Resulting from the Revisions to the IESBA Code that Require a Firm to Publicly Disclose When a Firm Has Applied the Independence Requirements for Public Interest Entities (PIEs)
These narrow scope amendments to two IAASB standards operationalize changes to the International Ethics Standards Board for Accountants’ (IESBA) International Code of Ethics for Professional Accountants (including International Independence Standards) related to listed and public interest entities.
The IPSASB held its third meeting of the year from September 12-15 in Switzerland hosted by the Canton of Zurich.
The IPSASB’s Next Strategy and Work Program
The IPSASB approved the 2024-2028 Strategy and Work Program Consultation. The proposals emphasize a greater focus on maintenance of IPSAS, including developing a Post-Implementation Review process and reaffirms the IPSASB decision to develop public sector sustainability reporting standards.
The IPSASB will hold in-person regional roundtables during the Consultation which will be open for 4-months.
Retirement Benefit Plans
The IPSASB approved IPSAS 49, Retirement Benefit Plans. This pronouncement provides accounting and reporting requirements for plans that provide retirement benefits to public sector employees.
IPSAS 49 will be effective for periods beginning on or after January 1, 2026.
Other Lease-Type Arrangements
The IPSASB continued to review the responses to Exposure Draft (ED) 84, Concessionary Leases and Right-of-Use Assets In-kind. During the meeting, the IPSASB agreed to proceed with the proposed principles with an aim to finalize the amendments to the Leases and Revenue Standards by March 2024.
Measurement-Application Phase
The IPSASB reviewed the applicability of current operational value to several IPSAS and concluded it applies to assets within the scope of IPSAS 32, Service Concession Arrangements: Grantor, but decided to perform further analysis on its applicability for IPSAS 12, Inventories, and IPSAS 43, Leases.
The IPSASB considered proposals to revise the definition of, and guidance on, recoverable service amount in IPSAS 21, Impairment of Non-Cash-Generating Assets. The IPSASB will consider illustrative examples at the December meeting.
Differential Reporting
The IPSASB reflected on the findings from its research and scoping phase and decided not to pursue a standard setting solution. Instead it decided to seek a partner to help develop practical application material to help preparers more easily navigate and apply IPSAS. The IPSASB aims to publish a feedback statement by early 2024 to summarize the full rationale supporting its decision.
Presentation of Financial Statements
The IPSASB received an education session on IPSAS 22, Disclosure of Financial Information about the General Government Sector and IPSAS 24, Presentation of Budget Information in Financial Statements and concluded the scope of the project should be consistent with the scope of IPSAS 1, Presentation of Financial Statements. The IPSASB approved the project brief for the Presentation of Financial Statements project.
Improvements to IPSAS 2023
The IPSASB approved ED 85, Improvements to IPSAS, 2023. ED 85 is expected to be published in October 2023 with a consultation period of 60 days.
Sustainability-Climate-Related Disclosures
The IPSASB received presentations from the IFRS Foundation, International Sustainability Standards Board, and New Zealand External Reporting Board to receive updates on their work related to sustainability reporting guidance and better understand their journeys specifically related to development of climate-related reporting standards.
Using the project brief approved in June 2023, the IPSASB agreed on its approach to developing its climate-related disclosure standard, including how it would incorporate climate expertise into the process.
Natural Resources
The IPSASB agreed to revise the definition of a natural resource as a naturally occurring item which embodies service potential or the capability to generate economic benefits.
The IPSASB also decided to reconsider the proposals on recognition and measurement, and whether the proposed guidance should be located in a standalone standard or as amendments to existing IPSAS.
Natural Resources-IFRS 6 Alignment
In response to comments received to the Natural Resources Consultation Paper, the IPSASB reviewed a first draft of an ED aligned with IFRS 6, Exploration for and Evaluation of Mineral Resources, including guidance aligned with IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine.
First-Time Adoption of Accrual Basis IPSASs
The IPSASB considered several alternatives to address the public need to clarify and make IPSAS 33, First-time Adoption of Accrual Basis IPSASs, more user friendly and effective. The IPSASB will review a proposal for updates to IPSAS 33 at its December meeting where material will be rearranged by topic and supported by non-authoritative guidance.
Board Appointments and Chair Extension
Following a rigorous nominations and interview process involving the IFAC Nominating Committee and IPSASB leadership, overseen by the Public Interest Committee and approved by the IFAC Board, the IPSASB announced its new and reappointed Board members and Deputy Chair for 2024, as well as the extension of its Chair through 2025.
Meeting Videos
Recordings of the meetings are available on our YouTube channel.
The revisions relating to (a) the definition of engagement team, and (b) group audits. The revisions deal with the independence and other implications of the changes made to the definition of “engagement team” in the Code to align with changes to the definition of the same term in the IAASB’s International Standards on Auditing (ISAs) and International Standards on Quality Management (ISQMs). The revisions also address holistically the various independence considerations in an audit of group financial statements. The revised provisions relating to the definition of engagement team and group audits will be effective for audits of financial statements and audits of group financial statements for periods beginning on or after December 15, 2023. Early adoption of the revisions is encouraged.
The upcoming expiry of the “jurisdictional provision” addressing long association of personnel with an audit client. The jurisdictional provision will expire and be no longer available for audits of financial statements for periods beginning on or after December 15, 2023. Under the jurisdictional provision (paragraph R540.20 of the Code), where a legislative or regulatory body (or organization authorized or recognized by such legislative or regulatory body) has established a cooling-off period for an engagement partner of less than five consecutive years, that shorter cooling-off period may be applied, subject to a floor of three years, provided that the applicable time-on period does not exceed seven years.
The back of the 2023 Handbook contains the IESBA-approved revisions to the Code, which are not yet effective. These revisions will become effective in December 2024 and include:
Changes to the definitions of “audit client” and “group audit client” in the Glossary arising from the approved revisions to the definitions of listed entity and PIE.
Reproducing and Translating the IESBA Handbook To help adoption and implementation of the IESBA standards, stakeholders are invited to submit requests for permission to reproduce or translate the IESBA Handbook online via the Online Permissions Requests or Inquiries system on the IFAC website.
The International Ethics Standards Board for Accountants (IESBA) is an independent global standard-setting board. The IESBA’s mission is to serve the public interest by setting high-quality, international ethics (including independence) standards as a cornerstone to ethical behavior in business and organizations, and to public trust in financial and non-financial information that is fundamental to the proper functioning and sustainability of organizations, financial markets and economies worldwide.
Sustainability Disclosure and Assurance in 20 More Jurisdictions
The State of Play Beyond the G20 expands IFAC's sustainability disclosure and assurance data to 20 additional jurisdictions beyond the G20 previously reported on. The State of Play Beyond the G20 focuses on the Global South with data from three jurisdictions from Latin America, six in Africa and Middle East, and four in the Asia-Pacific region, as well as six smaller-sized economies within the European Economic Area and Switzerland.
Fresh research from the International Federation of Accountants (IFAC) expands its sustainability disclosure and assurance data to 20 additional jurisdictions beyond the G20 previously reported on. The new report, The State of Play: Beyond the G20, focuses on the Global South with data from three jurisdictions from Latin America, six in Africa and Middle East, and four in the Asia-Pacific region, as well as six smaller-sized economies within the European Economic Area and Switzerland.
IFAC CEO Kevin Dancey said, “When viewed in full, the State of Play series of reports now provide data on the current market practices of nearly 2,000 of the largest stock exchange-listed companies across forty-two jurisdictions over the period 2019 through 2021. This broader lens on disclosure and assurance makes it even more clear that we are still in the early stages of the journey to provide investors and other stakeholders with consistent, comparable, decision-useful, and assured sustainability information that is as reliable as financial information.”
While the data shows an upward trend in the incidence of assurance, the scope of assurance being obtained by companies is narrowing. Additionally, fragmentation in terms of which assurance standard is used is evident. The International Auditing and Assurance Standards Board’s recently proposed sustainability assurance standard—International Standard on Sustainability Assurance 5000—addresses both of these issues. The International Ethics Board for Accountants is also working to enhance independence and ethics requirements to support high-quality assurance.
As governments, regulators and policy makers around the world are turning their attention to new sustainability requirements, IFAC is conducting this and other research to help raise awareness about the need for high-quality sustainability information and foster evidence-based policy and regulatory decisions, both of which are aligned with its commitment to the adoption of ISSB standards and the ISSB’s Partnership Framework.
Additional Key Findings
89% of companies reviewed reported some ESG information in 2021, with 48% of those companies receiving some level of assurance.
Sustainability disclosure—in the G20 as well as beyond the G20—is still an “alphabet soup” of standards and frameworks. However this study found more connectivity between sustainability and financial information, with only 19% of companies relying on stand-alone sustainability reports, compared to 50% for the G20 (as reported in The State of Play: Sustainability Disclosure & Assurance 2019-2021, published in partnership with AICPA-CIMA).
Assurance rates have risen from 37% to 48%, but engagements cover a narrowing set of topics.. Specifically, broader scope assurance has declined from 74% in 2019 to 64% of engagements in 2021.
Most assurance engagements were conducted by audit firms—62% of assurance engagements in 2021.
81% of these assurance engagements applied the IAASB’s International Standard on Assurance Engagement 3000.
About IFAC IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 180 members and associates in more than 135 jurisdictions, representing millions of professional accountants in public practice, education, government service, industry, and commerce.
Data from the Global South Demonstrates Need for ISSB Global Baseline Disclosure Requirements as Well as Broader Scope Assurance
