Seeking Convergence in Sustainability Reporting

1. Exposure Draft - General Presentation and Disclosures issued December 18, 2019, “to improve how information is communicated in the financial statements, with a focus on information about performance [in] the statement of profit or loss. The Board is proposing limited changes to the statement of cash flows and the statement of financial position.” Profit and Loss would have three new subtotals including ‘operating profit.’ ‘Non-GAAP’ management performance measures would need to be disclosed in a note that explains why they are useful, how they are calculated, and include a reconciliation to IFRS GAAP. Guidance on improved disaggregation of information would assist companies in providing data that is easier for users to evaluate. Also, a better analysis of operating expenses and explanations of unusual income and expenses would be required. The comment period ends on June 30, 2020.
2. Guide to Selecting and Applying Accounting Policies—IAS 8, published November 21, 2019, is a step-by-step guide for determining how to select and apply accounting policies when there are specific standards available, standards that cover similar or related issues, or no standards at all dealing with the issue.

1. International Audit and Assurance Standards Board (IAASB) -  Audit Client Briefing: Considerations for Management When Determining Accounting Estimates and Related Disclosures, published November 19, 2019, “to make chief financial officers, other senior management responsible for financial statement preparation, and staff directly involved in determining accounting estimates aware of matters to consider in preparing for the auditor’s requests pertaining to ISA 540 (Revised), Auditing Accounting Estimates and Related Disclosures.”
2. International Accounting Education Standards Board (IAESB) – Revisions to International Education Standards 2,3,4 and 8, issued October 21, 2019, “address learning and development for information and communications technologies (ICT) and professional skepticism. As market expectation increases for ICT skills and professional skepticism, these standards were developed to address the competencies, skills, and behaviors for both aspiring and professional accountants in these critical areas.”

1. Combating bribery in the SME sector, survey report issued November 13, 2019. “Small and medium-sized enterprises (SMEs) make up the great majority of businesses in all countries, and employ the majority of the global workforce. Yet their significance to the health of the global business environment is often overlooked. This is as true in relation to bribery and corruption problems as to other aspects of business regulation. This report continues ACCA’s work investigating how bribery and corruption damages the SME sector and argues that smaller businesses need to be encouraged and supported in their efforts to combat the threats posed.”

1. Updated Code of Ethics, issued October 28, 2019, with a focus on “ethics in the age of digital transformation.” The Code adds a new section, Making good decisions: building trust in a digital world, that covers 1) understanding digital disruption, 2) bias in automated decision-making, 3) data privacy, and 4) ethics and the business benefit.

1. See article in this issue of Audit & Accounting Alert.

1. The Cybersecurity Guide for Leaders in Today’s Digital World, published October 25, 2019, “to assist the growing number of C-suite executives responsible for setting and implementing the strategy and governance of cybersecurity and resilience in their organization. The guide bridges the gap between leaders with and without technical backgrounds. Following almost one year of research, it outlines 10 tenets that describe how cyber resilience in the digital age can be formed through effective leadership and design.”
2. Navigating Uncharted Waters: A roadmap to responsible innovation with AI in financial services, published October 23, 2019, explores and responds to the five key concerns of AI: explainability, systemic risk, bias and fairness, fiduciary duty, and algorithmic collusion.

1. Climate-related corporate reporting Where to next?, research report issued October 22, 2019, describing investor calls for more effective climate reporting. See article in this issue for further detail.
2. Client Asset Assurance Standard (Revised), issued November 25, 2019, updating the standard for audits of client assets held by financial services firms. Effective for periods beginning in 2020.

1. A buyer’s guide to assurance on non-financial information, published on November 2019 with the World Business Council for Sustainable Development, to help businesses “better understand how non-financial assurance works.”

1. Auditing Standards Board – Statement on Auditing Standards 138 - Amendments to the Description of the Concept of Materiality, issued December 5, 2019, to make the description of materiality consistent nationally and internationally. Effective for audit reports dated on or after December 15, 2020.
2. Auditing Standards Board - Statement on Standards for Attestation Engagements No. 20 - Amendments to the Description of the Concept of Materiality, issued December 5, 2019, to make the description of materiality consistent nationally and internationally. Effective for examination or review reports dated on or after December 15, 2020.
3. Auditing Standards Board - Statement on Standards for Attestation Engagements No. 19 - Agreed-Upon Procedures Engagements, issued December 5, 2019, “provides flexibility to a practitioner performing an agreed-upon procedures engagement by:

• removing the requirement that the practitioner request an assertion from the responsible party;
• allowing procedures to be developed over the course of the engagement;
• allowing the practitioner to develop or assist in developing the procedures;
• no longer requiring intended users to take responsibility for the sufficiency of the procedures and instead requiring the engaging party to simply acknowledge the appropriateness of the procedures prior to the issuance of the practitioner’s report, and
• permitting the practitioner to issue a general-use report.”
• Effective for agreed-upon procedures dated on or after July 15, 2021, with early implementation permitted.

1. Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes, ASU No. 2019-12, issued December 18, 2019, intended to reduce cost and complexity. Organizations no longer need to analyze whether the exceptions apply with regard to 1) the incremental approach for intraperiod tax allocation, 2) accounting for basis differences when there are ownership changes in foreign investments, and 3) interim period income tax accounting for year-to-date losses that exceed anticipated losses. Simplification is also provided for franchise taxes that are partially based on income, transactions with a government that result in a step up in the tax basis of goodwill, separate financial statements of legal entities that are not subject to tax, and enacted changes in tax laws in interim periods. Effective generally for years beginning in 2021 for public companies and 2022 for other entities. Early adoption is generally permitted.
2. Codification Improvements to Topic 326, Financial Instruments—Credit Losses, ASU No. 2019-11, issued November 26, 2019, addresses questions about various issues, including reporting of expected recoveries and the prohibition of recording negative allowances for available-for-sale debt securities. Effective generally in 2020.
3. Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, ASU No. 2019-10, issued November 15, 2019, “finalizes various effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses (CECL), leases, and hedging standards.”
4. Financial Services—Insurance (Topic 944): Effective Date, ASU No. 2019-09, issued November 15, 2019, “finalizes insurance standard effective date delays for all insurance companies that issue long-duration contracts, such as life insurance and annuities.”
5. Exposure Draft – Derivatives and Hedging (Topic 815) - Codification Improvements to Hedge Accounting,issued November 12, 2019, to clarify certain sections of the 2017 hedge accounting standard.” The comment period ends January 13, 2020.
6. Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606) No. 2019-08 November 2019 Codification Improvements—Share-Based Consideration Payable to a Customer – ASU 2019-08, issued November 11, 2019, “simplifies and increases comparability of accounting for nonemployee share-based payments, specifically those made to customers.” Effective generally in 2020.
7. Codification Updates to SEC Sections—Amendments to SEC paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization, and Miscellaneous Updates– ASU 2019-07, issued July 26, 2019, provides guidance on the SEC disclosures. Effective immediately.

1. Exposure Draft – Implementation Guidance Update—2020, issued December 4, 2019, “contains proposed new questions and answers that address application of the Board’s standards on the financial reporting entity, fiduciary activities, leases, external investment pools, asset retirement obligations, and conduit debt obligations. The Exposure Draft also includes proposed amendments to previously issued implementation guidance.” The comment period ends January 31, 2019.