Technical update

Corporate reporting

The FRC has published its Annual Review of Corporate Reporting. The report shows that the quality of corporate reporting across FTSE 350 companies is being maintained. The three areas identified as in need of improvement are impairment, cashflow statements and explanations of key assumptions. The FRC also identified a lack of internal consistency within the annual report as being an issue.

Findings include the following:

• Cashflows triggered a ‘substantive question’ letter from the FRC in almost one in 10 of all cases reviewed. The main item identified was misclassification errors.
• Impairment of assets also triggered a 10% query rate, with inconsistent assumptions, incomplete or missing sensitivity analysis, and issues with the discount rate used being the most common issues arising. Recoverability of investments in subsidiaries was also a cause for queries being raised.
• Financial instruments raised questions in the areas of repurchase of company shares, warrants, the accounting treatment applied to embedded derivatives and the use of the expected credit loss model to group company loans.
• Revenue recognition disclosures caused issues due to lack of an explanation of the accounting policies applied to a significant revenue stream, how the effect of variable consideration had been considered and the rationale for recognising revenue over time.

The UK government is not yet mandating a requirement to disclose sustainability information, but the report notes that it is consulting on the use of UK Sustainability Reporting Standards (UK SRS). UK companies must still, however, make climate-related financial disclosures.

In the international arena, the IFRS Foundation is looking for broader financial support from jurisdictions using its accounting and reporting standards. Currently, only 25% of jurisdictions requiring the use of International Accounting Standards Board (IASB) guidelines fund the IASB; and International Sustainability Standards Board (ISSB) seed financing is due to expire in 2026. The foundation is therefore seeking mid-term ‘fair share’ funding from governments ‘benefiting from adopting or otherwise using the standards contributing to their development and maintenance’.

Sanction breaching

Sanction breaching has moved up the political agenda in Ireland with the publication of the General Scheme of the Criminal Justice (Violation of EU Restrictive Measures) Bill 2025. Head 10 proposes to make sanction busting punishable on conviction on indictment, to an unlimited fine or imprisonment for a term not exceeding 10 years or both.

For accountants in industry, the list of prohibited exports or customers is extensive and being added to regularly. For accountants in practice, there is a list of persons for whom the accountant may not act and a general prohibition on the provision of account, audit or taxation services, indirectly or indirectly, to a client with an establishment in Russia.

In the UK, Colorcon has recently been fined £152,750 for breach of the UK’s Russia financial sanctions. The fine relates to 79 payments totalling £128,277.72, made by Colorcon’s Moscow office to its Russian employees and service providers. While the employees were not designated as sanctions targets, their banks were designated, meaning Colorcon breached financial sanctions by paying into accounts at the sanctioned banks.

Having self-reported the breach to the Office of Financial Sanctions Implementation (OFSI), Colorcon received a 35% discount on the fine in recognition of its voluntary disclosures and full cooperation with OFSI’s investigation; without this reduction, the penalty would have been £235,000. However, it did not qualify for the full discount because OFSI considered that it had unreasonably delayed in reporting the breaches.

OFSI assessed the breach as ‘serious’. It considered that aggravating factors included Colorcon’s status as a global company with an established presence in Russia that had ‘significant awareness’ of sanctions risk but failed to take reasonable care. It also noted the repeated and persistent nature of the errors made by Colorcon in failing to identify multiple payments to accounts held at designated banks over an extended period. (Payments were made between March and December 2022.)

OFSI noted that companies cannot rely on third parties to undertake financial sanctions checks on their behalf and they will be liable for any breaches that occur. They should regularly reassess sanctions policies and processes. In Colorcon’s case, relevant documentation had not been materially updated since 2018, and although 44 of the payments were covered under a general licence before its expiry, Colorcon failed to comply with its reporting obligations and continued transactions even after the licence had expired.

Sustainability

The International Sustainability Standards Board (ISSB) has announced an expansion of its newly named Jurisdictional Adopters Working Group, to boost discussions on creating a passporting system recognising sustainability reports from the 39 jurisdictions authorising or planning to authorise ISSB standards. The goal is that these ‘jurisdictions accept reports prepared in accordance with the ISSB Standards… accommodating jurisdiction-specific conditions as needed’ to ‘lower costs for preparers and… deliver efficiencies and comparable information for capital markets and preparers’.

The Taskforce on Nature-related Financial Disclosures (TNFD) is the latest sustainability reporting organisation integrating its work into the ISSB. It will complete technical work in progress by Q3 2026 and pause the commencement of further technical guidance work, said an ISSB note. This follows the ISSB advancing work on nature-related risks and opportunities through introducing incremental disclosure requirements on these topics into its existing standards IFRS S1 and IFRS S2.

The Organisation for Economic Cooperation and Development (OECD) has released a Global Corporate Sustainability Report 2025, finding that 91% of listed companies worldwide published a study on the adoption of sustainability reporting and assurance during 2024. Of the listed companies assessed, 88% received third-party assurance.

The Global Reporting Initiative (GRI) has launched an Integrity Matters Checklist giving non-state organisations (including investors and businesses) a system for reporting climate policy actions, aligned with United Nations guidance. This includes how organisations should report on efforts to cut greenhouse gas emissions, implement transition plans and reduce investment in fossil fuels.

Public sector

The International Public Sector Accounting Standards Board (IPSASB) has released amended guidance on materiality in public sector accounts, stressing what information should be included and what could be left out. Under its new changes to IPSAS 1 on the presentation of financial statements, the board says: ‘Information is material if admitting, misstating or obscuring it could reasonably be expected to influence the discharge of accountability by the entity…’

Auditing

The International Federation of Accountants (IFAC), the International Organisation of Supreme Audit Institutions (INTOSAI) and INTOSAI Development Initiative (IDI) have agreed to better collaborate in boosting public sector auditing. A memorandum of understanding has committed them to exchanging knowledge, experience and best practices; working to stage joint events, forums and dialogues; cooperating in liaising with donors for capacity-building projects; and promoting relevant initiatives and publications.

Accountancy bodies

The International Federation of Accountants (IFAC) has released a second IFAC Professional Accountancy Organisation (PAO) Strategy Planning Toolkit: Continuous Learning and Improvement Edition. It aims to help accounting organisations define and communicate their value, measure performance and reform operations.

IFAC and the International Bar Association (IBA) have launched an initiative aimed at supporting legal and accountancy professional bodies in fighting money laundering through a series of regional AML capacity building events, including workshops. The first was staged in the Cayman Islands in October, with professional accountancy bodies from 22 jurisdictions in the Caribbean and beyond attending.