The European Commission has adopted the European Sustainability Reporting Standards (ESRS) for use by companies subject to the Corporate Sustainability Reporting Directive. These are the 12 reporting standards that will begin to be compulsory in Ireland over the next few years depending on the size and status of the company.
Large quoted companies come in scope in 2024 and large unquoted (as defined in the Companies Act 2014 Section 280H) a year later, in 2025. Because these companies will be disclosing the sustainability information for their supply chain, SME and micro-businesses selling to such businesses will end up effectively in scope as well or risk losing their customer.
ESRSs are for businesses operating in Europe, and a parallel set of sustainability reporting standards are being developed for use outside Europe by the International Sustainability Standards Board (ISSB).
Double materiality is a far more onerous process than the inward reflection required by single materiality
The main differentiating issue is the ‘double materiality’ requirement in ESRS while the ISSB standards only have single materiality. Single materiality concerns whether the matter is material to the company, while double materiality considers whether a matter is material to the company or other stakeholders.
Determining if a matter is ‘double material’ means communicating with customers, consumers and other stakeholders to find out if a matter is material to them, which is a far more onerous process than the inward reflection required by single materiality.
Audit firms will need to provide assurance over their clients’ sustainability disclosures
The European Financial Reporting Advisory Group (EFRAG) will shortly publish non-binding technical advice on the standards and the materiality assessment. EFRAG will also continue its joint work with the International Sustainability Standards Board (ISSB) on optimising the interoperability of overlapping ESRS and ISSB standards. The commission has published a questions-and-answers page related to the ESRSs and their adoption.
The International Auditing and Assurance Standards Board has issued its proposed International Standard on Sustainability Assurance (ISSA) 5000, General Requirements for Sustainability Assurance Engagements. The largest audit firms will be providing assurance over sustainability disclosures in financial statements prepared in 2024 for their large public interest clients. All audit firms, including SMPs with large audit clients (large per the companies act), will need to provide assurance over their clients’ sustainability disclosures in 2025 financial statements.
CRO has recommenced enforcement proceedings for companies that have annual returns
ISSA 5000 is a principles-based, overarching standard suitable for both limited and reasonable assurance engagements on sustainability information reported in accordance with ESRS or the IFRS Sustainability Disclosure Standards.
After a period of forbearance during Covid-19, Companies Registration Office has recommenced enforcement proceedings for companies that have annual returns and financial statements outstanding. Companies in default are being given 10 weeks to bring the filings up to date or risk prosecution.
Late filing fees can be up to €1,200 per year so, for some companies facing multiple years of late filing fees, it is worth applying to the district court for a Section 343(5) order.
New regulations are effective for solicitors’ accounting periods commencing on or after 1 July 2023
A standard S343 application can cost around €1,000 but, to be successful, company directors need to have an excuse for being delinquent in their filing obligations that is acceptable to a judge. A company choosing the S343 route should note that a return already filed cannot be deemed on time, so the application needs to be made before filing in CRO. The S343 application will deem the returns on time and therefore remove the late filing fees, as well as allowing the company keep audit exemption.
A guide for members preparing a reporting accountant’s report for the Law Society under the new Solicitors Accounts Regulations 2023 is available. The regulations govern the maintenance by solicitors of client accounts and relevant office account transactions. They also set out the requirements on reporting accountants to carry out an examination of the accounting records of the solicitor and to report to the Law Society of Ireland in accordance with the regulations.
The new regulations are effective for solicitors’ accounting periods commencing on or after 1 July 2023. Although the first reporting accountant’s reports under the new rules are not expected to be made until the end of 2024, solicitors will need to start implement new client and office accounting procedures this year. This AB article has more details on the changes.