2022 has been an eventful year with companies facing global economic uncertainties from the Russia-Ukraine war, higher inflation rates, rising interest rates, and the acceleration of the importance of what companies are doing to combat climate change.

With all these events and changes, we continue to see increased scrutiny from regulators and a request for more transparent disclosures from both regulators and stakeholders. As part of our year end statutory reporting it is imperative to consider the developments that have occurred throughout the year to ensure we are meeting these regulators and stakeholders’ requirements.

This month’s article explores areas that regulators and stakeholders are expected to focus on in the 2022 statutory year end reporting. It is intended to guide you through some of the key items that you might consider when drafting your statutory year end reporting.

• The discussion of the risks and uncertainties faced by the company set out in the directors’ report should be clear, unambiguous, and balanced. Cross-referencing risks to any additional disclosures where they might be addressed in greater detail in the financial statements and elsewhere in the annual report can provide real value to stakeholders.
• Climate change is and will continue to be prevalent. The description of the impact climate change has had should be specific to your company, and the disclosure provided should include a balanced approach as to how you are weighing the impact of climate change within your business specifically. Do your climate disclosures consider:
  • the journey to setting climate-related targets
  • how and when you will get started on achieving these targets, as well as what effort will be required along the way
  • whether or not the journey has been examined for practical feasibility in light of financial and technological resources currently available.
• For larger listed companies or large UK resident companies, the disclosures required as part of the Task Force on Climate-related Financial Disclosures (TCFD) have significantly built momentum over the last five years however the general view is that more disclosures are still required and there are many more opportunities for improvement. These disclosures will continue to be important as the basis of the sustainability disclosures currently underway by the Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS) use the TCFD as a base. The TCFD have noted four areas of focus that preparers could action to improve the climate-related financial disclosures:
  • disclose the actual and potential financial impacts of climate-related issues on their businesses, strategies, or financial planning.  This also aligns with the FRC thematic on climate change assessing the impacts of climate on the financial statements
  • use a standard scenario to assess the resilience of their strategies to climate change
  • report climate-related targets in a consistent way across companies.

Please click here for a summary of the TCFD Status Report.

• Significant management judgements and key assumptions underlying major sources of estimation uncertainty should be disclosed clearly. Where there are major sources of estimation uncertainty, don’t forget to provide sufficient information around the sensitivity of each of the assumptions on the reporting amounts.
• Where key assumptions are disclosed in the impairment disclosures, values and explanations should be provided with reference to future expectations (considering external conditions and the company’s own strategy).
• The nature and extent of material risks should be discussed in a transparent manner and the effect of these risks on the financial statements should be clear. These could be risks arising from financial instruments such as significant changes in investing, financing and hedging relationships. A further example could be any significant inflationary features in revenue, leasing, supply or financing contracts.
• More locally, IAASA has recently released their Financial Reporting Decisions. IAASA has challenged different reporters on the likes of:
  • Alternative performance measures, especially considering the impact of climate change, should be carefully disclosed with the appropriate definitions, reconciliations and explanations
  • Operating segments and whether the information that the chief operating decision makers are receiving is consistent with the disclosure in the financial statements
  • The operating segments identified within a company should also be correlated to the cash-generated units used for goodwill impairment testing purposes and consistent disclosure should be provided.

While the above are some top tips for the 2022 financial statements, there have been a wide range of topical issues impacting companies that regulators and stakeholders will be interested in for the 2022 statutory year end reporting. Accounting Roundup – Closing Out 2022 is a great summary of some of the key impacts discussed above and others that you may want to consider within your 2022 statutory year end reporting. Note that the linked document is UK based and requires amending for Irish law.

Monthly Reporting Pack - February 2023

New Publications

IAASA
Compendium of Financial Reporting Decisions

Deloitte
iGAAP in Focus — Financial Reporting: IASB proposes amendments to IAS 12 to introduce a temporary exception from accounting for deferred taxes arising from OECD Pillar Two model rules

IFRS on Point — January 2023

IFRS Model Financial Statements

Illustrative disclosures for insurers applying IFRS 17

Accounting roundup — January 2023

Closing Out 2022 - UK

Resources and Publications

Governance in focus — On the board agenda 2022

Our annual review of board topics will stimulate your thinking and help prepare you for the year ahead. Across the board, expectations of business are rising and it is this demanding environment which shapes the articles in this year’s publication.

Corporate Reporting Insights 2022 — Surveying FTSE reporting

Our survey of the annual reports of 50 companies from among the FTSE 350 highlights the need for more connectivity in reporting on purpose, people, planet, prosperity and resilience. We also share our findings in respect of procuring assurance.

IFRS Model Financial Statements 2022

The Model for 2022 illustrates the presentation and disclosure requirements of IFRS Standards and also contains ‘best practice’ examples.

IFRS in your pocket 2022

IFRS in your pocket is a comprehensive summary of the current IFRS Standards and Interpretations along with details of the projects on the standard-setting agenda of the International Accounting Standards Board.

IFRS e-learning website

Our IFRS e-learning platform allows external users to complete over 40 of Deloitte’s IFRS e-learnings free of charge with 6 million+ uses in recent years.

Understanding the differences between U.S. GAAP and IFRS Standards

A comprehensive 380-page publication focusing on some of the most common and significant differences that may affect financial statements when converting from U.S. GAAP to IFRS Standards and vice versa. Updated to 2022.

Corporate governance reporting highlights - areas for future focus

Key messages and expectations for further improvements in corporate governance reporting and examples of better disclosure.

IFRS Foundation Trustees' sustainability reporting initiative

Summary of continuing developments.

New IAS Plus resource page

Highlights some of the key accounting and disclosure issues to be considered by entities that may arise as a result of COVID-19 in preparing financial statements.