Hey everyone,
October has been relatively quiet for IFRS updates, so you can take a breather – or maybe catch up on any previous editions of Reporting Period you might have missed! 😉
To help with catching up, the IASB has published a series of webcasts covering the latest exposure drafts on the equity method of accounting and the impact of climate-related matters. For European preparers, there’s an important update: ESMA has released its enforcement priorities for the 2024 annual reports.
But let’s start off with an analysis of insurers’ first annual reports under IFRS 17.
Note: You’re currently reading an older issue from the archive, so all links have been removed.
Technical Publications
Review of IFRS 17 annual reports
Following the UK FRC’s report last month, ESMA has now published a European overview with observations and recommendations on the first annual financial statements prepared under IFRS 17. ESMA’s report focuses on:
- Impact of IFRS 17 on primary financial statements.
- Transition provisions.
- Accounting policies, judgements, and estimates.
- Impact of IFRS 17 on non-GAAP measures / APMs.
Overall, the findings indicate that insurers generally have met the disclosure requirements. However, ESMA highlighted some areas for improvement, particularly around the granularity and transparency of transition provisions, as well as the specificity of accounting policies, judgements, and estimates. In short, ESMA noted a lack of entity-specific details in some cases.
European enforcement priorities
ESMA has published its European enforcement priorities for 2024 annual financial reports, highlighting two main areas of focus for IFRS financial statements.
The first priority addresses liquidity, specifically regarding disclosures of supplier finance arrangements and new requirements for assessing how covenants affect the classification of liabilities as current or non-current. Here’s a quick recap of these new requirements:
- Classification of liabilities as current or non-current.
- Disclosure of supplier finance arrangements.
The second priority focuses on enhancing the quality of disclosures related to accounting policies, judgements, and sources of estimation uncertainty. ESMA emphasises that these disclosures should be entity-specific and should avoid generic, boilerplate language that merely repeats IFRS requirements.
For instance, companies should consider providing sensitivity analyses if there’s a risk that even minor changes in assumptions or estimates could significantly impact the carrying amounts of assets or liabilities. Companies should also consider the potential impact of current macroeconomic and geopolitical developments on estimation uncertainty, and explain this where relevant.
While these priorities are especially relevant for EU-based issuers, they reflect principles and guidelines that are widely applicable internationally.
Work in Progress at the IASB
Webcast: Equity method
In the September edition of Reporting Period, we covered the IASB’s exposure draft proposing amendments to IAS 28, aimed at resolving some common application issues with the equity method of accounting (despite many accountants advocating for fair value measurement instead). The IASB has followed up with a series of webcasts explaining the proposed changes, available not only in English but also in French, Spanish, Japanese, and Chinese.
If you haven’t yet had a chance to explore the proposed changes, here are some resources to get you started:
- IASB’s snapshot.
- Deloitte’s publication.
- BDO’s publication.
Next milestone: The exposure draft is open for comment until 20 January 2025.
Webcast: Climate-related (and other) uncertainties in financial statements
Another webcast released by the IASB in October covers a recent exposure draft that presents eight examples on how to apply IFRS requirements to report the effects of climate-related and other uncertainties in financial statements.
For more insights into this exposure draft, check out Deloitte’s publication and KPMG’s guide Are you clear on climate reporting in the financial statements?
Next milestone: The exposure draft is open for comment until 28 November 2024.
That’s all for this edition of Reporting Period. As always, I’d love to hear your feedback, so please feel free to reply directly to this email with any thoughts or comments.
Thank you for being a subscriber.
Best regards,
Marek