IASB, ISSB advance new global standards

The International Accounting Standards Board and the International Sustainability Standards Board held separate meetings in London this week to work on implementing and formulating standards for companies such as rate-regulated utilities and topics such as the statement of cash flows.

The two global standard-setters operate under the oversight of the International Financial Reporting Standards Foundation and work together on developing standards. The IFRS Foundation formed the ISSB in 2021 in an effort to bring together the various standards developed by the former Sustainability Accounting Standards Board, Climate Disclosure Standards Board, International Integrated Reporting Council, Value Reporting Foundation and Task Force on Climate-rated Financial Disclosures. In 2022, the ISSB unveiled draft versions of two sustainability and climate disclosure standards, IFRS S1, General Requirements for Disclosure of Sustainability-related Financial Information, and IFRS S2, Climate-related Disclosures, and finalized them in 2023. Since then, the ISSB has been working with various countries around the world to adopt the standards. The ISSB Symposium convened Thursday in London, gathering delegates from over 45 jurisdictions to focus on implementation of those ISSB standards.

In a keynote address, ISSB chair Emmanuel Faber announced the expansion of the Jurisdictional Working Group, which is now being renamed the Jurisdictional Adopters Working Group. Currently 40 jurisdictions have announced plans to use the ISSB standards and they hope to develop a kind of "global passport" while trying to avoid fragmentation of the standards by local authorities. Jurisdictions will be able to accept reports prepared in accordance with the ISSB standards as issued by the ISSB, accommodating jurisdiction-specific conditions as needed, to deliver roughly comparable information for capital markets and preparers.

A new Jurisdictional Rationale Guide for the adoption or other use of ISSB standards and an accompanying tool were presented at the symposium. 

"The ISSB standards are being firmly established as the global baseline, covering around 40% of global capital markets," Faber said in a statement Thursday. "We are committed to maximizing the benefits ISSB standards offer. The expansion of the Jurisdictional Adopters Working Group and our new guide respond to jurisdictions' needs for forums, tools and resources supporting the effective use of ISSB standards as the global passport."

Separately, the IASB board held one of its regularly scheduled meetings in London on Wednesday and Thursday. During the meeting, the board members discussed a number of ongoing projects, including one on the statement of cash flows. 

Among the topics of discussion, according to an IASB official who spoke to Accounting Today ahead of the meeting, was noncash transactions, which is a priority for investors who have provided feedback on the project. (Other priorities include disaggregation of items and non-IFRS metrics). Investors pointed out that information on noncash transactions is spread beyond the statement of cash flows and they need to hunt through other financial statements to find it all. They asked for the IASB to look at the existing requirements for disclosing noncash transactions and what can be done to bring it all together. The IASB staff went through and found all the disclosure requirements for noncash transactions, and presented them in a paper for the board. In another paper, they suggested ideas for possible formats where all the information can be collected together to make it more usable for investors. 

Another discussion at the meeting concerns a project on business combinations, specifically in terms of disclosures, goodwill and impairment. The IASB wants companies to disclose performance information for a subset of their acquisitions, and the synergies of the business combinations. The IASB will be discussing the feedback it's received on the project in several papers.

The agenda also includes a conversation about a longstanding project on rate-regulated activities by organizations such as utility companies. The IASB is working on putting out a final standard in the first half of 2026. The board is looking at the ways utilities are compensated. Some are compensated using a "nominal basis," such as a consistent 7% return, while some contracts say they're going to be compensated on a "real basis," with inflation adjustments such as 2% above inflation. The board members are looking at the feedback they received from stakeholders on ballots and comments on the project. 

The IFRS approach differs from U.S. GAAP, which uses a cost capitalization model, while IFRS is looking at the differences in timing on the revenue and expense sides. The IASB recently met with the U.S.'s Financial Accounting Standards Board in London, where they discussed their ongoing projects. The IASB is working on an intangibles project and looking at pollutant-pricing mechanisms such as carbon credits. FASB has been working on its own project on accounting for environmental credits and proposed an accounting standards update last December. The IASB is taking more of a principles-based standard for trading of carbon credits, along with the trading of cryptocurrency-based tokenized carbon credits. FASB officials told the IASB that one of the problems they encountered was that certain carbon credits actually flip between being used for compliance purposes and being used for trading, suggesting it could be difficult to create a standard that's strictly for trading carbon credits.