[Global Financial Insights] IASB Amends IFRS for Nature-Dependent Contracts and More

Editorial Team – [2024] 169 taxmann.com 429 (Article)

This week’s Global Financial Insights covers significant updates in financial reporting and auditing practices:

1. IASB amends IFRS for Nature-Dependent Contracts: The IASB has amended IFRS 9 and IFRS 7 to improve reporting on nature-dependent electricity contracts, such as PPAs, clarifying ‘own-use’ requirements, allowing hedge accounting, and adding new disclosure rules. These changes take effect from 1 January 2026, with earlier adoption permitted.
2. FRC proposes FRS 101 amendments: The FRC has issued FRED 86 proposing amendments to FRS 101 to streamline reporting and reduce compliance costs for entities applying the standard. Key changes include an exemption from certain IFRS 18 requirements and preventing the dual application of FRS 101 and IFRS 19. The consultation is open until 7 March 2025.
3. FASB proposes environmental credit standards: The FASB has proposed a new Accounting Standards Update (ASU) to improve the accounting and disclosure of environmental credits and related obligations. The update addresses the lack of guidance under GAAP and aims to reduce diversity in accounting practices. Stakeholders can submit feedback on the proposal by April 15, 2025.
4. FRC annual audit inspection: The FRC’s annual inspection report for Tier 2 and Tier 3 audit firms highlights progress and challenges in audit quality, with disparities, especially in the PIE sector. The FRC calls for stronger quality management and faster progress in improving audits. It plans enhanced supervision for Tier 2 firms and targeted support for Tier 3 firms to drive improvements.
5. FRC Draft Strategy 2025-28: The FRC has published its draft strategy for 2025-28, focusing on supporting UK economic growth and enhancing public trust in corporate governance and reporting. The strategy includes initiatives like a revised approach to audit firm supervision and a review of enforcement procedures. A consultation is open to shape future priorities, with plans to minimize costs and strengthen statutory powers.
6. FRC NHS audit market feedback: The FRC’s initial feedback on its NHS audit market study highlights concerns about market capacity, limited auditor choice, and procurement issues. The study includes data on audit fees, firm engagements, and timeliness, with further input invited by 6 February 2025, and a final report due in Spring 2025.

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