Enforcement decisions
The European Securities and Markets Authority (ESMA) has published the 29th Extract from its database of enforcement decisions taken by EU accounting enforcers. ESMA decisions, although anonymised, serve to confirm the accounting and disclosures required under IFRS and, where a company is struggling to understand a specific requirement, they can be very useful guidance.
The latest extract serves almost as a fully comprehensive FAQs on issues arising in IFRS financial statement reporting and deals with related-party disclosures, measurement of expected credit losses, alternative performance measures and the calculation of return on capital employed.
Read a compendium summary list and descriptor of all issues dealt with in all 29 extracts up to May 2024.
After the CPA and ICAI merger, there will only be two Irish RABs remaining
IAASA annual report
The Irish Auditing and Accounting Supervisory Authority (IAASA) has published its 2023 Annual Audit Programme and Activity Report. This includes a section detailing the supervision of the three remaining recognised accounting bodies (RABs) in Ireland: ACCA, the Institute of Certified Public Accountants in Ireland (CPA) and the Institute of Chartered Accountants in Ireland (ICAI). After the CPA and ICAI merger, there will only be two Irish RABs remaining.
On an annual basis IAASA reviews regulatory plans, annual returns, annual and regulatory reports for each of the RABs and supervises their performance of regulatory functions, including the approval and registration of statutory auditors and audit firms; the monitoring of continuing education; the quality assurance schemes (audit monitoring); and the investigation and disciplinary systems.
Italian Wine Brands
IAASA’s review of the financial statements for the year ended 31 December 2022 for Italian Wine Brands, a company with debt quoted on the Euronext Dublin, resulted in the company issuing a corrective statement, although it did not issue amended financial statements.
The evidential requirements for reckless trading have been lowered in new legislation
The company acknowledged that it omitted a ‘responsibility statement’ and certain disclosure requirements under IFRS 3, Business Combinations, IFRS 8, Operating Segments, IAS 36, Impairment of Assets and IFRS 16, Leases. The financial statements also apparently contained mathematical errors. In addition, the company acknowledged that there were issues with its disclosures in respect of alternative performance measures such as EBT, EBIT and EBITDA. The company’s auditors are noted as BDO Italia.
Reckless trading
The evidential requirements for reckless trading have been lowered in new legislation. The Employment (Collective Redundancies and Miscellaneous Provisions) and Companies (Amendment) Act 2024 has removed the word ‘knowingly’ from Section 610 of the Companies Act 2014 and made other changes that provide for additional civil liability for directors and officers of a company where there was fraudulent or reckless trading. The amendment effectively lowers the evidence requirement under Section 610. The amended section is below, with deleted words emboldened and insertions italicised:
‘(1) If in the course of the winding up of a company…it appears that…any person was, while an officer of the company, knowingly a party to the carrying on of any business of the company in a reckless manner, [they can be made personally liable for the debts of the company].…that his or her actions or those of the company would be likely to cause loss to the creditors of the company’.
The new legislation also amends the requirements for liquidators, particularly in respect of the provision of information to employees of the company in liquidation.
Large corporate customers are specifying sustainability criteria in contracts for SME suppliers
Sustainability reporting for SMEs
Large corporate customers are now frequently specifying sustainability criteria within procurement contracts for their SME suppliers, as this AB article outlines. The sustainability criteria will usually include a section requiring that the SME confirm that they have strategies in place related to matters such as energy use and source of energy, effluent, water use, ecosystem interaction, workforce equality and safety, and corporate governance.
Some customers will go further and ask for a sustainability report from the SME, which will detail strategies and the measurement basis and success or otherwise of achieving the goals.
ACCA has a guide to assist in reporting. We also have a series of guides, which are written for the UK so will need minor amendment for Ireland. These can be used by an SME to develop a strategy in a particular area, such as the Essential guide to reducing pollution and waste and the Essential guide to environmental business travel.
