The IASB has proposed amendments to IAS 32 to address debt and equity reporting challenges for companies. “Companies’ solutions to the reporting challenges differ, resulting in diverse accounting practices that make it difficult for investors to assess and compare companies’ financial position and performance,” a news release said.
As a result, investors are calling for better information, particularly about equity instruments, according to the release. “IAS 32, Financial Instruments: Presentation sets out how a company that issues financial instruments should distinguish debt instruments from equity instruments,” the release said. “The distinction is important because the classification of the instruments affects the depiction of a company’s financial position and performance.”
To address these challenges, the IASB proposes to amend IAS 32, IFRS 7, Financial Instruments: Disclosures, and IAS 1, Presentation of Financial Statements. According to the release, the board proposes to:
- Clarify the underlying classification principles of IAS 32 to help companies distinguish between debt and equity;
- Require companies to disclose information to further explain the complexities of instruments that have both debt and equity features; and
- Issue new presentation requirements for amounts—including profit and total comprehensive income—attributable to ordinary shareholders separate to the amounts attributable to other holders of equity instruments.
The comment deadline is 29 March 2024. Comments can be submitted online or by email to commentletters@ifrs.org.
FRC reviews audit sampling in large firms
The UK Financial Reporting Council (FRC) published its thematic review of audit sampling – a fundamental tool for auditors, allowing the auditor to draw conclusions about a population based on the sample selected.
The regulator reviewed the sampling methodologies of the largest audit firms to identify areas of good practice, to highlight any concerns that will drive improvements, and support quality management, a news release said. The review found that all audit firms should:
- Ensure that they provide engagement teams with sufficient guidance and training to support their use of professional judgement in audit sampling; and
- Update their methodologies and guidance to drive better documentation of key professional judgements in this area.
“The review will be particularly useful for the wider audit market as sampling has been an area of repeated Audit Quality Review (AQR) findings for smaller firms,” the release said. “It will also highlight the significance and impact of professional judgement throughout the sampling process.”
FCA looks to implement sustainability requirements
The UK Financial Conduct Authority (FCA) announced that it will introduce a series of measures to improve the trust and transparency of sustainable investment products and minimise greenwashing, said. Those measures, according to a news release, include new sustainability disclosure requirements and an investment labels regime after detailed engagement with a range of stakeholders, including industry, other regulators, and consumer groups.
“This package of measures, including the consumer-focussed labelling regime, will support the UK’s position as a world-leading, competitive centre for asset management and sustainable investment,” the release said. To enhance the credibility of the sustainable investment market, the FCA will introduce:
- An anti-greenwashing rule for all authorised firms to make sure sustainability-related claims are fair, clear, and not misleading;
- Product labels to help investors understand what their money is being used for, based on clear sustainability goals and criteria; and
- Naming and marketing requirements so products cannot be described as having a positive impact on sustainability when they don’t.
UK government releases upskilling guidance
New draft guidance from the UK government aims to support businesses to upskill their workers with the tools they need for jobs alongside artificial intelligence (AI). The guidance sets out areas of focus for employers, workers, and training providers.
“Given the growing use of AI in businesses across the country, this will serve as a vital tool for employers to ensure their workers can harness the huge potential of the technology to fuel both their own development and that of their organisation,” a news release said. “By upskilling workers, businesses will also ramp up productivity and ensure their workforce can focus on the tasks which will make the biggest impact.”
The guidance is intended to help employers boost their employees’ understanding of AI so they can use it in their day-to-day role to reap the benefits safely, the release continued. Feedback on the government’s guidance can be submitted online.
— To comment on this article or to suggest an idea for another article, contact Steph Brown at Stephanie.Brown@aicpa-cima.com.