The International Accounting Standards Board and its constituents face multiple challenges from the growing overlap between financial reporting and the emerging area of sustainability reporting, the board has been warned.
In papers discussed by the IASB since November, as well as discussions at the board’s 15 November meeting, staff have warned that implementing and producing new sustainability reports “alongside financial statements will mean that preparers have even less capacity to engage with the Board in the coming years.”
The staff analysis comes in the wake of IASB member Mary Tokar urging the IASB to consider the implications for stakeholder workloads.
Speaking during the November meeting round, she said the board must remember it is not alone in facing capacity constraints, describing the situation as a “systemic issue”.
Tokar said: “[I]n some ways, our stakeholders could have more of [those] capacity problems, because one of the other messages I’ve picked up is that […] a lot of the increase in sustainability reporting demands is falling on the people who handle financial reporting – not only and solely, but it at least in part.”
The former KPMG partner added that connectivity between the IASB’s work and the International Sustainability Standards Board’s efforts was “the elephant in the room”.
The IFRS Foundation, which oversees the activities of the two boards, recently announced the appointment of Emmanuel Faber to chair the new sustainability board and has put out a call for candidates to apply to join the new board.
According to a 14 December webcast, the ISSB’s early workstreams are likely to include an agenda consultation and work on its conceptual framework.
In addition, the IFRS Foundation has already released prototype climate and general disclosure requirements that were developed by its Technical Readiness Working Group.
According to a staff paper prepared for the IFRS Advisory Council, the main areas of overlap between the IASB’s workload and ISSB’s remit on sustainability reporting are most likely in the areas of work to develop new IFRSs and projects to overhaul existing ones.
The staff think this overlap between IASB and ISSB translates into either potential joint projects, such as management commentary and the conceptual framework, as well as possible related projects, such as climate-related risks, pollution pricing mechanisms, and intangibles.
Meanwhile, the 2021 agenda consultation also revealed that pensions accounting could be said to have lost its pull as a priority accounting issue.
Warren Singer, head of UK pensions accounting with consultancy Mercer, told the board in a 27 September 2021 comment letter that the requirements of IAS 19 were “largely fit for purpose and well understood by users of financial statements.”
The European Financial Reporting Advisory Group urged the board to tackle difficulties with IAS 19’s discounting requirements.
Business Europe, which advocates for European preparers, also urged the IASB to tackle discounting.