FINANCIAL REPORTING
Financial Reporting News
The IFRS Foundation’s International Accounting Standards Board (IASB) has today published its Third Agenda Consultation Feedback Statement and Snapshot outlining its priorities for the next five years.
The Feedback Statement explains the reasons for the IASB’s decisions and shows how the IASB responded to the extensive feedback from its diverse stakeholders.
This feedback, obtained via a public consultation in 2021, has helped to shape the IASB’s activities and work plan.
The three main strategic priorities are to:
- maintain the strategic direction and balance of the IASB’s activities while increasing slightly efforts to develop digital financial reporting and improving the understandability and accessibility of IFRS Accounting Standards;
- progress current projects; and
- add intangibles, statement of cash flows and climate-related risk in financial statements to the work plan.
The Financial Reporting Council (FRC) has published its thematic review of judgements and estimates update.
Companies are required to disclose their more complex accounting judgements, as well as the most significant sources of estimation uncertainty. These disclosures allow readers to assess how the accounting policies applied have been affected by the judgements taken by management. They facilitate a better understanding of assumptions made about the future and the extent to which changes to those assumptions may affect a company’s future position.
The FRC’s first thematic on the topic of judgement and estimation uncertainty disclosures was published in November 2017. Today’s updated review and CRR’s most recent routine monitoring in 2021/22 have identified some improvement in the overall quality of judgement and estimate disclosures since the 2017 report.
- Companies should explicitly state whether estimates have a significant risk of a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
- Sensitivity disclosures should be provided more frequently and in the way that is most meaningful to readers.
- Companies should assess whether disclosure of climate-related significant judgements or assumptions and sources of estimation uncertainty are required by paragraphs 122 or 125 of IAS 1 and consider whether information about assumptions with a longer-term effect is required.
- Where additional estimate disclosures are provided, such as those carrying lower risk, having smaller impact or crystallising over a longer timeframe, they should be clearly distinguished from those with a short-term effect.
Source: www.frc.org.uk
The Financial Reporting Council (FRC) and Financial Conduct Authority (FCA) have published two reports which found that premium listed companies have made significant steps forward in the quality of climate-related information provided in their financial reports, but further improvements are needed.
Since 2021, premium listed commercial companies have been required to include a statement in their annual financial report, setting-out whether they have made disclosures consistent with the Task Force on Climate-related Financial Disclosures’ (TCFD) recommendations.
The FRC reviewed 25 larger companies more impacted by climate change and found that companies were able to provide many of the TCFD disclosures expected by the FCA’s Listing Rule, and climate-related reporting in the financial statements, marking a significant improvement in comparison with previous years.
However, there are several areas where companies will need to raise the quality of their disclosures in future years.
These include:
- Providing more granular information about the effect of climate change on different business sectors and geographies.
- Balancing the discussion of climate-related risks and opportunities appropriately.
- Linking climate-related disclosures to other risk management and governance processes.
- Explaining how they have decided which climate-related information should be disclosed.
- Explaining more clearly how the effects of different global warming scenarios, and their own net zero commitments, may affect the valuation of their assets and liabilities.
To access the article in full, refer to the following link
Source: www.frc.org.uk
The number of global companies obtaining independent assurance on their environmental, social and governance (ESG) information increased from 51% to 58% in 2020, compared to the previous year, according to new data from the International Federation of Accountants (IFAC), American Institute of CPAs (AICPA) and Chartered Institute of Management Accountants (CIMA), the latter two of which represent the unified voice of the Association of International Certified Professional Accountants.
The 2020 information released is an update to the accounting bodies’ inaugural study last year that examined global trends in both sustainability-related reporting and its assurance. This latest update offers the first benchmark of progress relative to the original data. A follow-up study that incorporates 2021 information is expected to be released at a later date.
When it comes to ESG assurance, 82% of engagements were limited in scope in 2020, essentially the same as in 2019 (83%). Some 61% of assurance engagements were performed by audit firms on a global basis, a slight decline from the previous year (63%). Jurisdictions with some of the highest rates of assurance performed by professional accountants include Australia, France, Italy, Germany and Spain. In other countries, including South Korea, the United Kingdom and the United States, most assurance engagements are conducted by service providers outside of the accountancy profession. Professional accountants have high professional standards, including independence, and are subject to regulatory oversight, which is critical in this space.
To access this article in full, refer to the following link
Source: www.ifac.org