Sustainability reporting
The European Parliament has agreed its negotiating position on simplified sustainability reporting and due diligence duties for businesses.
MEPs voted that only businesses employing on average more than 1,000 employees and with a net annual turnover of over €450m should have to carry out reporting under the Corporate Sustainability Reporting Directive (CSRD). Previously every large company came in scope.
MEPs also supported limiting due diligence obligations under the Corporate Sustainability Due Diligence Directive to very large companies with more than 5,000 employees and a net annual turnover of over €1.5bn.
Only those businesses that fall within the scope of the CSRD would also be required to provide sustainability reporting under the EU taxonomy rules (which classify sustainable investments).
Sustainability assurance
The UK’s Financial Reporting Council (FRC) has issued ISSA (UK) 5000, General Requirements for Sustainability Assurance Engagements. The standard provides UK companies, investors and assurance providers with a consistent, internationally aligned standard for voluntary use in sustainability assurance engagements.
The same standard is expected to be issued in Ireland shortly.
Emissions disclosure
The International Sustainability Standards Board has published a newsletter covering the following three topics: biodiversity, ecosystems and ecosystem services; human capital; and amendments to greenhouse gas emissions disclosure.
The European Banking Authority is highlighting the risks for certain crypto assets
Sanctions guidance
New guidance has been published on countering Russian sanctions evasion. The guidance, which is targeted at businesses operating in the freight and shipping sector, includes:
- information on the range of goods at heightened risk of being diverted to Russia
- suggestions for compliance best practice and enhanced due diligence procedures
- red flag indicators of potential sanctions evasion via circumvention
- additional resources to help businesses in the sector manage their risk and meet their compliance obligations.
Crypto assets
The European Banking Authority has issued a warning and a factsheet for consumers on the risks and lack of protection for certain crypto assets and providers. The main risks associated with crypto include extreme price movements, illiquidity, misleading information, fraud, scams and hacks, the lack of any consumer protection and product complexity.
The factsheet discusses the crypto asset market regulations and what protection may be available for certain crypto assets across the EU.
Cybersecurity toolkit
The National Cyber Security Centre in the UK has launched a cyber action toolkit: a single destination for sole traders, micro businesses and small organisations to start building their cyber defences. The toolkit asks the user a number of questions and then provides a checklist of matters to address. It has simple guidance covering everything from how to change a Gmail password to how to turn on automatic updates for your apps.
While the toolkit is intended for UK businesses, it is fully applicable in Ireland as well.
Smaller companies accounting
The FRC has published a review of reporting by the UK’s smaller listed companies. It focuses on four key areas where investors pay close attention and where the FRC has historically identified room for improvement:
- revenue recognition (the goal is to ensure clear, company-specific accounting policies)
- cashflow statements (to encourage accurate classification and consistency with other disclosures)
- impairment of non-financial assets (to enhance the transparency disclosure of assumptions and sensitivities)
- financial instruments (to tailor policies and risk disclosures to the company).
Audit best practice
Following inspections of the 12 largest audit firms in the UK, the FRC has published key findings and a good practice report. Both the FRC and the Irish Auditing and Accounting Supervisory Authority have previously reported on areas of weakness in audits, and this report looks at some of the best practices in audit in those areas where weaknesses were identified.
Those weaknesses include: impairments, provisions, revenue recognition, valuation of assets and liabilities, inventory, ISQM1, planning and risk assessment, IT testing and group audit oversight.
