IAASA, Ireland’s accounting enforcer, has today published its annual Observations paper highlighting matters that those charged with governance should consider when preparing their financial statements for 2022.
The paper notes that 2022 financial statements will be prepared against an uncertain outlook with businesses facing uncertainties:
interest rate increases with the first European Central Bank rate rises in 10 years and the expectation of further rate increases later in the year
inflation with domestic price increases at their highest level in 38 years, and
a slowdown in economic growth forecasts and some talk of recessionary risks in some economies.
Meanwhile, the COVID-19 recovery path remains unclear and sporadic resurgence in cases continues to be a source of concern.
IAASA’s paper highlights some key areas that warrant scrutiny by those preparing, approving and auditing 2022 financial statements in the upcoming reporting season including the impact of the war in Ukraine, geo-political developments, impairment testing and climate commitments.
IAASA expects that when preparing their 2022 financial statements, companies will:
provide company specific disclosures on the significant judgements and the sources of estimation uncertainty and changes in the key assumptions underpinning assets, liabilities, income, expenses, and cash flows
disclose the impact that COVID-19 restrictions have had on the company’s financial performance, financial position, cash flows and risks, and the mitigating actions taken to respond to the pandemic
consider the impact of climate change on the company’s operations and on the measurement of assets and liabilities, and
apply the specific recognition, measurement, presentation, and disclosure requirements of financial reporting standards to provide users with financial information that is comparable, relevant, verifiable, timely and understandable.
IAASA also expects that companies will not misuse alternative performance measurements (APMs), will not misuse exceptional item presentation, and will not “greenwash” when it comes to disclosing the impact of climate change.
The 2022 Observations paper may be accessed here.