Expected credit loss
The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has published a study on the application of IFRS 7, Financial Instruments: Disclosures and IFRS 9, Financial Instruments (impairment requirements) regarding banks’ expected credit losses (ECL).
ECL is a difficult and complex calculation for a bank, requiring very detailed calculation based on uncertain assumptions and future events. The study highlights opportunities for improvement in the level of compliance, comparability and transparency in the application of the IFRS requirements.
The Irish Auditing and Accounting Supervisory Authority (IAASA) has also issued a guidance document on accounting for ECL under IFRS 9, Financial Instruments. The IAASA’s Information Note is based on observed trends in the application of IFRS 9 by banks and, in particular, since the start of the Covid-19 pandemic.
Enhanced systems of audit quality management are to be designed and implemented by 15 December 2022
The key messages are the need for careful review and analyses of the totality of ECL information disclosed by banks, particularly information about material post-model adjustments (management overlays), judgements surrounding significant increase in credit risk, and changes to forward-looking information, ECL allowances and ECL sensitivity.
The IAASA also indicated it expects that as Covid-19 pandemic relief measures and supports are withdrawn, additional disclosures and greater transparency of these impacts on ECLs will be disclosed in banks’ financial reports.
Audit quality standards
The IAASA has issued new auditing standards that require enhanced systems of audit quality management to be designed and implemented by 15 December 2022 – early adoption is permitted. The new standards are:
- International Standard on Quality Management (‘ISQM’) (Ireland) 1, Quality Management for Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related Services Engagements;
- International Standard on Quality Management (Ireland) 2, Engagement Quality Reviews; and
- International Standard on Auditing (‘ISA’) (Ireland) 220 (Revised December 2021), Quality Management for an Audit of Financial Statements.
The new standards replace International Standard on Quality Control (Ireland) 1 (ISQC1) and ISA (Ireland) 220. A short information video on the revised quality management standards is available.
ACCA supported members in practice with a model ISQC1 manual and toolkit. A similar toolkit is planned to support members implanting ISQM.
Intellectual property
The European Union Intellectual Property Office (EUIPO) launched a new SME Fund, which offers vouchers for EU-based SMEs to help them protect their intellectual property (IP) rights. The Fund will offer the following support:
- reimburse 90% of the fees charged by member states for IP scan services
- reimburse 75% of the fees charged by intellectual property offices for trademark and design registration
- reimburse 50% of the fees charged by the World Intellectual Property Organisation
- reimburse 50% of the fees charged by national patent offices for the registration of patents in 2022.
Applications will be examined and evaluated based on a ‘first in first out’ criterion. SMEs with no experience in the area of intellectual property are encouraged to apply first for an IP scan service and only subsequently for the other services.
