Technical update

Global standards

The International Federation of Accountants (IFAC) has reported that its member jurisdictions are steadily adopting and using global accounting and auditing standards. It says that in December 2023, more than 90% of IFAC member jurisdictions used International Standards on Auditing (IAS), IFRS Standards and the International Code of Ethics for Professional Accountants. IAS adoption rose from 67% in 2019 to 72% in 2023; and IFRS Standards partial adoption rose from 29% in 2019 to 40% in 2023, although full adoption fell from 62% to 57%.

The IFRS Foundation Trustees have published proposed updates to the IFRS Due Process Handbook, taking account of the creation of the ISSB. It describes IFRS boards’ procedures for developing, maintaining and supporting IFRS standards.

Sustainability

IFAC, the We Mean Business Coalition and the Global Accounting Alliance have released guidance on corporate governance aiding the establishment of sustainability reporting systems. Building Trust in Sustainability Reporting and Preparing for Assurance: Governance and Controls for Sustainability Information outlines steps to align sustainability and financial reporting quality, timing and connectivity.

The International Organization of Securities Commissions (IOSCO) has launched a network to support the adoption and use of IFRS sustainability reporting standards developed by the International Sustainability Standards Board (ISSB). IOSCO’s Growth and Emerging Markets Committee Network for Adoption or Other Use of ISSB Standards comprises 31 members and will build capacity on supervisory and enforcement of ISSB standards. The network will also explore how IOSCO materials can support adoption.

The Global Reporting Initiative (GRI) has created a working group to develop new focused sustainability reporting standards on pollution, creating new GRI disclosure requirements. The group includes experts in air and soil emissions, critical incidents, plastic, chemicals and other pollutants.

Ethics

The International Ethics Standards Board for Accountants (IESBA) is to develop a new standard on accounting firm culture and governance frameworks, emphasising ethical values within practices. This follows the release of an IESBA working party report calling for ethical leadership and transparent accountability mechanisms in firms.

Financial instruments

The International Accounting Standards Board has amended IFRS 9, Financial Instruments and IFRS 7, Financial Instruments: Disclosures, to help companies better report the financial effects of nature-dependent electricity contracts, such as expanding wind and solar power. These are often structured as power purchase agreements, with performance varying through uncontrollable factors such as weather. Changes include clarifying ‘own-use’ requirements; permitting hedge accounting when contracts are used as hedging instruments; and adding disclosure requirements to clarify how contracts impact financial performance and cashflows.

Banking

IOSCO, the Basel Committee on Banking Supervision and the BIS Committee on Payments and Market Infrastructures have published proposals on improving transparency and streamlining margin processes, increasing the predictability of requirements across centrally and non-centrally cleared markets.

Audit

The International Forum of Independent Audit Regulators has warned of potential threats to audit firm independence from the increasing trend within the sector to accept equity investment. A statement explained that risks included an increased desire for short-term returns on investment from profitable audits, perhaps reducing audit quality, along with a potentially limited understanding by private equity investors of audit firms’ public interest responsibilities.