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TAC Public Meeting June 2024: Meeting Summary
PUBLIC MEETING SUMMARY
Date: 18 June 2024
Time: 10:00-17:00
Location: FRC Office, 8th Floor, 125 London Wall, London, EC2Y 5AS
The recording of the meeting and agenda papers are available online.
Attendance
| Name | Designation |
|---|---|
| Sally Duckworth | Chair |
| Craig Mackenzie | Member |
| David Harris | Member |
| Dia Desai | Member |
| Harriet Cullum | Member |
| Hilary Eastman | Member |
| Jeremy Osborn | Member |
| Joseph Noss | Member |
| Madeleine Evans | Member |
| Nick Rowbottom | Member |
| Peter Hogarth | Member |
| Scott Barlow | Member |
| Supriya Sobti | Member |
| Jenny Carter | Member appointed by the Financial Reporting Council (FRC) |
| Paul Lee | Member appointed by the UK Endorsement Board (UKEB) |
| Mike Ashby | Observer from the Department for Business and Trade (DBT) |
| Mita Gandhi | Observer from the Bank of England (BoE) |
| Carlos Martin Tornero | Observer from the Financial Conduct Authority (FCA) |
| Sarah-Jayne Dominic | Secretariat |
Private meeting
The TAC held a private meeting at 09.30 to 09.55 to discuss confidential and administrative matters.
1. Welcome and apologies
The Chair welcomed members and observers to the first full day meeting of the TAC.
The Chair noted that the TAC was quorate and read out the attendees—both in person and online. Joseph Noss and Supriya Sobti left the meeting early due to other commitments.
The Chair asked the members to declare any interest in the agenda items. No interests were declared in agenda items.
The TAC began by discussing Agenda Paper 7 which lists key updates since IFRS S1 and IFRS S2 were issued in June 2023. This paper was for information only and no decisions were required of the TAC.
2. Current reporting in the UK
The TAC considered Agenda Paper 2A, which provides an overview of current sustainability-related reporting requirements and considers the current UK reporting framework insofar as it overlaps with IFRS S1 and IFRS S2, and Agenda Paper 2B, which summarises the findings from a literature review of corporate reporting reviews conducted over the last two years.
These papers were for information only and no decisions were required of the TAC.
3. The location and timing of sustainability-related disclosures
The TAC considered Agenda Paper 3 which presents an analysis of the requirements in IFRS S1 to disclose sustainability-related information in the same location and at the same time as the general purpose financial report. The TAC was asked the following questions:
- Does the TAC agree with the analysis in this paper in relation to the disclosure location and timing provisions in IFRS S1?
- Does the TAC agree to tentatively recommend to maintain the requirements in IFRS S1 paragraphs 60-63, B27 and B45–B47 on location of disclosures?
- Does the TAC agree to tentatively recommend to maintain the requirements in IFRS S1 paragraphs 64-69 on timing of reporting?
The TAC discussions covered the following points:
- Consistency of location is very helpful but the location of disclosures is also dependent on materiality, which will be different for different entities. Location is an implementation issue.
- It is not clear if the coterminous requirement in IFRS S1 supersedes the provisions in IFRS S2 which permit the use of data in the value chain from different reporting periods to the reporting entity's.
- Coterminous reporting is ideal and should improve over time although for some disclosures such as Scope 3 emissions there is likely to be a permanent delay in acquiring the data from entities in the value chain.
- There are already aspects of the standards which mean that data is reported at a lag, such as the emission conversion factors published by DESNZ which are based on data from two years prior to the reporting date.
- The TAC also discussed the challenges of using estimates to align reporting periods for certain sustainability topics.
The TAC tentatively approved the recommendations, but will revisit these requirements in future discussions on materiality, greenhouse gas emissions and transition reliefs. The TAC will note some of the points raised in the discussion as part of its advice to DBT.
4. Commercially sensitive information
The TAC considered Agenda Paper 4 which presents an analysis of the exemption and requirements in IFRS S1 that entities can use to omit commercially sensitive information from their disclosures in specific and limited circumstances. The TAC was asked the following questions:
- Does the TAC agree with the analysis in this paper in relation to the exemption in IFRS S1 on commercially sensitive information?
- Does the TAC tentatively recommend that the exemption and requirements in IFRS S1 paragraph B34–B37 relating to commercially sensitive information are maintained without amendment?
- Does the TAC tentatively recommend to flag to DBT that there are inconsistencies in UK legislation, which could prevent entities from asserting compliance with IFRS S1?
The TAC discussions covered the following points:
- The TAC noted implementation issues around the inconsistencies with IFRS S1 and the UK's legal framework, but did not consider that the exemptions in the Companies Act would prevent entities from complying with IFRS S1.
- that the ISSB could be engaged with on possible inconsistencies between IFRS S1 and IFRS S2 and IFRS Accounting Standards.
- The TAC agreed that protections were necessary to not require the disclosure of material that would be seriously prejudicial and suggested that guidance from the ISSB could support entities with making these disclosures. The guidance could include clearly defined categories of commercially sensitive information.
The TAC tentatively approved the recommendations, subject to addressing the comments raised during the meeting and approval by the Chair.
5. Judgements, uncertainties and errors, including revising comparatives
The TAC considered Agenda Paper 5 which presents an analysis of the requirements in IFRS S1 that require entities to disclose information about the judgements, assumptions and uncertainties used in the preparation and presentation of sustainability-related disclosures. The paper also reviews the requirements for entities to restate comparative amounts to correct material errors, and to revise comparative amounts due to changes in estimates. The TAC was asked the following questions:
- Does the TAC agree with the analysis in this paper in relation to the requirements in IFRS S1 relating to judgements, uncertainties and errors, including revising comparatives due to changes in estimates?
- Does the TAC tentatively recommend to maintain the requirements in IFRS S1 paragraphs 74-76 relating to judgements?
- Does the TAC tentatively recommend to maintain the requirements in IFRS S1 paragraphs 77-82 relating to measurement uncertainty?
- Does the TAC tentatively recommend to maintain the requirements in IFRS S1 paragraphs 83-86 and B55-B59 relating to errors?
- Does the TAC tentatively recommend to maintain the requirements in IFRS S1 paragraphs B50-B54 relating to revising comparative amounts due to changes in estimate?
- Does the TAC tentatively recommend to flag to DBT that additional guidance may be required?
The TAC discussions covered the following points:
- The TAC agreed that there would be a natural evolution in data quality and that this was a period of learning for companies. The TAC also agreed that transparency should be a key objective, that providing an explanation for the changes was important, but that this could be challenging.
- The TAC agreed that guidance from the ISSB on the disclosure of judgements and uncertainties would support the application of the requirements. The guidance could include changes in data quality; the thresholds for restatements and revisions; the difference between revisions and restatements and between errors and changes in estimates;
- the explanation for changes; and the materiality reassessment. Ideally guidance would evolve as practice evolves.
- The TAC noted implementation issues around the publication of conversion factors and the wording of the SECR requirements.
The TAC tentatively approved the recommendations, subject to addressing the comments raised during the meeting and approval by the Chair.
6. Reporting entity boundary and consolidated reporting
The TAC considered Agenda Paper 6 which presents an analysis of the reporting entity boundary and consolidated reporting issues that have been raised by stakeholders in relation to the requirements in IFRS S1 and IFRS S2. The TAC was asked the following questions:
- Does the TAC agree with the analysis in this paper in relation to the reporting entity boundaries requirements in IFRS S1 and IFRS S2?
- Does the TAC tentatively recommend to maintain the requirements in IFRS S1 paragraphs 20 and B38?
- Does the TAC tentatively recommend that the issues in paragraphs 20.1 and 20.2 are noted in the advice provided to DBT?
The TAC discussions covered:
- The TAC noted implementation issues around there being an exemption for certain subsidiaries and agreed that references should be made in paragraph 20.1 of the paper to section 401 of the Companies Act and other exemptions such as those in the strategic report and the Non-Financial and Sustainability Information Statement, related to reporting requirements for subsidiaries.
- The TAC expressed support for aligning sustainability disclosures with the financial view of control and noted that transition reliefs would be discussed as a separate topic. Members noted, however, that the discussions had focused on climate and that there might be a variety of different issues in relation to other topics.
- The TAC agreed that additional guidance may be of value for conglomerates and other complex entities.
The TAC tentatively approved the recommendations, subject to addressing the comments raised during the meeting and approval by the Chair.
7. Any other business
There was no AOB.
The meeting ended at 15:00.