Technical Roundup 15 December

Welcome to this edition of Technical Roundup.

In recent developments, the Dept of Enterprise, Trade and Employment has published the Digital Services Bill 2023 which will provide for the full implementation in Ireland of the EU Regulation on a Single Market for Digital Services and the International Auditing and Assurance Board issued the new International Standard for the Audits of Less Complex Entities on 6 December 2023.

Read more on these and other developments that may be of interest to members below.

Financial Reporting

The Financial Reporting Council (FRC) has issued FRED 85 Draft amendments to FRS 101 Reduced Disclosure Framework – 2023/24 cycle. Every year, the FRC carry out a review of the FRS 101 standard to consider amendments made by the International Accounting Standards Board (IASB) to their standards, and whether such changes should result in an amendment to FRS 101. In FRED 85, the FRC are proposing minor changes to FRS 101 to ensure consistency with IAS 1 Presentation of Financial Statements.

The FRC has published an insight report “Structured digital reporting – 2023 insights” which highlights some areas for focus for companies when producing their annual financial report in a structured digital format under FCA Rules. This includes some examples of best practice in the areas of tagging, usability & design and process.

The FRC has issued version 2.0 of Technical Actuarial Standard 300: Pensions (TAS 300).

The IFRS Foundation has released its November 2023 monthly news summary, which summarises their news items and events during the month.

The IFRS Interpretations Committee (IFRIC) has issued its November 2023 update which summarises decisions made by the Committee in its public meetings. This includes details of some tentative agenda decisions on climate-related commitments under IAS 37 and disclosure of revenues and expenses for reportable segments under IFRS 8.

The International Accounting Standards Board (IASB) has published a summary of its project on extractive activities which considered whether to amend or replace IFRS 6 Exploration for and Evaluation of Mineral Resources.

The IASB has published a webcast which provides some insight into the forthcoming IFRS Accounting Standard for Subsidiaries. The standard is expected to be issued in the first half of 2024.

EFRAG, the European Financial Reporting Advisory Group, has published its final comment letter in response to the IASB’s Exposure Draft- Annual Improvements – Volume 11. The UK Endorsement Board has also published its comment letter and feedback statement on the Exposure Draft.

EFRAG has published its November 2023 update which summarises public technical discussions held and decisions taken during the month.

The Pillar Two tax rules that will apply to companies with consolidated revenue over €750m are contained in the Finance No2 Bill that is making its way through the Oireachtas. In relation to the financial reporting implications of the Pillar Two tax rules, IAS 12 Revised and FRS 102/101 revised now set out financial reporting disclosure requirements for those companies.

Assurance and Auditing

The Financial Reporting Council (FRC) has published its annual inspection findings for Tier 2 and Tier 3 audit firms and a number require ‘significant improvement’. The findings outline that of the audits reviewed, 38% required only limited improvements, 24% required more than limited improvements and a further 38% required significant improvements. The FRC identified deficiencies in the audit of judgements and estimates, and going concern, both of which require audit teams to demonstrate robust professional scepticism. Firms must demonstrate improvement including investing in their audit methodology, human resources and audit quality functions, learning from things that went wrong or went well, and seeking to embed a culture that recognises and prioritises audit quality. The FRC is taking a number of actions to improve resilience and competition in the PIE audit market.

The FRC has announced their areas of focus for 2024/25. The includes priority sectors are:

• Construction and Materials
• Food Producers
• Gas, Water & Multi-utilities
• Industrial Metals and Mining
• Retail

These are for both corporate reporting reviews and audit quality inspections.

ISA for LCE

Following approval at their September 2023 meeting, the IAASB issued the new International Standard for the Audits of Less Complex Entities on 6 December 2023.

Where it is adopted, or permitted, the standard is effective for audits of financial statements for periods beginning on or after December 15, 2025, (i.e. 2026 calendar year audits) with early adoption being permitted and encouraged. The standard has not yet been adopted for use in Ireland or the UK.

The standard can be downloaded from the IAASB website.

Sustainability

The International Sustainability Standards Board (ISSB) have been providing updates on their activities at COP 28. These include;

• Their planned future cooperation with the International Organization for Standardisation towards effective communication about sustainability-related risks and opportunities.
• Details of the growing number of Organisations and jurisdictions who have committed to advancing the adoption or use of the ISSB’s climate-related reporting at a global level.
• An announcement that Emmanuel Faber will continue as ISSB chair until the end of 2027.
• Details of the progress made in advancing global sustainability disclosures since the establishment if the ISSB was announced at COP 26.

The International Sustainability Standards Board has provided details of some new and updated resources coming into effect on 1 January 2024. These are intended to help companies apply the ISSB Standards IFRS S1 and IFRS S2.

The IFRS Foundation has launched the IFRS Sustainability Knowledge Hub which seeks to support users of the ISSB standards. This is intended to help auditors, investors, regulators and stakeholders as they begin their reporting journey under the ISSB standards.

IFAC have announced plans to revise the International Education Standards to bring greater focus to sustainability reporting and assurance, given the evolving role of accountants in the area of sustainability.

Sanctions/Anti-money laundering

The UK’s National Crime Agency and National Economic Crime Centre have issued an alert to financial institutions and other members of the UK regulated sector warning that Russia is trying to procure UK sanctioned goods through intermediary countries.  Sanctions imposed on Russia as a result of its invasion of Ukraine have had a significant impact on its ability to purchase products, including military supplies, on international markets. The alert provides information to UK businesses on common techniques suspected to be in use to evade sanctions on the export of high-risk goods, which Russia is using on the battlefield in Ukraine.

The European Council and Parliament have reached a provisional agreement on creating a new European authority for countering money laundering and financing of terrorism (AMLA) - the centrepiece of the anti-money laundering package, which aims to protect EU citizens and the EU's financial system against money laundering and terrorist financing.

Other News

The Credit Union (Amendment) Bill 2022 has recently been sent to the President for signature. Click here for a government press release where the Minister for Financial Services, Insurance and Credit Unions welcomed the proposed amendments to the legislation which she said aim to bring about significant reforms for the credit unions sector in Ireland and represents a very significant piece of legislation that will have far-reaching positive implications for the credit union sector in the years to come.

In other credit union news, the Central Bank of Ireland has issued their December Credit Union News publication which includes a reminder to all credit unions on key financial  considerations and other matters for consideration at year end including impairment reviews of assets, liquidity management, systems of control, cybersecurity and operational resilience (including outsourcing) and Lending Framework Review with an expectation of publishing analysis of the review in H1,2024.

The Dept of Enterprise Trade and Employment recently published  the Digital Services Bill 2023, which will provide for the full implementation in Ireland of the EU Regulation on a Single Market for Digital Services. Click here for a press release giving more details on the Bill and the EU Regulation commonly referred to as  the Digital Services Act. The EU Regulation establishes a pioneering regulatory framework to protect EU users of digital services and their fundamental rights online. The press release notes that the Irish Digital Services Bill is a technical bill, drafted to address specific obligations on Member States of the EU to give effect to the supervision and enforcement provisions of the EU Regulation. The Bill does not add to or amend the obligations on online platforms under the EU Regulation. Those obligations have direct legal effect in all Member States of the EU and do not require any implementing measures in national law.

In its recent publication, IFAC’s Professional Accountants in Business group discuss how accountants are leading and driving sustainability and digital transformation agendas. Some areas discussed in this article include;

• The accountancy profession’s role in driving higher-quality, decision-useful sustainability-related information
• The use of AI in transitioning businesses and the nature of work
• Strategies for nurturing future leaders

                               ~          Happy Christmas        ~