Enforcement priorities for 2020 annual reports
European common enforcement priorities for 2020 annual reports have been issued
The 2020 enforcement priorities for annual reports prepared in accordance with IFRS reflect the need to provide adequate transparency regarding the consequences of the COVID-19 pandemic expected to affect several areas of the 2020 annual financial reports.
The 2020 enforcement priorities for annual financial reports include
IAS 1 Presentation of Financial Statements
The application of IAS 1 with a focus on going concern, significant judgements and estimation uncertainty and the presentation of COVID-related items in the financial statements.
IAS 36 Impairment of Assets
The application of IAS 36 where the recoverable amount of goodwill, intangible assets and tangible assets may be impacted by the deterioration of the economic outlook of various sectors.
IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures
The application of IFRS 9 and IFRS 7 including general considerations relating to risks arising from financial instruments, focusing on liquidity risk, and specific considerations related to the application of IFRS 9 for credit institutions when measuring expected credit losses.
IFRS 16 Leases
Specific issues related to the application of IFRS 16, including explicit disclosures by lessees, which have applied the IASB’s amendment providing relief to lessees when accounting for rent concessions.
Priorities related to non-financial statements
Impact of the COVID-19 pandemic on non-financial matters
ESMA highlights key non-financial information issues and alternative performance measures with regard to the impact of COVID-19, social and employee matters, business model and value creation, and risks relating to climate change.
Social and employee matters
ESMA notes that health crises such as the COVID-19 pandemic further increase the relevance of providing transparency on employee-related matters, especially regarding health and safety.
Business model and value creation
ESMA emphasises that in order to enable users of non-financial statements to get an understanding of the business model and its relationship with and implications for the non-financial matters, companies are expected to provide information about their strategy together with its implementation.
Risk relating to climate change
ESMA continues to emphasise the relevance of environmental matters and in particular, the measures adopted by issuers to prevent and mitigate the negative consequences associated with climate change and with the risk of an increase in world average temperatures above 1.5 degrees
ESMA reminds that, starting from the financial year 2020, annual financial reports of companies whose securities are admitted to trading on a regulated market shall be prepared in compliance with the European Single Electronic Format (“ESEF”).
Finally, ESMA highlights that following the United Kingdom’s departure from the European Union on 31 January 2020 (‘Brexit’), the EU and the UK have entered a transition period that is currently planned to last until 31 December 2020. It remains important to closely monitor Brexit negotiations and to provide disclosures on what impact Brexit will have on activities and financial and non-financial information.
For more details on the priorities, please refer to the document to download and the links below: