Accountancy Plus The Official Journal of CPA Ireland - The Future is Now - The New - Accountancy Europe
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March Issue 2021
Accountancy Plus
The Official Journal of CPA Ireland
The
Future is Now -
The New
World of Work.
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1
Editorial President’s Message
PRESIDENT’S MESSAGE
Accountancy Plus Welcome to the March 2021
March 2021 edition of Accountancy Plus.
2020 was an extraordinary and challenging This will include a mixture of live sessions with
year for CPA Ireland and its members, however key industry experts in technology, case studies
CPA Ireland even in the face of a global pandemic, we of those who have successfully managed
have responded positively to these challenges the transition and several live sessions with
17 Harcourt Street, and realised significant achievements and software companies who will engage in Q&A
Dublin 2, D02 W963 developments throughout the year. with the audience to give them clarity on what
software is best for them.
The new CPA Ireland syllabus - ‘Ready to
T: 01 425 1000 Face the Future of Accounting’ - was launched The CPA Ireland Tax Conference 2021 was
in September 2020. We were delighted to held online and covered a number of topics of
F: 01 425 1001
collaborate with the Analytics Institute of relevance in the current environment, including
Ireland to provide the opportunity for our the tax implications of Brexit, sustainability
Unit 3, students who complete the Data Analytics tax, and pandemic taxation. Our Review of
The Old Gasworks, for Finance subject at Strategic Level to attain Professional Issues series of online events took
dual qualification. Qualified members who place over a number of webinars for each of
Kilmorey Street, complete our Diploma in Data Analytics, run the regions and our Annual Conference and
Newry, BT34 2DH as a post qualification specialism, also have Irish Accountancy Conference will be held
the opportunity to apply for membership of later on in the year.
the Analytics Institute of Ireland.
T: +44 (0) 28 3025 2771 When I started my term as President of CPA
W: www.cpaireland.ie We successfully launched our online Ireland, there were a number of core issues
E: cpa@cpaireland.ie examinations for the August 2020 exam I wanted to address including the continued
sitting and will continue to hold our exams support of entrepreneurs and SMEs in
online for future exam sittings. For the 2021 Ireland and the ever-growing importance of
Editor examinations, Cirrus will be our online sustainability finance.
Patricia O’Neill assessment partners. Cirrus is a cloud-based,
e-assessment platform which will allow us to As the year progresses and we hope to return
deliver all examinations online with confidence to some form of normality, it is essential
Chief Executive and ease. We have also moved to AI invigilation that businesses refocus on the sustainability
Eamonn Siggins by using Proctorio, a comprehensive, learning agenda.
integrity platform. These online platforms will We must continue to hold sustainability in the
be used for our CPA qualification examinations, forefront of our minds after and cannot avoid
Editorial Adviser
our Diploma in Forensic Accounting and our progressing with it because of Covid-19. Irish
Róisín McEntee Certified Tax Adviser course. companies are at risk of losing ground on
The success of our post qualification competitors by failing to address sustainability
Technical Adviser specialisms has continued, and we will issues. In many cases, this is a direct result
Alan Bailie continue to run courses in Data Analytics, of Covid-19. This is understandable as many
Forensic Accounting, Tax, Advanced VAT, businesses have been focusing on keeping
US GAAP, FRS102, IFRS and The Governance the lights on rather than what energy is used
Advertising to power them.
of Charitable Organisations. These post
Ciara Durham qualification specialisms grew in popularity There is an opportunity for the accountancy
T: 086 852 3463 in 2020 with the new Advanced VAT for profession to show leadership by including
E: accountancyplus@gmail.com Accountants programme proving to be sustainability reporting as a core service and
particularly successful. not wait for legislation. To help the profession
In December 2020, I was delighted to formally adapt to this new role, sustainability reporting
Published by has been included as a core element of CPA
admit the new conferees into membership
Nine Rivers Media Ltd. through our first ever virtual conferring Ireland’s new education syllabus, Ready to
T: 01 667 5900 ceremony. I commend these graduates for Face the Future of Accounting.
E: gary@ninerivers.ie having to adapt quickly to online assessment As this is my last message as President of
during a period of social isolation, uncertainty, CPA Ireland, I would like to thank CPA
remote working, economic chaos, and the members, students, Council and staff for your
Printed by greatest health risk in our lifetimes. I would ongoing support. I started out my term as
Persona like to wish them every success in their future president at a virtual AGM and will be finishing
careers and look forward to them becoming up my term when I pass over the office of
involved with the Institute on many levels. the President to Áine Collins at the next
Distribution
virtual AGM. I wish Áine a very successful and
Lettershop Services Ltd. These are only an example of some of the
highlights from 2020 and we are looking enjoyable term as the next President of
forward to another busy year ahead in CPA CPA Ireland.
Ireland with many virtual conferences,
events and webinars planned.
CPA Ireland is currently in the process of
developing an interactive digital toolkit for
accountants to assist you in digitising the John Devaney
finance function and an accountancy practice. President CPA Ireland
Accountancy Plus March Issue 2021
Contents
Institute Law & Regulation In Practice
President’s Message 01 Law & Regulation News 12 In Practice News 33
The Potential Impact
Institute News 56 Human Resources in 2021
13 of Covid-19 on Audits -
Caroline McEnery
ISA (Ireland) 570 – 34
Publication Notices 64
Going Concern
Umesh Rana
Finance & Management
CPA Profile Mergers & Acquisitions
Finance & Management in the Accounting
15 36
Jimmy Sheehan 06 News Profession
Mark Butler
Leadership Insight:
Sharon Gaffney 07 16
Mark Edmondson
Value-Based Pricing
39
Eoin Healy & Neil Hughes
CPD Irish exporters continue to
meet challenges
20
News & Events 59 with resilience and vigour
Simon McKeever Personal Development
Student Compliance in the Pressures of a pandemic
42
Time of a Pandemic 22 Ben Rawal
Student News 63
Hugh Jones
Coping with lockdown:
Opinion Manging the psychological
Taxation challenges of Covid-19
44
Challenges and Mark Smyth
opportunities for the Tax News 25
03
savvy business leader
The future is now – the
Dermot Duff Finance Act 2020
26 ‘new world of work’ 47
Jane O’Hanlon
Chantal Haynes-Curley
Financial Reporting The EU UK Trade and
Cooperation Agreement
Financial Reporting News 08 30 IT
- A tariff-free deal?
Paul McMahon
Unpuzzling the Digitising all your selling
Sustainability opportunities - A case for
50
Reporting Alphabet Soup 09 thinking in the long term
Hilde Blomme & Vinny O’Brien
Jona Basha
From Shoe Box to Inbox -
Keeping in Step with the
53
Times
Noel J. Delaney
03
Challenges and opportunities
Challenges and opportunities for the savvy business leader by Dermot Duff
OPINION
for the savvy business leader
by Dermot Duff
Work, life and other four-letter words: How the new world of work will affect our work and personal
lives. The world changed radically in Spring 2020, when the digital world of work finally arrived with
a bang, and the pandemic accelerated nascent changes we knew were imminent.
Not alone did this pandemic change The Forces at Work An employee’s output is now more
the nature of certain kinds of work visible and measurable, with less
The seismic shift, accelerated by
fundamentally, it changed the nature administrivia and social loafing. There
the pandemic, is driven by some
of life itself, for work is an integral part are fewer meetings, but more Zooms
relentless forces, fundamentally
of life: often a drudgery, essentially – which ironically are better structured
changing the nature of work and
a way of earning one’s daily bread and more easily scheduled than
even the concept of the corporation:
but also a way to find meaning in physical meetings.
life - a vehicle for achievement, for
belonging, for comradeship (and, yes, Dramatically Automation, Low transaction costs New social and
conflict, jealously and resentment). improved AI, IoT undermine the managerial
connectivity Industry 4.0 concept of a company paradigms
By improving connectivity
• Reduces the • Office automation • Companies moved • The untethered
and untethering employees, it constraint of away from perennial employee
also undermines the nature of geography and time • Productivity tools sub-contracting to
zone reduce transaction • Remote working
management and the fundamental • Robotics
costs in the 1930’s: • Greater work
concept of the modern corporation. • Aids disruption, • Virtual assistants these are now
promotes innovation specialisations make
In this landscape, lie huge threats - • End of privacy
dramatically reduced management more
and huge opportunities. Accounting • Ubiquitious difficult
• Work & ome
firms, large and small, cannot just • Instant intertwined • Digital natives seek
increase productivity, but must also autonomy, flexibility,
meaning
offer new services (such as predictive
analytics, real-time analysis and
bespoke accounting).
As Ronald Coase explained, the The working day has no beginning
modern corporation only became nor end. Some of the time spent
According to the OECD, almost commuting is now spent productively.
the standard organisation model
one-third of all jobs worldwide There is less inter-personal conflict.
a mere century ago, when the
will be transformed by There is also less social interaction,
transaction costs negated the value
technology in the next decade. of subcontracting. less spontaneity, less genuine
(Saadia Zahidi, “We need a collaboration, less juicy gossip (and
global reskilling revolution— Despite expectations to the contrary,
no office romance), less opportunity
here’s why,” World Economic work that is transactional (and that
for ego-gratification, but more fatigue,
Forum, January 22, 2020, can largely be done by individuals
ennui and isolation.
weforum.org). alone), productivity has increased
substantially. A year in lockdown is hard to bear:
the pre-existing relationships (with
colleagues, friends, wider family but
also with clients) that have supported
us through the first year will erode in
the “new normal” of endless partial
lockdowns. What then?
Organisations traditionally devote
substantial time and money to foster
engagement, collaboration, culture
formation, goal alignment: does
this now mean that these prized
intentions are no longer valid?
Accountancy Plus March Issue 2021
04
That the increased productivity (in Clubs, professional networks, why they’re unique; and they create
certain occupations) has achieved charities, physical conferences, music distinctive cultures that help retain
more than those prized initiatives? venues and large events are now all the best people.
Or is it a false dawn, and the “ties utterly changed. What will replace
So, refine your sense of purpose and
that bind” will gradually loosen, and them, if anything?
develop a unique affirmation of your
corporations will become loose
The answer, of course, is that corporate identity—in Simon Sinek’s
associations of foot-loose, resentful,
something will: human ingenuity will famous words, first develop your why
disassociated task-fulfillers?
see to that. Human needs remain of work, before you go on to develop
Or will the needs of Man, reputedly unchanged, and will be met, in some the way or the what of work.
social animals, be met in other ways? form – eventually.
Will the winning organisations find Simon Sinek, Start with Why: How Great
As Prof. David Ulrich explains, an Leaders Inspire Everyone to Take Action, New
ways to overcome these challenges,
“abundant” organization enables its York, NY: Penguin Group, 2009.
and get the vaunted “best of two
employees to be completely fulfilled
worlds” – the old, analogue one and
by finding meaning and purpose from We all know that “where your talents
the new, digital, post-Covid one?
their work experience. This meaning and the needs of the world cross,
Where the winning companies find
enables employees to have personal there lies your vocation.”
ways, in a new hybrid world, to
hope for the future and create value
succeed in increasing engagement, Organizations will benefit from clear
for customers and investors.
enhancing collaboration, generating expression of what they stand for,
innovations and, yes, satisfy Man’s This is the opportunity, ironically, for why they exist, and will use purpose
search for meaning, as articulated by organisations to step into the void, as the human glue to create a
Viktor Frankl in his book Man’s Search and provide a means for engagement, sense of purpose and a sense of the
for Meaning: a crucible for innovation and a collective, even when people are
vehicle for productivity – especially mainly working in splendid isolation.
“Everything can be taken from “cognitive productivity” – smarter
a man but one thing: the last working, frictionless, flexible and The 7 Levers to Benefit
of the human freedoms — to meaningful. from the New World of Work
choose one’s attitude in any Ralph Waldo Emerson says “the While transactional office-type work
given set of circumstances, to purpose of life is not to be happy. It can and perhaps should mainly be
choose one’s own way.” is to be useful, to be honourable, to done remotely, the greater challenge
be compassionate, to have it make lies in building a sense of collective
“Work is a must that hopefully, some difference that you have lived purpose, shared destiny, strategic
in the right setting, becomes and lived well.” alignment, and conscious culture
a joy. Something we all need, formation. More problematically, it
but that so often is treated also involves the oxymoronic sharing
in principle as anathema” of tacit and implicit knowledge (to
according to prominent be addressed elsewhere). Innovation,
previously seen as serendipitous,
accountant Patrizia Künzel.
now can be assisted, even remotely,
by Design Thinking and related
As St Paul proclaimed: “If anyone techniques.
is not willing to work, let him not
eat.” That approach still holds sway The 7 Levers are illustrated below:
today – though people naturally have
different opinions of it. Rather than
being viewed as a cross to be borne,
it’s now often a source of social
status and pride and indeed it often
forms the basis of one’s personal
identity, giving meaning to lives and
boosting self-esteem.
The Old Pillars of Society are Three Keys: Purpose,
Diminished but New Pillars will Value and Uniqueness
Arise More than ever, future-ready
organizations (of all sizes) improve
The old pillars of society are already
their chances of this in three ways:
weakened: the church, the pub,
they get clear on their purpose; they
the extended family, and now the
know how they create value and
workplace is potentially diminished.
Accountancy Plus March Issue 2021
05
Ten Steps Towards Success: Seventh, realise that the early stages He says that, more than anything
in the process of innovation are else in the human make-up, it can
First, reap the current benefits:
Challenges and opportunities for the savvy business leader by Dermot Duff
OPINION
rooted in shifting perspective (to afford an ability to rise above any
higher transactional productivity,
finally see what was previously hidden situation, even if only for a few
lower office costs, less conflict.
in plain sight), diversity of work & life seconds. The attempt to develop a
experience (which can be increased sense of humour and to see things
Second, embrace the digital age –
with the new global workforce) and in a humorous light is some kind
use the technology to reduce the
especially the creation of new ideas of a trick learned while mastering
wasted effort in coordinating work,
through the fusion of two or more the art of living. Yet it is possible
to minimise delays, and – most of
pre-existing ideas (such as happened to practice the art of living even in
all – to make some irksome tasks less
in the creation of the iPhone). Yes, a concentration camp, although
onerous.
the opportunity for serendipitous suffering is omnipresent.
creativity is diminished – but that
Third, realise you can now recruit Reduce groundhog days. Maintain
serendipity was essentially unplanned
talent and labour from across the curiosity. The phone is your friend:
fusion which can now be sparked by
globe: companies are already hiring talk, don’t always Zoom. Hold
the generation of torrents of ideas
(with seeming success) people they the conversation. End the solitary
that may coalesce, the inclusion of
have never physically met. A person’s confinement.
far-flung experts, easier access to
track record (and proven work ethic)
distant clients, computer-enabled Most of all, don’t waste this particular
remains the best predictor of success.
anthropology (to explore clients). crisis, because it transforms
Social media tells you much more
work and creates opportunity
than the candidate (or referee) ever
Eight, don’t leave the seminal for the strategically savvy: note
would.
moments to chance – don’t rely Albert Einstein’s cry that “in the
on serendipity entirely in pursuit midst of every crisis, lies great
Fourth, realise trust between
of new ideas, services or markets: opportunity.” This is the opportunity
colleagues is not just affective, but
instead, follow an innovation process, for organisations to recognize that
effective: yes, it still remains the case,
have deadlines to create a sense of a brave new world is upon us – but
in Prof Robert Cialdini’s, a question
urgency, invite fresh perspectives only the brave will prevail.
of “Liking” – we like people who are
(outsiders, industry observers, clients).
like us, and who like us, too. However,
You can access experts from across
action is more powerful – trust is built
the world – often inexpensively,
on effectiveness: people doing what
because travel is not involved, and
they say they will. Delivering quality
the time commitment is low.
work on time. Doing unselfish actions,
contributing discretionary effort.
Ninth, let’s all be adults, not
Paying forward. Being a good citizen.
employers and employees. All must
All these remain timeless, regardless
lead, all must follow.
of place.
Martin Seligman’s book,
Fifth, cultivate culture. Your culture,
Flourish claims that employees can
and your values, need not change,
acquire a more positive outlook
simply because people are more
on their work by having “PERMA” -
physically remote. They need to
Positive emotion, Engagement,
become less emotionally remote. It
Relationships, Meaning, and
will require clearer articulation of your
Accomplishments. When employees
culture, values and norms, with less
take personal accountability for
reliance on the old “osmosis” method
creating these attributes they do
of unplanned culture formation. Dermot Duff
not depend on the leader, but on
themselves for their work experience. Dermot Duff is a Module Leader in
Sixth, realise cognitive productivity
The mature employee becomes International Business Strategy and in
(the work of professionals of all Operations Strategy in Trinity Business
the agent of change for their own
kinds, such as lawyers, through legal School, where he also manages student
development.
tech), unchanged for years, can now consultancy projects for the MSc degree
dramatically increase. Knowledge that portfolio.
Tenth – Celebrate! Mark the
was previously tacit and unstructured
successes, honour the milestone An Electronics Engineer from UCD, he
can now be codified through
events, be as happy as you can be. held senior engineering management
technology and, more significantly, positions in ITT Alcatel in The Hague
through coaching and “teaching and was later European Transformation
As Frankl observed, “Humour is
moments” in which the art of the Manager for Digital Equipment
another of the soul’s weapons in the
professional is made more scientific. Corporation (later HP) in Geneva,
fight for self-preservation”. subsequently joining the Irish Management
Institute in a senior role.
Accountancy Plus March Issue 2021
06
Title:
Managing Director
CPA Profile Company:
Teams PLUS
Jimmy Sheehan Qualifications:
FCPA, FIATA
Why did you decide to start out What one word describes sitting on a table in a room. It’s -5
in a career in accountancy? what your CPA qualification degrees. Your goal is to melt the ice
It wasn’t an active decision to be an has given you? cube. So, you warm up the room by
accountant per se. After school Options! An accountancy one degree and nothing happens to
I started working in hospitality. I qualification alone doesn’t give you the ice cube. You warm the room by
lived in several different countries good business experience, but it gives one degree again, and again until it’s
and had a lot of fun and had some you the permission to put yourself now 0 degrees Celsius. All that effort,
amazing life experiences. In my mid forward for opportunities where you all those little changes and still you
20’s I realised this wasn’t a lifestyle might not otherwise be considered. can’t get the ice-cube to melt. But
that I would want in my 40’s so I then, you raise the temperature by
started the Accounting Technician just one more degree and now the
What has been your biggest
qualification. It was just a two-year ice-cube starts to melt – changes
career achievement?
course, so I knew even if I didn’t like happen. What you’ve been trying to
I think if we look for career defining achieve, happens. It wasn’t the one
it, time would pass quickly and at the moments, we’ll always be striving
end I’d still have a well-recognised degree change on its own, but rather
for something out of reach and the combined effort of all the little
and respected business qualification. that’s not good for self-morale. It’s changes over time.
perfectly acceptable to have goals
Why did you choose CPA Ireland to drive you, to give you a sense of That’s what is happening with
as your qualification route? purpose and challenge you. I’m very accountancy. We’re adopting all these
CPA Ireland has been very supportive happy with my career to date, but I innovations and soon that one degree
to me throughout my career, both in don’t see any one thing as being the of change will totally transform how
my time as a student and member. biggest achievement. I prefer to look accountants work.
As an ATI graduate, I found that at where I am now and learn from
CPA Ireland recognised the value of the journey so far and apply the smart How do you unwind?
being an ATI and provided the most choices I’ve made into my plans for I have young kids. One tends to jump
flexible options in terms of education the future. from being busy at work to being
delivery, career aspirations in that I busy at home. Each is a welcome
could work in Industry or Practice What or who inspires you most distraction and break from the other…
and training as I wasn’t tied into a in business? but unwinding…. there are a few years
contract. My Grandad taught me my first lesson left before I can think about that type
in business when I was 6 or 7. Know of luxury!!
Please provide a brief history of your customer. Everything else stems
your career. from that. I enjoy reading business What traits do you admire in
I’m currently Managing Director of books. We can all find inspiration in others?
Teams PLUS, and its parent company, learning from others. I’m currently Rolling your sleeves up. You don’t
Contracting PLUS. Teams PLUS is the reading Tools of Titans (Tim Ferris), have to be the best at anything.
exact business I needed when I was Atomic Habits (James Clear) and am Often those who are the best put
in practice and was struggling with re-reading Oversubscribed by Daniel themselves under so much pressure,
finding and retaining good staff, trying Priestly. and have external pressures on them,
to reduce work in progress and drive that they are miserable. Try and be
profitability. Accountants and finance What advice would you give happy. Do something you enjoy. Let’s
teams using this service now have to those recently qualified or be honest, we’d all love to win the
the advantage I was looking for 10 currently studying for their CPA lotto and not have to work. But when
years ago. Along the way I’ve worked qualification? you get bored of lying on the beach,
in practice and industry. I’ve been what’s going to ‘pull you back in’?.
Always put your hand up. If an
Financial Controller, Auditor, Practice
opportunity arises to be involved in If you can marry work you enjoy with
Owner, Consultant. I’ve worked with
a project or area where you have no your innate ability, and add a little bit
small teams and in Top10 firms. I’m a
experience, take it. Accountancy is of giddy-up, you’ll have success.
firm believer in doing what you enjoy,
changing. In Atomic Habits, James
and when you don’t enjoy it anymore,
Clear uses an analogy of an ice-cube
try something different.
Accountancy Plus March Issue 2021
07
Title:
Director of Finance and
CPA Profile
Jimmy Sheehan and Sharon Gaffney
CPA PROFILE
Organisational Services
Company:
Sharon Gaffney Royal Victoria Eye and Ear
Hospital
Qualifications:
FCPA, IATI
Why did you decide to start out Every position and different work Financial Controller of the company
in a career in accountancy? environment was a learning curve where I was working as an Assistant
Maths and accountancy were always and I gained incredible experience. accountant. I was 6 months away
my passion and top subjects when I mainly worked in SMEs in the from my final exams and becoming
in secondary school. Unfortunately, private sector which gives you the a fully qualified CPA, but the
when doing my leaving cert, I just did opportunity to be involved in many opportunity arose. The CEO said he
not have the best day on the day of other projects and really understand had so much confidence in me and
my accountancy exam and did not the working of each company from my abilities as an accountant that he
get the result I wanted. So, I initially top to bottom. wanted me to take on the challenge.
went on to do a one-year business I grabbed that opportunity with both
When I got the opportunity to go
course. From this I got a position in hands, shaking may I add but
back into the public sector it was like
Finance in Our Lady’s Hospital for I loved every minute of it. It was just
I had never left. I was able to bring all
Sick Children. It was there that one a fantastic time and I learned so
that I learned in the private sector
of my colleagues told me not to give much about myself.
into my new position.
up on my dream and to pursue my
accountancy qualification. I did and My current role as Director of finance I realised how important it was to
I have never looked back and will and organisational services in the show people the confidence you
always remember that chat as it Royal Victoria Eye and Ear Hospital have in them and their work, to
was really the start of my career. is one of my most enjoyable roles. let them know how well they are
Working in a hospital is an ever- doing and to help them grow as
Why did you choose CPA Ireland changing environment, obviously strong individuals. We all had to
over the last year it has brought many start somewhere; we all need that
as your qualification route?
new challenges. However, I have encouragement. I will never forget
I went to a few open days in learned over the years that no matter that opportunity and I try every day
different colleges to see what route what level you are at you need to to support my team to develop
was best for me. I felt the CPA work as part of a team. That is what their skills and give them the right
qualification allowed me to pursue I love the most about my current role, encouragement.
my accountancy qualification in a the team I have behind me and the
very flexible way and they were also efforts of everyone in the hospital, What or who inspires you most
very welcoming. I worked full time makes it run smoothly each day. in business?
and therefore I needed to be able
to attend classes and give my very In 2020 the one person that stood
How do you find your CPA out for me was Jacinda Ardern, Prime
best while still working. It was also
qualification has helped you minister of New Zealand. In 2017 she
a worldwide recognised qualification
in your role? was asked whether she felt a woman
and who knew at that age what the
future held so I needed a strong As CPA’s we need to be able to could have both a baby and a high-
qualification that I could go adapt to different types of industries powered career. 3 years later I think
anywhere with. within our career and that is what we can all agree on the answer. Her
the qualification provides you with. sheer determination and her ability to
Please provide a brief history Confidence and adaptability. While unite New Zealand in dealing with the
studying CPA I found it had a broad pandemic was admirable. Her slogan
of your career.
range of subjects in what we were that was repeated so often “be strong,
I started my career in the public be kind” is something that we should
required to learn. These different
sector in Our Lady’s Hospital. I all take on board. Her approach to
aspects help in many ways, as an
worked in a few areas within Finance her family and work life has brought
accountant’s role is ever changing
which really helped shape my career her continued success in her role as
and not only about the numbers.
path. As I grew more confident in a leader. It takes strength and courage
my work and with the backing of to be an empathetic leader and she
What has been your biggest
my studies behind me, I left to work has proven that she has both.
career achievement?
in the private sector, which I did for
nearly 17 years before returning to the While I have been so lucky to
public sector. have several career achievements,
what sticks in my mind is the day
I was asked to take up the role as
Accountancy Plus March Issue 2021
08
Financial Reporting News
Covid-19 - Going Concern FRC consults on
The IFRS Foundation has recently published guidance Going annual review of
Concern – a focus on disclosure to assist both companies FRS 101
and accountants in deciding whether a business is a going
concern. Whilst the guidance is based upon the requirements The Financial Reporting Council (FRC)
of the International Financial Reporting Standards (IFRS), it has recently issued FRED 77 Draft
is also likely to be of use to companies and accountants Amendments to FRS 101 Reduced
preparing their financial statements in accordance with Disclosure Framework – 2020/21 cycle
FRS 102 as many of the principles are consistent to both proposing amendments to FRS 101
following the latest annual review.
frameworks.
A fundamental decision management have to make in The Exposure Draft proposes
preparing financial statements is whether to prepare them amendments to FRS 101 to provide
on a going concern basis. In the current stressed economic certain disclosure exemptions in
relation to IAS 16 Property, Plant and
environment, brought about by the ongoing impact of
Equipment and for consistency with IAS
Covid-19, a greater degree of judgement may be needed by
1 Presentation of Financial Statements.
management in determining whether or not the financial
statements should be prepared on a going concern basis. Paragraphs 39 and 40 of IAS 1 were
deleted by the Annual Improvements
Financial statements are prepared on a going concern basis
to IFRS’s 2009-2011 Cycle and were
unless management either intends to liquidate the entity or
therefore only applicable to accounting
to cease trading or has no realistic alternative but to do so.
periods beginning before 1 January
Management in making its assessment of an entity’s ability
2013. Fred 77 therefore also proposes
to continue as a going concern is required to consider all an amendment to FRS 101 to remove a
available information about the future. reference to paragraphs 39 and 40 of
The publication provides guidance on the additional factors IAS 1.
that management may need to consider before concluding Source: www.frc.org.uk
on whether preparing financial statements on a going
concern basis is appropriate, including:
• The effect(s) of any temporary shut-down or curtailment of
the entity’s activities; IFRS 8 – Identification of
• Possible restrictions on activities that might be imposed by Chief Operating Decision
governments in the future; Maker
• The continuing availability of government supports; and IFRS 8 – Operating Segments requires
• The effects of longer-term structural changes in the market disclosure of information about a company’s
for example, changes in customer behaviour. operating segments. Determining the Chief
Operating Decision Maker (CODM) is an
The guidance also addresses the specific disclosure important step for companies in identifying
requirements of IAS 1 in relation to going concern, including operating segments for the purpose of these
the disclosure of judgements that have the most significant disclosures.
effect on amounts recognised in the financial statements
and the requirements where an entity is no longer a going The Irish Auditing and Accounting
concern. The guidance can be accessed at https://cdn.ifrs. Supervisory Authority has recently published
org/-/media/feature/news/2021/going-concern-jan2021. an information note, the purpose of which
pdf?la=en. is to assist companies in determining the
CODM.
Source: www.ifrs.org
Source: www.iaasa.ie
Accountancy Plus March Issue 202109
Unpuzzling the Sustainability
Unpuzzling the Sustainability Reporting Alphabet Soup by Hilde Blomme & Jona Basha
FINANCIAL REPORTING
Reporting Alphabet Soup
by Hilde Blomme & Jona Basha
The world is on a trajectory for a temperature rise exceeding 3°C above pre-industrial levels,
surpassing the 2°C target of the Paris Agreement1 and obviously, the ambitions for 1.5°C. In addition
to climate change, environmental degradation, human rights and social issues are increasingly
concerning companies, investors, policymakers, regulators and society in general. The coronavirus
crisis brought a range of non-financial information (NFI)2 issues to the forefront and underscored
their relationship with the economy.
Stakeholders understand that An answer to calls for harmonisation the risks and opportunities of climate
companies’ financial and NFI reporting came in September 2020 from CDP, change. The recommendations are
impact and depend on one-another. the Climate Disclosure Standards Board structured around 4 pillars:
Therefore, it is important to address (CDSB), the Global Reporting Initiative 1. governance
NFI to ensure resilient business models. (GRI), the International Integrated
2. strategy
The International Financial Reporting Reporting Council (IIRC) and the
Standards (IFRS) guide financial reporting Sustainability Accounting Standards 3. risk management
almost globally, however, NFI reporting Board (SASB). These 5 leading global 4. metrics and targets.
does not enjoy the same level of organisations on sustainability reporting
standardisation. (collectively referred to as “the Five) They are adopted in the European
mapped how their initiatives fit to their Commission’s (EC) 2019 Guidelines on
NFI framework developers and vision for a comprehensive corporate the Non-financial Reporting Directive
reporting system3. Accountancy Europe (NFRD)5, and expected to become
standard setters
welcomed their unprecedented and mandatory in New Zealand6, the United
There are currently a number of Kingdom7, Hong Kong8 and Switzerland9
much awaited collaboration. Let’s
voluntary NFI initiatives and frameworks, as well as being supported by investors
explore the Five’s work in a bit more
commonly referred to as the ‘alphabet (e.g. BlackRock10, State Street Global
detail.
soup’. While the scope of each of these Investors11, Norges Bank Investment
frameworks and initiatives differ based Who is who? Management12). Established in 2000,
upon the needs of the users of those CDP13 runs a disclosures system on
Established by the Financial Stability
frameworks, they also share common climate change, water security and
Board in 2015, the Task Force on
elements and complement one-another. deforestation for investors, preparers,
Climate-related Financial Disclosures
(TCFD)4 aims to inform investors on countries, and rates them based on
these datapoints.
1 United Nations (2015), Paris Agreement, see: https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement
2 Even though “non-financial information” lacks a formal definition, for the purposes of this article it is deemed to include information relating to environ-
mental, social and governance (ESG), corporate social responsibility (CSR), internally generated intangibles (e.g., intellectual property, knowledge, relation-
ships, teamwork, trust, branding, reputation, technology, etc.) and other value drivers that are not usually measured in monetary terms.
3 CDP, CDSB, GRI, IIRC, SASB, Statement of Intent to Work Together Towards Comprehensive Corporate Reporting, see: https://29kjwb3armds-
2g3gi4lq2sx1-wpengine.netdna-ssl.com/wp-content/uploads/Statement-of-Intent-to-Work-Together-Towards-Comprehensive-Corporate-Reporting.pdf
4 TCFD (2017), Recommendations of the Task Force on Climate-related Financial Disclosures, see: https://www.fsb-tcfd.org/publications/
5 European Commission (2019), Communication from the Commission – Guidelines on non-financial reporting: Supplement on reporting climate-related
information, see: https://eur-lex.europa.eu/legalcontent/EN/TXT/?uri=CELEX%3A52019XC0620%2801%29
6 New Zealand first in the world to require climate risk reporting, see: https://www.beehive.govt.nz/release/new-zealand-first-world-require-climate-risk-re-
porting
7 UK joint regulator and government TCFD Taskforce: Interim Report and Roadmap, see: https://www.gov.uk/government/publications/uk-joint-regula-
tor-and-government-tcfd-taskforce-interim-reportand-roadmap
8 Securities and Futures Commission (2020), Consultation Paper on the Management and Disclosure of Climate-related Risks by Fund Managers, see:
https://apps.sfc.hk/edistributionWeb/api/consultation/openFile?lang=EN&refNo=20CP5
9 Federal Council fleshes out proposals for sustainable Swiss financial centre, see: https://www.admin.ch/gov/en/start/documentation/media-releases/me-
dia-releases-federal-council.msg-id81571.html
10 Blackrock, Larry Fink Letter to CEOs, see: https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter
11 State Street Global Advisors, CEO’s Letter on our 2021 Proxy Voting Agenda, see: https://www.ssga.com/us/en/institutional/ic/insights/ceo-letter-2021-
proxy-voting-agenda
12 Norges Bank Investment Management (2020), Consultation on the FCA’s Proposals to Enhance Climate-related Disclosures, see: https://www.nbim.no/
en/publications/consultations/2020/consultation-on-the-fcasproposals-to-enhance-climate-related-disclosures/
13 CDP, see: https://www.cdp.net/en
Accountancy Plus March Issue 202110
Since 2007, CDSB14 has provided a In addition to financial materiality, they
framework for reporting environmental categorise NFI matters as material to:
information, useful for investor decision-
1. enterprise value creation (important
making. It includes the characteristics
for investors as they eventually have a
of information, requirements for
financial impact on the company), and
disclosures and guiding principles.
2. the economy, environment and
Founded in 2010, the IIRC15 developed
people (important to broader
its’ International Integrated Reporting
stakeholders).
Framework ( Framework) which
aims to provide investors with
The International Accounting Standards
information on an entity’s value creation
Board (IASB), SASB and CDSB would
story and how it uses and impacts the
provide the standards to address
6 capitals (financial, manufactured,
enterprise value creation, underpinned
intellectual, human, social and
by the principles of the Framework.
relationship, natural).
GRI standards would both complement
Since 1997, the GRI16 has been
the enterprise value creation standards
developing standards that enable
and provide the basis for wider impacts.
a broad range of stakeholders to
understand the impact a company has The Five further illustrated reporting
on the environment, people and the for enterprise value creation with a
planet. These consist of universal, prototype standard on climate-related
sector and topic standards. financial disclosure20.
SASB17 published industry-specific
standards in 2018. They aim to provide What is missing?
investors with topics and metrics, which While the Five may provide the content
may have a material financial impact on of NFI standards, adequate governance
the company. Similar to TCFD, they are (including due process) is necessary to
very popular among investors. legitimise the standards. The Cogito
Paper in 2019 proposed enhancing IFRS
How do these initiatives fit structures to address NFI reporting and
together? ensure interconnected standard setting.
These ideas were broadly referenced
Accountancy Europe’s Cogito Paper
by the IFRS Foundation in its recent
2019 Interconnected standard setting
consultation paper on sustainability
for corporate reporting18 (Cogito Paper
reporting21.
2019) elaborated a materiality lens
that builds on the popular financial Following 576 overwhelming responses,
materiality19, expands time-horizons the IFRS Foundation may announce
to include impacts on value creation the establishment of a sustainability
and addresses wider impacts on the standards board (SSB), in parallel to
environment and society (see Figure 1). the IASB, at the UN Climate Change
Conference COP26 meeting in
The Five built on these ideas in their
November 202122.
paper and developed “dynamic
materiality”, which guides their vision for The International Organization of
corporate reporting (see Figure 2). Securities Commissions23 noted that,
when put together, the Five and the IFRS
14 CDSB, see: https://www.cdsb.net/
15 IIRC, see: https://integratedreporting.org/
16 GRI, see: https://www.globalreporting.org/
17 SASB, see: https://www.sasb.org/
18 Accountancy Europe (2019), Interconnected standard setting for corporate reporting, see: https://www.accountancyeurope.eu/publications/intercon-
nected-standard-setting-for-corporate-reporting/
19 The IASB notes that “[i]nformation is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the
primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific
reporting entity.”
20 CDP, CDSG, GRI, IIRC, SASB, Reporting on enterprise value Illustrated with a prototype climate-related financial disclosure standard, see: https://29kjw-
b3armds2g3gi4lq2sx1-wpengine.netdna-ssl.com/wp-content/uploads/Reporting-on-enterprise-value_climate-prototype_Dec20.pdf
21 IFRS Foundation Consultation Paper on Sustainability Reporting, see: https://www.ifrs.org/projects/work-plan/sustainability-reporting/
22 News, IFRS Foundation Trustees announce next steps in response to broad demand for global sustainability standards, see: https://www.ifrs.org/news-
and-events/2021/02/trustees-announce-next-steps-in-response-to-broad-demand-for-global-sustainability-standards/
23 IOSCO, Open response to the open letter from CDP, Climate Disclosure Standards Board (CDSB), Global Reporting Initiative (GRI), International Integrated
ng Council (IIRC) and Sustainability Accounting Standards Board (SASB) proposing avenues for Working together to meet the needs of the capital
markets, see: https://www.iosco.org/library/speeches/pdf/20201029-Erik-Thed%C3%A9en.pdf
Accountancy Plus March Issue 202111
address the contents and governance The potential way forward?
for NFI standard setting.
Unpuzzling the Sustainability Reporting Alphabet Soup by Hilde Blomme & Jona Basha
FINANCIAL REPORTING
Accountancy Europe’s Follow-up paper
The European and global state to Cogito Paper 201931 suggested
a “building block” approach to NFI
of play
standard setting. The foundation block
The European Union (EU) has been would be a set of globally accepted
leading the NFI agenda for years. NFI standards, applicable to all
Currently, there are 3 processes companies. This would help improve
running in parallel: market transparency and guide capital
1. The revision of the NFRD24. to sustainable investments. Additional
“blocks” of EU NFI reporting standards
2. Potential changes to the governance
important to meet EU public policy Hilde Blomme
and funding of the European
objectives could be added. Accountancy Europe Deputy CEO
Financial Reporting Advisory Group
(EFRAG) if it were to be mandated The Value Reporting Foundation and
Hilde leads the professional expertise
with EU NFI activities25. CDSB could join the SSB under the IFRS team and provides regulatory and
3. EFRAG Lab preparatory work for Foundation to develop NFI reporting technical expertise in the areas of
the possible elaboration of EU NFI standards, material to value creation. reporting, assurance, (sustainable)
In the longer term, the IFRS structures finance, tax and practice development.
standards26.
may be enhanced to address wider
These critical developments will stakeholders, and therefore potentially
crystalise in 2021: EFRAG will report welcome GRI. EU leadership is critical
to the EC by the end of February 2021, to achieve this global base.
whereas the proposals on the revised
NFRD are expected in April 2021. Ultimately, the future European NFI
standard body could play a double role:
In the EU, NFI standards are important (1) endorsing (SSB´s?) standards and (2)
to achieve public policy objectives, developing an additional EU layer
including the ambitions of the European of standards.
Green Deal27. Therefore, the EFRAG Lab
has been developing its technical advice
to the EC for future EU NFI standards.
Their outreach document28 lays out
ideas on the foundations, operational Jona Basha
guidelines, architecture and reporting Senior Manager at Accountancy Europe
structure of the future European NFI
standard setter. Jona is also part of the corporate reporting
team. She engages in various financial
On a global level, SASB and IIRC reporting matters and specialises in
announced their intention to merge and non-financial information reporting and
form the Value Reporting Foundation29, standard setting.
with CDSB potentially joining at a later
stage30.
24 EC, Non-financial reporting by large companies (updated rules), see: https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12129-Revi-
sion-of-Non-Financial-Reporting-Directive
25 EFRAG, Ad-personam governance mandate, see: https://www.efrag.org/Activities/2010051124018235/Ad-personam-governance-mandate
26 EFRAG, Non-financial reporting standards, see: https://www.efrag.org/Activities/2010051123028442/Non-financial-reporting-standards#
27 EC, A European Green Deal, see: https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal_en
28 EFRAG Lap Project Task Force Non-financial reporting standards, Outreach meeting European standard- setting (ESS), see: https://www.efrag.org/Assets/
Download?assetUrl=%2fsites%2fwebpublishing%2fSiteAssets%2fPTF-NFRS%2520Outreach%2520Document%2520final.pdf
29 Press release (2020), IIRC and SASB announce intent to merge in major step towards simplifying the corporate reporting system, see: https://www.sasb.
org/wp-content/uploads/2020/12/IIRC-SASB-Press-Release-Web-Final.pdf
30 CDSB (2020), The Value Reporting Foundation – What is next for CDSB?, see: https://www.cdsb.net/harmonization/1125/value-reporting-foundation-
%E2%80%93-what-next-cdsb
31 Accountancy Europe (2020), Follow-up paper: Interconnected standard setting for corporate reporting, see: https://www.accountancyeurope.eu/publica-
tions/follow-up-paper-interconnected-standard-setting-for-corporate-reporting/
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