As the corporate reporting evolves, there has been a continuous rise in demand for non-financial information and disclosures by companies depicting long-term value creation, sustainability reporting, corporate social responsibilities and alike. Such information facilitates informed decision making by various stakeholders, in particular investors. Companies report such non-financial information in various forms (voluntarily or as required by the statue) such as sustainability or Environmental, Social and Governance (ESG) reporting, integrated reporting, reporting on corporate social responsibility, greenhouse gas statements, and service performance reporting in the public sector (commonly referred to as ‘Extended External Reporting (EER)’). There is a corresponding increase in demand for assurance engagements on such extended types of reporting. International Standard on Assurance Engagement (ISAE) 3000, Assurance Engagements Other Than Audits or Reviews of Historical Financial Information issued by the International Auditing and Assurance Standards Board (IAASB) establishes requirements and other explanatory material specific to reasonable and limited assurance attestation engagements (including application to direct engagements) other than audits or reviews of historical financial information. Recently, IAASB has also issued ‘Non-Authoritative Guidance on applying ISAE 3000 (Revised) to EER assurance engagements’. In this edition of Accounting and Auditing Update (AAU), we aim to highlight key considerations for the management/preparers in preparation of the EER report as envisaged in the guidance issued by IAASB.
In response to the growing interest of investors, ESG is also quickly moving to the forefront of the regulators including U.S. Securities and Exchange Commission’s (SEC) agenda. This is apparent from the recent statement issued by the Acting Chair of the SEC, Allison Herren Lee, which indicated that the SEC Division of Corporation Finance will enhance its focus on climate-related disclosure in public company filings. Additionally, the staff of the SEC Division of Corporation Finance has issued guidance about disclosure considerations for Special Purpose Acquisition Companies (SPACs) in connection with their Initial Public Offering (IPO) and subsequent business combination transactions. Our article covers these and other accounting and financial reporting developments under the US GAAP that would be relevant for the companies in the current period or near term.
There have been various regulatory developments in India and internationally during the month. The Ministry of Corporate Affairs (MCA) has clarified that spending of funds earmarked for Corporate Social Responsibility (CSR) for setting up makeshift hospitals and temporary COVID-19 care facilities would be an eligible CSR activity under Schedule VII of the Companies Act, 2013. Internationally, the International Accounting Standards Board (IASB) has issued an exposure draft to seek comments on the proposed amendments to IFRS 13, Fair Value Measurement and IAS 19, Employee Benefits consequent to the application of IASB’s proposed guidance explaining IASB’s approach of modification of the disclosure requirements in IFRS. Our regulatory updates section provides an overview of these and other financial reporting updates in India and internationally.