Sustainability
The International Sustainability Standards Board (ISSB) has approved key technical decisions about the operation of its first two proposed sustainability-related disclosure standards, IFRS S1 and S2 – on general and climate-related disclosures – requiring all direct and indirect greenhouse gas emissions to be declared. That means that Scope 1 direct emissions from a company, Scope 2 indirect emissions from electricity purchased and used, and Scope 3 indirect emissions from across a company’s value chain must all be measured and declared under ISSB-authorised statements. The ISSB says it may allow more time for the collection of Scope 3 data than for Scope 1 and 2.
The ISSB also confirmed that companies complying with its standards must use climate-related scenario analysis to report on climate resilience and to identify climate-related risks and opportunities. The ISSB says that this will help preparers make use of materials developed by the Task Force on Climate-Related Financial Disclosures (TCFD) when making these assessments.
The IFRS Foundation trustees have revealed the membership of a new Integrated Reporting and Connectivity Council (IRCC) that will help integrate ISSB standards with those of the International Accounting Standards Board (IASB). The IRCC chair will be Charles Tilley, former CEO of the International Integrated Reporting Council.
The sustainability reporting technical expert group of the European Financial Reporting Action Group (Efrag) is discussing the development of European sustainability reporting standards for listed SMEs and voluntary reporting standards for unlisted SMEs. The simplified standards would operate alongside the European Union standards being developed by Efrag for approval by the European Commission in 2023.
Financial statements
The IASB has released amendments to IAS 1 on the presentation of financial statements to improve how companies report long-term debt with covenants. IAS 1 requires companies to classify debt as non-current only if they can avoid settling that debt in the 12 months following the reporting date. However, as compliance with covenant conditions may lead to the debt settlement date being brought forward, the revision allows companies to use the non-current classification as long as they disclose the covenants in the notes to the financial statements.
Auditing
The International Auditing and Assurance Standards Board (IAASB) is consulting on proposed changes to its International Standard on Auditing (ISA) 500 on collecting enough audit evidence on which to draft an opinion. The changes would introduce a principles-based approach for considering and making judgments about audit evidence. It will also advise on using auditing technology, such as automated tools and techniques.
Data use
The IAASB has released analysis on homomorphic encryption algorithms that allow computations to be done on encrypted data without need for decryption. Homomorphic encryption allows data to be protected in use, providing confidentiality during analysis.
Public sector
The International Public Sector Accounting Standards Board (IPSASB) has proposed additional guidance on how governments and public sector entities can apply two previously published IPSASB guidelines to their reporting on sustainability programme information. The guidance provides illustrative examples on green bonds, carbon taxes, subsidies and other climate change policies. The move comes ahead of a looming IPSASB decision on whether to develop a public sector sustainability reporting system.
Quality management
The International Federation of Accountants (IFAC) has released the first instalment of a three-part publication helping small and medium-sized practices implement the IAASB’s new quality management standards, which come into effect from 15 December 2022. The first instalment addresses the mindset change required, and the shift in focus from quality control to quality management.
Ethics
The International Ethics Standards Board for Accountants (IESBA) has released advice on ethics considerations in sustainability reporting, with guidance on greenwashing concerns. It highlights the applicability of its international code of ethics for professional accountants to challenges in sustainability reporting and assurance – in particular, the tackling of misleading and false sustainability information.
More information
Read our article on the double materiality principle and how companies should report on the impact of sustainability issues on the outside world.
