

“These disclosures are essential to provide investors with the information needed to direct investments towards environmentally sustainable activities. They will also be a key building block for the reporting of other financial market participants under the EU Taxonomy.” Recommendations ESMA’s proposals focus on how to further specify the three KPIs set out in Article 8(2) of the Taxonomy Regulation for nonfinancial undertakings and those provided by asset management companies that fall within scope of the NFRD: ● Non-financial undertakings: The proposals set out the definitions that should be used for the calculation of the turnover KPI, the CapEx

KPI and the OpEx KPI. These are complemented with the minimum information that should accompany these disclosures and the methodology including the level of granularity for the reporting of the three metrics. ● Asset managers: The proposals set out the KPI that asset managers should disclose, the methodology to be applied to that KPI and recommendations for the development of a coefficient methodology to assess

Taxonomy-alignment of investments in investee companies that do not report under the NFRD.

ESMA also proposes that non-financial undertakings and asset managers use standardised templates for their reporting under Article 8 in order to facilitate comparability of these disclosures and enhance their accessibility to investors that will reuse this information.

The EC invited the three European Supervisory Authorities (ESMA, EBA and EIOPA) to provide advice on Key Performance Indicators (KPIs) disclosing how, and to what extent, the activities of businesses that fall within the scope of the NFRD qualify as environmentally sustainable under the Taxonomy Regulation. Along with ESMA, the other two ESAs published their proposals: EBA advice and EIOPA advice.

ASIA PACIFIC

Singapore 2021 volumes of SFRS(I)S AnD FRSS

The ASC has published the collections of SFRS(I)s and FRSs that are required to be applied for annual reporting period beginning on 1 January 2021. These include official pronouncements issued by the ASC up to 31 December 2020, but do not include new/revised/amendments to SFRS(I)s and FRSs which are effective for annual reporting periods beginning after 1 January 2021.

Further information is available at www.aisc.gov.sg. UnITED STATES

FASB, IASB and The Accounting Review seek academic research papers for joint 2022 “Accounting for an Ever-Changing World” Conference

The Financial Accounting Standards Board (FASB), the International Accounting Standards Board (IASB), and The Accounting Review (TAR) have issued a joint call for academic research papers on how key standards are performing in the capital markets. Selected papers will be presented at a joint conference titled “Accounting for an Ever-Changing World,” scheduled for 2 to 4 November 2022 in New York City, and will be considered for publication in The Accounting Review. The initiative is intended to strengthen connections between the academic and standardsetting communities and encourage academic research that supports the FASB and the IASB in their review of recent major standards.

Call for research papers Research papers should focus on the effectiveness of the FASB and/or IASB standards on revenue recognition (Topic 606 and IFRS 15, Revenue from Contracts with Customers), leases (Topic 842 and IFRS 16, Leases), and financial instruments (Topic 326, Financial Instruments – Credit Losses, and IFRS 9, Financial Instruments). Specifically, the standard-setting Boards seek information on whether the standards have: ● accomplished their stated objectives; ● provided benefits to users of financial information; ● resulted in unexpected implementation or continuing application costs; or ● given rise to unexpected economic consequences.

Research that examines the impact of similarities or differences between US GAAP and IFRS Standards in these areas is also appropriate.

Deadline for paper submissions The deadline is 15 May 2022; early submission is encouraged. Selected papers will be presented at the conference and considered for publication in The Accounting Review. Papers should follow TAR’s editorial policy and be submitted via the journal homepage, along with a cover letter indicating the submission is for the joint conference. (A submission fee of $200 is required.)