Financial Reporting
1. IFRS 6 – Exploration for and Evaluation of Mineral Resource
The IASB has published a summary of its project on extractive industries, within which the board considered whether to amend or replace IFRS 6 which was initially rolled out as an interim step for the accounting of extractive activities back in 2004. The paper outlines the rationale behind the IASB undertaking the project, the considerations which took place, and the pivotal decisions taken.
Based on evidence collected between 2018 and 2023, the IASB did not find compelling evidence that standard-setting would be necessary whilst acknowledging that diverse accounting policies for exploration and evaluation expenditure would continue to be used in practice. The IASB therefore concluded this project at its September 2023 meeting.
Read more at: https://www.ifrs.org/news-and-events/news/2023/12/iasb-summarises-its-completed-project-on-extractive-activities/
2. Proposed updates to IFRS Accounting Taxonomy
The IFRS Foundation is responsible for the development of XBRL representations of IFRS Accounting standards. When the IASB releases new IFRS Accounting Standards or makes changes to existing ones, it concurrently revises the IFRS Accounting Taxonomy to incorporate updated presentation and disclosure specifications.
On the 5th of October 2023, the IASB has proposed updates to the IFRS Accounting taxonomy to reflect recent updates to IAS 12 ‘Income Taxes’, IFRSs for SME, IAS 7 ‘Statement of Cash Flows’, IFRS 7 ‘Financial Instruments: Disclosures’ and IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’.
Read more at: https://www.ifrs.org/news-and-events/news/2023/10/iasb-proposes-updates-to-the-ifrs-accounting-taxonomy-2023/
3. Financial instruments with both debt and equity features
The IASB has proposed amendments to tackle the challenges that companies encounter when dealing with financial instruments possessing both debt and equity characteristics. IAS 32 provides criteria for classification, aiding practitioners in distinguishing whether an instrument should be categorized as debt or equity.
While IAS 32 is effective for most financial instruments, the IASB acknowledges that financial instruments have evolved since the standard’s inception. Consequently, there have been discrepancies in reporting practices among companies, making it difficult for investors to evaluate and compare the financial positions of such entities. The IASB has therefore suggested further clarification of the classification criteria in IAS 32.
Read more at: https://www.ifrs.org/news-and-events/news/2023/11/iasb-consults-on-improved-accounting-requirements-for-financial-instruments/
4. FASB - Accounting for and Disclosure of Crypto Asset
The FASB recently released an Accounting Standard Update (ASU) aimed at enhancing accounting practices and disclosures for crypto assets. The primary focus is to offer investors more pertinent information about these assets.
Unlike the previous approach that required measuring crypto assets historically, the updated Codification now requires measuring them at fair value at the end of each reporting period with changes in fair value being reflected in net income. Additionally, the new standard mandates disclosing significant holdings, contractual sale restrictions, and movements during the reporting period.
These changes in the ASU are effective for all entities for reporting periods beginning after December 15, 2024. Early adoption is allowed for both interim and annual financial statements not yet issued.
Read more at: https://www.fasb.org/page/getarticle?uid=fasb_Media_Advisory_12-13-23
5. EFRAG Endorsement Status Report
In the closing quarter of 2023, EFRAG released two endorsement status reports, officially supporting recent updates to IAS 12 ‘Income Taxes’ in respect of International Tax Reforms – Pillar Two Model Rules as well as the endorsement of amendments to IAS 1 ‘Presentation of Financial Statements’.
Regarding modifications to IAS 12, the European Union has granted approval for the implementation of a temporary exception to the Deferred Tax requirements in IAS 12 Income Taxes arising from the OECD’s Pillar Two Model Rules.
The European Union has also endorsed changes to IAS 1 concerning the accurate classification of liabilities as current or non-current resulting from loan agreements with covenants, along with additional guidance on disclosures when such loan agreements are featured in an entity’s financial statements.
Read More at:
https://www.efrag.org/News/Public-467/EFRAG-Endorsement-Status-Report—Update
https://www.efrag.org/News/Public-460/EFRAG-Endorsement-Status-Report—Update
Audit
1. Enhancement to auditor’s report transparency on independence in response to revisions within the IESBA Code of Ethics
In October 2023, The International Auditing and Assurance Standards Board (“IAASB”) has introduced revisions to enhance transparency and offer auditors a straightforward process for implementing modifications to the International Ethics Standards Board for Accountants (IESBA) Code of Ethics for Professional Accountants, including International Independence Standards. The amendments specifically impact the International Standard on Auditing 700 (Revised), which deals with forming an opinion and reporting on financial statements, and ISA 260 (Revised) which pertains to communication with those charged with governance.
Under the revised IESBA Code, companies are now mandated to disclose instances where they have adhered to independence requirements for public interest entities during the audit of an entity’s financial statements. The IAASB’s amendments offer a well-defined and practical structure for incorporating this new mandate by facilitating effective communication in the auditor’s report and with those charged with governance.
Reference:
2. New Edition of the IAASB Handbook
A 2022 edition of the “Handbook of International Quality Management, Auditing, Review, Other Assurance, and Related Services Pronouncements” has been released by the IAASB.
The handbook includes, among other things, the IAASB’s new and revised quality management standards, as well as the International Standard on Related Services (ISRS) 4400 (Revised), Agreed-upon procedures engagements.
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3. ISSA 5000 on Materiality
In response to requests from a range of stakeholders for additional information on materiality matters in relation to the recently proposed International Standard on Sustainability Assurance (ISSA) 5000, General Requirements for Sustainability Assurance Engagements, the IAASB has issued a comprehensive set of Frequently Asked Questions.
Such questions include, among other questions and answers, how the concept of materiality applies to sustainability reporting and assurance and the definition of double materiality.
Reference:
4. New Standard for Audits of Less Complex Entities issued by the IAASB
In December 2023, The International Auditing and Assurance Standards Board (IAASB) published the International Standard on Auditing for audits of financial statements of less complex entities (the ISA for LCE). This new stand-alone ISA is effective for audits commencing on or after 15th December 2025.
For more information in relation to this standard, one can refer to the following article compiled by Zampa Debattista in relation to the New International Standard on Auditing for Auditing of Financial Statements of less complex entities:
Reference:
https://www.iaasb.org/news-events/2023-12/new-standard-audits-less-complex-entities-issued-iaasb
5. IAASB Issues Guidance for Assurance Practitioners when citing IFRS Accounting Standards
In December 2023, the IAASB issued guidance clarifying how auditors or practitioners should be referencing IFRS Accounting Standards in their reports.
The guidance includes, among other things, how auditors should be referring to the IFRS Accounting Standards in their auditor reports, as well as clarification on inclusion of the registered trademark symbol when referencing a particular accounting standard or in an auditor’s report. The alert issued by the IAASB also refers to changes and developments that the IAASB intends to make to upcoming editions of the IAASB handbook, especially with regards to IASs and IFRSs.
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6. New public consultation opened on narrow scope amendments to meet expectations for public interest entities
The International Auditing and Assurance Standards Board (IAASB) has recently issued proposed amendments to existing pronouncements or their interpretations, including the extension of the scope of entities included under the International Standards on Quality Management and the International Standards on Auditing (ISAs), making them susceptible to:
- Engagement quality reviews
- Providing transparency in the auditor’s report on specific aspects of the audit
- Communicating with those charged with governance to assist them in fulfilling their responsibility in overseeing the financial reporting process.
The objective of the proposed revisions is two-fold:
- Firstly, to better align the definitions and requirements within IAASB standards with new definitions for publicly traded and public interest entities in the IESBA Code.
- Secondly, to broaden the applicability of existing differential requirements applicable to listed entities, to align with the ever-increasing stakeholder expectations in relation to audits of public interest entities.
Feedback on the respective exposure draft is open until 8th April 2024.
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7. Release of new Quality Management Toolkit to assist Small and Medium-Sized Practices Globally
The International Federation of Accountants (“IFAC”) and Chartered Accountants Australia and New Zealand (“CA ANZ”) has issued a quality management toolkit to aid small and medium-sized enterprises adopt the quality management standards issued by the IAASB.
This quality management toolkit, together with the Illustrative Risk Matrix, includes illustrative documents, policies, checklists as well as sample letters and forms to aid small and medium-sized practices (SMPs) establish their quality objectives, identify and assess their quality risks and implement responses to address the quality risks identified.
The quality management toolkit can be accessed through the following link: ifac.org/qualitymanagement.
Reference:
ESG
1. IFAC - Sustainability Reporting Developments
After thorough research and external outreach, IFAC determined that while a professional accountant’s skills can apply to sustainability reporting and assurance, there is a need for improved International Education Standards (IES) specifically emphasizing sustainability reporting. The IES have been formulated by the International Accounting Education Standards Board (IAESB) and constitute the foundational principles, concepts, and definitions aimed at improving accountancy education.
IFAC predicts that professional accountants will play a vital role in aiding clients amid the rising market demand for sustainability reporting and assurance. Consequently, IFAC plans to initiate a public consultation on proposed standard revisions scheduled for Q2 2024.
IFAC also introduced a Small Business Sustainability checklist offering small businesses guidance on developing sustainability strategies, policies, and procedures. The checklist provides a comprehensive range of initiatives and actions to be considered in terms of environmental, social, and governance (ESG) factors which are customisable to the needs of specific industries.
Read more at:
https://www.ifac.org/knowledge-gateway/preparing-future-ready professionals/publications/small-business-sustainability-checklist
https://www.ifac.org/news-events/2023-12/ifac-announces-plan-revise-international-education-standards-sustainability-reporting-and-assurance
2. EFRAG introduces ESRS Q&A platform
As part of EFRAG’s efforts to enhance the quality of standards in the European Union, the organization has unveiled the ESRS Questions and Answers (Q&A) platform. The primary objective of this initiative is to assist preparers and other stakeholders in effectively implementing ESRSs. This platform is designed to offer guidance on various technical implementation queries that may arise.
Read more at: https://www.efrag.org/News/Public-454/Launch-of-the-EFRAG-ESRS-QA-Platform-to-support-implementation-of-ESR
3. MGA releases a voluntary ESG Code of Good Practice
In a significant development for Malta’s gaming industry, the Malta Gaming Authority (MGA) has proudly launched the Environmental, Social, and Governance (ESG) Code of Good Practice for the remote gaming sector. This code serves as a self-regulatory tool, aiding remote gaming companies in aligning with industry best practices to effectively meet evolving stakeholder expectations.
Although voluntary, the MGA encourages all licensees to adopt the ESG Code, showcasing their commitment to sustainability and contributing to the ongoing improvement of the industry’s ESG standards.
Read more at: https://www.mga.org.mt/mga-publishes-voluntary-esg-code-of-good-practice/
4. Publication of ESRS Implementation Guidance
EFRAG has issued three non-authoritative Draft Implementation Guidance (IG) documents to assist on the most challenging aspects of ESRS sustainability reporting standards. EFRAG has published the following three documents:
1. Materiality Assessment Implementation Guidance: Outlines reporting requirements for materiality assessments, offering practical steps and FAQs for the double materiality assessment
2. Value Chain Implementation Guidance: Details reporting requirements for the value chain during the materiality statement. A ‘value chain map’ has also been prepared to summarize implications per disclosure requirement.
3. Draft List of ESRS Datapoints: Provides a concise list of disclosure requirements coming out of sector-agonistic standards.
Read more at: https://www.efrag.org/News/Public-471/Publication-of-the-3-Draft-EFRAG-ESRS-IG-documents-EFRAG-IG-1-to-3-
John Debattista
Partner
Janis Hyzler
Audit Leader
