EFAA Leadership’s Activities

EFRAG Member Organisations, 13 January 2022

Salvador Marin, EFAA President, and Paul Thompson joined this teleconference call to discuss revisions to EFRAG’s Statutes and Internal Rules as well as governance and finance for the new Sustainability Reporting pillar.

EFRAG General Assembly Meeting, 21 January 2022

Salvador Marín and Sara Zambelli joined this teleconference call to approve revisions to EFRAG’s Statutes and Internal Rules as well as governance and finance for the new Sustainability Reporting pillar.

IASB SME Implementation Group (SMEIG), 21 January 2022

Paul Thompson and Jose Maria Hinojal, member of EFAA Assurance Expert Group participated in the SMEIG meeting to provide advice to the IASB on possible changes to the IFRS for SMEs. The agenda papers and meeting recording are posted on the IFRS Foundation public website here. Paul’s six-year term as a SMEIG member ends in June 2022.

CPA Ireland Conversation with European Commissioner for Financial Services, Financial Stability and Capital Markets Union, Mairead McGuinness, 25 January 2022
Salvador Marin, Paul Thompson and the leadership of EFAA’s member organisations participated in this live online debate centred on sustainability reporting. Salvador asked how SMEs stood to be impacted.

January 28 Industrial Barometer of Spain 2021

Salvador Marín coordinated the presentation of the economic report. He highlighted the need to boost the activities and well-being of SMEs in Europe.

Edinburgh Group Global Webinar Series, 3 February 2022

Paul Thompson, EFAA Director was a member of a panel to debate digital transformation and competences attended by over 300 delegates from across Africa, Europe, and Asia. Paul highlighted EFAA’s Digital Competency Maturity Model, a free to use online self-assessment tool for SMPs.

Sustainability Reporting and Assurance Update

Europe

The European Financial Reporting Advisory Group (EFRAG) has issued a press release concerning the reform of EFRAG’s governance, and the integration into its structure of a Sustainability Reporting pillar. EFRAG welcomes 13 new Member Organisations active in this domain, in addition to its 17 Member Organisations (EFAA being one of these) in the Financial Reporting Pillar which all have also joined the EFRAG Sustainability Reporting Pillar. Today, EFRAG closes its call for candidates for its Sustainability Reporting Board which will be responsible for all sustainability reporting positions of EFRAG including technical advice to the EC on draft EU Sustainability Reporting Standards and amendments to Standards. The EFRAG call for candidates for both the chair (PDF version attached) and the members (PDF version attached) of its Sustainability Reporting Technical Expert Group (TEG) are still open – the deadline is 28 February 2022. The Chair of the EFRAG Sustainability Reporting TEG is responsible for directing and managing all of EFRAG’s sustainability reporting technical activities. Members of the EFRAG Sustainability Reporting TEG will be chosen primarily based on their technical sustainability reporting competences, subject matter knowledge and practical experience.

On 10 January 2022, the European Parliament’s Committee on Legal Affairs (JURI) debated a draft report prepared by the rapporteur MEP Pascal Durand on the EC’s proposed Corporate Sustainability Reporting Directive (CSRD) with a focus on the amendments tabled by other MEPs. One of the main points of contention is on the extent to which SMEs are scoped into the CSRD. Opinions varied widely amongst the MEPs making obtaining consensus very challenging. Negotiations are ongoing and the Committee vote is expected in March 2022. Meanwhile the European Council commenced their examination of the CSRD here.

On 10 February, an exchange of views took place during the European Parliament’s Committee on Legal Affairs (JURI) with Jean-Paul Gauzes and Patrick de Cambourg, both representing the European Financial reporting advisory group (EFRAG). The new structure and finances of EFRAG were discussed as well as the work done by the “European Lab Project Task Force on preparatory work for the elaboration of possible EU non-financial reporting standards” (PTF-NFRS). This exchange was followed by an exchange with Mairead McGuinness, Commissioner for Financial services, financial stability and Capital Markets Union on CSRD. The video is available here.

The EC plans to publish its sustainable corporate governance (SCG) proposals on 15 February though further delay is possible. One of the expected elements of the SCG proposals is around supply chain due diligence. While most SMEs are expected to be scoped out or only partially included in these requirements, they may be exposed to ‘trickle-down’ impacts of the legislation as their larger supply chain partners may request sustainability-related information from them so that they can fulfil their own legal due diligence obligations.

EFAA Responds to Quality of Corporate Reporting and Enforcement Consultation

EFAA has responded to the European Commission (EC) consultation Strengthening of the Quality of Corporate Reporting and its Enforcement. The consultation, which focuses on public interest entities (PIEs), aims to enhance the quality of corporate reporting by strengthening the three pillars of corporate governance, audit, and supervision. While EFAA’s response is prepared from the perspective of SMPs our greatest concern is to present solutions that best serve the public interest. EFAA enthusiastically welcomes the initiative and the all-encompassing approach that captures the entire corporate reporting ecosystem. Some of the main points made in the EFAA response are:

• We urge greater coherence and efforts to strengthen all pillars together. The ecosystem is only as strong as the weakest pillar. Moreover, we believe ‘the whole is greater than the sum of the parts’ – complimentary measures mean that the overall effectiveness of any reforms will be maximized.
• We caution that regulation intended for PIEs is not inadvertently passed on to SMEs and SMPs.
• We believe modifications to the EU framework on corporate reporting should aim to facilitate doing business by SMEs and reduce burdens and/or simplify requirements.
• We support developing audit quality indicators but impress on the need for multi-stakeholder involvement.
• We see value in companies issuing a public statement on the effectiveness of internal controls over financial reporting that focuses on fraud and going concern.
• We believe all PIEs should have an audit committee with sufficient members competent in reporting and auditing.
• We urge further simplification and harmonisation of the audit rules including removing Member State options.
• We welcome further investigation into ways of simultaneously increasing competition and quality in the PIE audit market for example, including market caps and joint audits.
• We There is merit in harmonising reporting and audit supervisors’ policies and activities to achieve a level playing field embedded in EU legislation.
• We believe the supervisory framework should focus on facilitating an environment that fosters learning and development for both companies and auditors, rather than focus on sanctioning.

Other Developments in International Standard Setting

Audit, Assurance and Quality Management

The Public Interest Oversight Board’s (PIOB) newly formed Standard Setting Boards’ Nominations Committee has issued the Invitations for Application for the International Auditing and Assurance Standards Board (IAASB) and the International Ethics Standards Board for Accountants (IESBA). The application period will be open until 30 March 2022.

The Nominations Committee will make recommendations to the PIOB for up to five new appointments and re-appointments to the IAASB and for four volunteer openings on the IESBA for terms beginning 1 January 2023.

For more information see the PIOB’s nominations web page.

The IAASB recently released further conforming and consequential amendments to the IAASB’s standards resulting from the new and revised quality management standards, which were released in December 2020. The conforming amendments remove actual or perceived inconsistencies between the IAASB’s suite of standards and the quality management standards and become effective as of December 15, 2022.

Ethics
The Staff of the IESBA have released a set of frequently asked questions (FAQs) on the recently revised fee-related provisions of The International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code). The FAQs have been informed by the extensive discussions and consultations with a wide range of stakeholder groups and the IESBA’s own deliberations during the development and finalization of the standard.

Reporting
EFRAG has released an electronic survey to stimulate the debate on its Discussion Paper Better Information on Intangibles – Which is the best way to go?. Comments to the Discussion Paper are requested by 30 June 2022. Read more here.
FRAG has also issued a summary report of the EFRAG BusinessEurope IASB joint webinar ‘Future of IFRS disclosure requirements: What we learnt from the field test with European preparers’ on 10 December 2021′. At the event, field test participants shared their fieldwork experience on the IASB ED Disclosure Requirements in IFRS Standards—A Pilot Approach. Read more here.

Guidance for SMPs

EFAA has a library of resources, regularly updated, to help SMPs become sustainable here. Readers are also reminded that  EFAA has a specially curated list of free guidance here to help SMPs and their SME clients come through the COVID-19 crisis stronger and smarter.

EC Consultation on VAT in the Digital Age

The European Commission has launched a consultation on “VAT in the digital age”, which is open until 15 April 2022. The consultation seeks stakeholders’ views on whether the current VAT rules are adapted to the digital age, and on how digital technology can be used both to help Member States fight VAT fraud and to benefit businesses. Especially, the consultation relates to: (i) VAT reporting obligations and e-invoicing; (ii) the VAT treatment of the platform economy; and (iii) the use of a single EU VAT registration.

EUIPO Launches Ideas Powered for Business Website

European Union Intellectual Property Office (EUIPO), with whom EFAA signed an MOU in 2020 and who will host the EFAA 2022 International Conference at their headquarters in Alicante, Spain, launched the Ideas Powered for business website on 22 January 2022. The Ideas Powered for business website is a one-stop shop for SMEs across the EU, offering up-to-date and trusted information in jargon-free language and access to support from a number of sources. It will also prove useful for SMPs who advise SMEs. The website hosts wide-ranging IP-related information, including an interactive map of public and private EU entities in the EU offering support along with a comprehensive list of tools and training material to meet the needs of all EU SMEs, including beginners and start-ups. Whilst currently only available in English, to effectively support SMEs throughout the EU, the website will progressively be made available in all 24 official EU languages by combining automatic and human translation.