Educational Material on Natural and Social Aspects of Climate-Related Disclosures Coming Soon
The International Sustainability Standards Board (ISSB) said that its staff are developing educational materials to illustrate the application of new climate disclosure requirements in the context of the natural and social aspects of related risks and opportunities. The material aims to help companies with how to consider risks and opportunities around areas such as water, biodiversity, deforestation, and transition, ISSB Chair Emmanuel Faber explained on an August 1 board podcast. “This does not expand in any way or change the scope of IFRS S2 but simply would provide support for companies to fully use S2 in their ability to describe with as must as possible a common language to their investors, issues that are related to climate in the nature space and in the social area as well,” he said. In June, the board published IFRS S1, General Requirements for Disclosure of Sustainability-related Financial Information, and S2, Climate-Related Disclosures, to take effect in 2024. Under S1, businesses must disclose all sustainability-related risks and opportunities that could reasonably be expected to affect their cash flows, access to finance or cost of capital over the short, medium or long term that could reasonably be expected to affect prospects. S2 is specific to climate-related risks to which the entity is exposed; that is, climate-related physical risks, transition risks, and opportunities available to the entity.
Public Roundtable on Proposed Income Statement Expense Rules Planned
FASB said it will hold a public roundtable on December 13 about recently proposed disclosure rules on income statement expenses. Those interested in participating in the roundtable “should submit a comment letter and register for consideration,” according to a July 31 board announcement. Roundtable participants “will be selected to ensure a balance of perspectives from investors, preparers, auditors, and other stakeholders.” The goal of the roundtable is for the board to obtain extra feedback on proposed Accounting Standards Update (ASU) 2023-ED500, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) Disaggregation of Income Statement Expenses,” which was published on July 31 to solicit public input. The comment period ends on October 30. The proposed guidance aims to provide users of financial statements with more detailed information about the types of expenses, including employee compensation, depreciation, amortization, and costs incurred related to inventory and manufacturing activities in income statement expense captions such as cost of sales; selling, general, and administrative; and research and development.
AICPA Board to Vote on Proposal on Quality Management Attestation Standards
The AICPA’s Auditing Standards Board (ASB) held a special meeting to vote to issue proposed quality management (QM) statements on standards for attestation engagements (SSAE). Initially, the ASB’s Attestation Standards Task Force had planned to present proposed QM SSAEs in June for the board’s vote. The task force titled the exposure draft as SSAE, “Amendments to the Attestation Standards for Appropriate Consistency With the New and Revised Quality Management Standards.” According to a discussion paper prepared for the meeting, the ASB will be voting for a proposal that would primarily revise AT-C section 105, “Concepts Common to All Attestation Engagements,” and also to the documentation requirements in sections 205, “Assertion-Based Examination Engagements,” 210, “Review Engagements,” and 215, “Agreed-Upon Procedures Engagements.” These planned revisions are intended to conform with the QM standards that the AICPA published in June 2022. The suite of QM standards are as follows:
- Statement on Quality Management Standards (SQMS) 1, A Firm’s System of Quality Management
- SQMS 2, Engagement Quality Reviews
- Statement on Auditing Standards(SAS) 146, Quality Management for an Engagement Conducted in Accordance With Generally Accepted Auditing Standards
- Statement on Standards for Accounting and Review Services (SSARS) 26, Quality Management for an Engagement Conducted in Accordance With Statements on Standards for Accounting and Review Services
Audit firms must comply with SQMS 1 by December 15, 2025.