The Institute has issued its response to the public consultation on draft European Sustainability Reporting Standards (ESRSs), prepared by the European Financial Reporting Advisory Group (EFRAG). Under the Corporate Sustainable Reporting Directive (CSRD), the European Commission have proposed changes to the nature and extent of sustainability reporting in the EU over the coming years. The CSRD proposes mandated European Sustainability Reporting Standards and aims to strengthen sustainability reporting requirements currently mandated under the Non-Financial Reporting Directive. The public consultation involved the consideration of 13 exposure drafts across the following areas; Two cross-cutting exposure drafts covering general principles, strategy, governance and materiality assessment. Five environmental topical standards covering Climate change Pollution Water & marine resources Biodiversity, and Resource use and circular economy. Four social topical standards covering Own workforce Workers in the value chain Affected communities, and Consumers and end users Two governance topical standards covering Governance, risk management and internal control, and Business conduct The Institute assembled an experienced working group of industry experts to review the consultation and prepare a response. Some of the summary points to note in the response include; The Institute fully support the introduction of sustainability reporting standards to ensure that certain entities report transparently on their Environmental, Social and Governance (ESG) impacts. There are concerns regarding the short timeframe allowed for responding to such a comprehensive consultation. It is critical that the ESRSs are closely aligned to the ISSB standards which are currently being drafted. One way of achieving this alignment would be for EFRAG to work with the ISSB to agree on a global baseline of minimum disclosure requirements. This would be an alternative to having standards requiring differing disclosures about the same ESG matter. The Institute has voiced concerns regarding materiality as proposed in the draft standard. There is a lack of guidance on how to apply “double materiality” as proposed in the ESRSs which may lead to inconsistent use across entities. There are also concerns regarding the workability of the rebuttable presumption contained in the standard and it is unclear how this can be applied which may lead to a lack of comparability between entities. The transition to the ESRSs will be challenging for entities as many of the concepts within ESRS and the systems needed to report are not yet well established. There are some concerns noted regarding the verifiability of information required to be reported on under the ESRSs. Information to be reported about an entity’s supply chain may be difficult to verify and gain assurance on in some instances. The response highlighted some terminology improvement recommendations as well as opportunities for greater harmony across governance disclosure requirements. There is no provision for disclosure exemption on the basis of commercial sensitivity and legal prejudice in the ESRSs. Overall, whilst the Institute believes that the introduction of ESRSs is an important step in businesses reporting transparently on their ESG impacts, there is much room for improvement in the standards as they are currently drafted. The Institute encouraged EFRAG to take the time necessary to address respondents concerns and to make the standards more operable before they are finalised.

Section 819 of the Companies Act 2014 (2014 Act) relating to the restriction of directors of insolvent companies has recently been amended as a result of the commencement of the Companies (Corporate Enforcement Authority) Act 2021 (CEA Act). Section 34 of the CEA Act has added additional grounds for application to court by the Corporate Enforcement Authority (CEA), a Liquidator or a Receiver to restrict a director including failure by a director of an insolvent company to: convene a general meeting of shareholders for the purpose of nominating a named Liquidator, table a notice to nominate such Liquidator, or provide the required notice to employees of the company in the winding up of the company.  Some of these changes were brought about by a Company Law Review Group report in 2017 on the protection of employees and unsecured creditors. These changes were recommended to address difficulties where directors do not put a company into liquidation or walk away without a Liquidator being appointed. Additional insolvency-related changes to the 2014 Act, following the commencement of the CEA Act, include: the CEA has power to request evidence from a person that they are qualified to act as Liquidator of an Irish company (section 32 CEA Act); restoration of the obligation to file resolutions with the CRO in a creditors' winding-up (section 31 CEA Act); and if a liquidation is not concluded within 12 months after commencement, a Liquidator may be required to file more frequent reports to the CRO on the progress of the liquidation (section 33 CEA Act). 

The FRC has published the 20th edition of Key Facts and Trends in the Accountancy Profession. This report provides statistical information and trends on members and students in the accountancy profession. Information contained in the report is taken from the six UK Chartered Accountancy bodies (which includes the Institute), the Association of International Accountants and the Association of Accounting Technicians. The report shows that membership within these accounting bodies grew by 2.8% worldwide to 590,000 members in 2021 and student numbers grew by 1.6% to 597,000. The report shows that the overall percentage of female members worldwide has increased from 36% in 2017 to 37% in 2021 and noted a continued decline in the number of audit registered firms (down from 5,127 in 2019 to 4,745 in 2021).

The FRC has published an update of its thematic review of judgements and estimates. The first thematic review in this area was published in 2017 and this updated publication was produced due to the frequency with which issues in relation to the topic continue to be identified. This publication also includes guidance on topical matters such as climate change. The disclosure of judgements and estimation sources form a key part of the financial reporting process and continues to be an area of focus and challenge for preparers. The report highlights that good disclosure of judgements and estimates should be tailored to a company's specific circumstances and should explain, in sufficient detail, the judgements and assumptions made. Sources of estimation uncertainty should be quantified and other relevant information such as sensitivities or ranges of potential outcomes should be provided where these help readers understand management’s judgements about the future. In order to assist preparers, the review identifies many good examples of detailed disclosures relating to judgements and estimates. It also identifies some areas where there is room for improvement.

THE LEGISLATIVE PROHIBITION The Russia (Sanctions) (Eu Exit) (Amendment) (No. 14) Regulations 2022 (“No.14/2022 Regulations”) came into force on 21 July. An explanatory memorandum was issued with the No.14/2022 Regulations which the reader can access here . The No.14/2022 Regulations amend the Russia (Sanctions) (EU Exit) Regulations 2019 (“2019 Regulations”) and provide for a ban on certain professional and business services. Under newly enacted section 54C a person must not directly or indirectly provide “accounting services” to a person connected with Russia. “accounting services” is defined in new section 54B and means accounting review services, which are services involving the review by a person of annual and interim financial statements and other accounting information, but excluding auditing services; compilation of financial statements services, which are services involving the compilation by a person of financial statements from information provided by a client, including preparation services of business tax returns when provided together with the preparation of financial statements for a single fee, but excluding such preparation services of business tax returns when provided as a separate service; other accounting services such as attestations, valuations, preparation services of pro forma statements; bookkeeping services, which are services consisting of classifying and recording business transactions in terms of money or some unit of measurement in the books of account, but excluding bookkeeping services related to tax returns; Readers can see that the definition scopes out certain services, auditing services is excluded from the prohibition under “accounting review services”, preparation services of business tax returns when provided as a separate service is excluded and so are bookkeeping services related to tax returns. Regulation 21(2) of the 2019 Regulations sets out what a person connected with Russia means. A person is to be regarded as “connected with” Russia if the person is— (a) an individual who is, or an association or combination of individuals who are, ordinarily resident in Russia, (b) an individual who is, or an association or combination of individuals who are, located in Russia, (c) a person, other than an individual, which is incorporated or constituted under the law of Russia, or (d) a person, other than an individual, which is domiciled in Russia. DEFENCES, EXCEPTIONS AND LICENCES New section 54C provides that it is a defence for a person to show that they did not know and had no reasonable cause to suspect that the person to whom the services were provided was connected with Russia. New section 60DA provides certain exceptions to the ban. The prohibition is not contravened if the act is done: - to satisfy UK statutory or regulatory obligations (not arising under contract). - in respect of contractual obligations concluded before 20 July 2022 provided the act is done before the end of the period of one month beginning with the day on which the No 14/2022 Regulations came into force (21 July 2022) and that the person doing the act has notified the Secretary of State in the UK no later than the day 10 working days before the day on which the act is carried out. -out of necessity for the official purposes of a diplomatic mission or consular post in Russia or of an international organisation enjoying immunities in accordance with international law. Licensing provisions are contained in Part 7 of the 2019 Regulations. Please see Chartered Accountants Ireland  sanctions webpages for further information and links including paragraph  3.2 of updated government guidance  UK Government webpage on “Russia Sanctions: Guidance”. Please see here for a useful article on the sanctions by Stephenson Harwood LLP UK sanctions: professional and business services to Russian clients (shlegal.com) .The article includes  a comparison with the EU ban on provision of accounting services introduced in early June 2022 and about which see further Chartered Accountants Ireland recent news item . This information is provided as resources and information only and nothing in these pages purports to provide professional advice or definitive legal interpretation(s) or opinion(s) on the applicable legislation or legal or other matters referred to in the pages. If the reader is in doubt on any matter in this complex area further legal or other advice must be obtained. While every reasonable care has been taken by the Institute in the preparation of these pages, we do not guarantee the accuracy or veracity of any resource, guidance, information or opinion, or the appropriateness, suitability or applicability of any practice or procedure contained therein. The Institute is not responsible for any errors or omissions or for the results obtained from the use of the resources or information contained in these pages. Chartered Accountants Ireland can accept no responsibility for the content on any site that is linked to/from the Institute website. Links are provided in good faith for the potential support of members and students.  

The Consultative Committee of Accountancy Bodies (CCAB) is an umbrella group of chartered professional bodies in the UK of which Chartered Accountants Ireland is a member. CCAB has recently published a number of helpful client due diligence case studies. Case study 1 -High Risk jurisdiction Case Study 2 – Varying CDD based on level of risk Case Study 3 – Change in client circumstances Case Study 4 – An offer that’s too good to refuse You can click here to access them. The case studies provide different scenarios and consider certain questions in each such as what were the red flags to pick up? What are the risks and the potential threats the firm faces or may face? What action(s) should be or should have been taken?