The International Organization of Securities Commissions (IOSCO) published its final nine policy recommendations, which aim to address market integrity and investor protection concerns arising from decentralised finance (DeFi) by supporting greater consistency of regulatory frameworks and oversight in member jurisdictions.
According to a news release, the recommendations cover six key areas:
- Understanding DeFi arrangements and structures;
- Achieving common standards of regulatory outcomes;
- Identification and management of key risks;
- Clear, accurate, and comprehensive disclosures;
- Enforcement of applicable laws; and
- Cross-border cooperation.
The DeFi policy recommendations are complementary to the organisation’s policy recommendations for cryptocurrency and digital assets markets issued in November.
IOSCO issues recommendations on accounting for goodwill
IOSCO also published Recommendations on Accounting for Goodwill, a report for issuers, audit committees or others charged with governance, and external auditors.
According to a news release, the report aims to enhance the “reliability, faithful representation, and transparency of goodwill recorded and disclosed in financial statements”.
The recommendations will be useful to standard setters, including the International Accounting Standards Board (IASB), the release said. The report was preceded by a 90-day public consultation launched in June.
“IOSCO again reminds issuers of the importance that their accounting and disclosures result in a fair and transparent presentation of the financial position, performance, and cash flows of the company,” the release said. “This means the goodwill should not be stated at an amount in excess of its recoverable amount, that impairment losses should be recognised in a timely manner, and that disclosures of significant judgements, and key assumptions related to the recoverability be transparent.”
FRC publishes audit findings, opens consultation on 2024 plans
The UK Financial Reporting Council (FRC) published its annual inspection findings for Tier 2 and Tier 3 audit firms, a news release said, alongside the actions these firms should prioritise to deliver high quality audits and contribute to a more resilient audit market.
“Only 38% of audits reviewed required no more than limited improvements, 24% required more than limited improvements, and a further 38% required significant improvements,” the release said. “Tier 2 and Tier 3 firms must prioritise … 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.”
In another news release, the regulator announced the launch of a consultation on its plan and budget for 2024–25 which sets out its priorities and resources for next year. The draft plan sets out how the FRC intends to deliver on its strategic priorities.
Overall, the 2024–2025 combined budgeted cost for the FRC and the UK Endorsement Board (UKEB) will be higher than the previous year, but 5% lower than previously expected to reflect the rate of inflation, the release said. The FRC “continues its work to restore public trust and confidence in audit, corporate reporting, and governance, while embedding its remit to support UK economic growth and competitiveness”.
The consultation on the FRC’s draft plan and budget and the UKEB’s draft strategy is open until 26 January. Respondents can submit their comments to UKEndorsementBoard@endorsement-board.uk.
IFAC addresses transformation and internal control
Informed by the International Federation of Accountants’ (IFAC) professional accountants in business (PAIB) advisory group’s last meeting, IFAC detailed “three paths through which professional accountants have led organisational transformation that can be a guide for PAIBs and businesses globally”, a news release said.
“As businesses grapple with uncertainties and navigate the complexities of digital transformations, sustainability and climate transitions, organisational leaders equipped with the unique skill set of PAIBs are essential,” the release said. “PAIBs’ roles more commonly extend beyond traditional financial responsibilities, positioning them as key leaders shaping the trajectory of organisational success.”
IFAC also published a new report focused on how companies can integrate sustainability information into existing internal control and governance frameworks, according to another news release. The report suggests that “an integrated internal control approach will lead to higher quality and more integrated reporting, and help companies avoid perceptions of greenwashing and regulatory or legal action”.
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal Control — Integrated Framework has long provided a good foundation for delivering confidence in corporate reporting, the release said. In an integrated internal control environment, it can provide the foundation for enhancing the quality of sustainability data used for measuring progress on key sustainability objectives, the release said.
— To comment on this article or to suggest an idea for another article, contact Steph Brown at Stephanie.Brown@aicpa-cima.com.
