Page 1 of 4Our Ref.: C/FRSCSent electronically through the IFRS Foundation Website (www.ifrs.org)
27 July 2021Mr Erkki LiikanenIFRS FoundationColumbus Building7 Westferry CircusCanary WharfLondon E14 4HDUnited KingdomDear Mr. Liikanen,IFRS Foundation Exposure DraftProposed Targeted Amendments to the IFRS Foundation Constitution toAccommodate an International Sustainability Standards Board to Set IFRSSustainability StandardsThe Hong Kong Institute of Certified Public Accountants (HKICPA) is the only bodyauthorised by law to set and promulgate standards relating to financial reporting, auditingand ethics for professional accountants, in Hong Kong. We are grateful for theopportunity to provide you with our views on this IFRS Foundation Exposure Draft (ED).The HKICPA has responded to the Consultation Paper on Sustainability Reporting (CP).In that response, we noted there is an urgent need for a global set of sustainabilityreporting standards, and that the development of a sustainability standards board underthe structure of the IFRS Foundation is an appropriate approach.As such, we broadly support the IFRS Foundation’s proposed governance structure toprovide adequate oversight of a new sustainability standards board, and consider thatthe amendments are proportionate to the Trustees’ strategic direction. We remain of theview that it is important that the IFRS Foundation advance quickly on this initiative giventhe international demand.Our detailed comments are provided in the Appendix.If you have any questions regarding the matters raised in this letter, please contact me,Cecilia Kwei, Director (ceciliakwei@hkicpa.org.hk) or Tiernan Ketchum, Deputy Director(tiernanketchum@hkicpa.org.hk) of the Standard Setting Department.Sincerely,Chris JoyExecutive Director, Standards and RegulationPage 2 of 4Work undertaken by HKICPA in forming its viewsThe Hong Kong Institute of Certified Public Accountants:
(i)
issued an Invitation to Comment on the ED on 3 May 2021 to its members andother stakeholders;
(ii)
sought input from its Sustainability Committee, which is comprised of a diverseselection of senior-level sustainability experts; and(iii)
developed its views through its Financial Reporting Standards Committee. TheCommittee comprises academics, preparer representatives from various industrysectors, regulators, as well as technical and industry experts from small, mediumand large accounting firms.This submission outlines the HKICPA's views and summarises our stakeholders'comments on the ED. You may access our stakeholder responses here:
https://www.hkicpa.org.hk/en/Standards-and-regulation/Standards/Open-for-comment-documents/fred/fin-report-archives/2021arDetailed comments on the EDProposal 1 – Expand the Foundation’s remit to create a new board that will setIFRS sustainability standardsQuestion 1 – Do the amendments proportionately reflect the Trustees’ strategicdirection?
1.In our response to the CP, we noted that the Institute and the majority of itsstakeholders considered that establishing a new sustainability standards boardwithin the structure of the IFRS Foundation would be an appropriate way forward.We continue to think that the IFRS Foundation offers a robust governance structurewith requisite processes, experience and relationships. We furthermorerecommended that the IFRS Foundation leverage on the expertise of existinginitiatives, and appreciate that this has been captured in the Trustees’ strategy.Question 1(a) – Amendments to the objectives of the Foundation (section 2b of theConstitution)
2.We consider that the proposed objective of the International SustainabilityStandards Board (ISSB) is broadly proportionate to the Trustee’s strategic directionas laid out in the ED. We appreciate that the proposed objective broadly aligns tothat of the IASB, and according to the ED is drafted to provide the ISSB with thebroadest possible objective within the Trustees’ strategic scope. As noted in ourresponse to the CP, we generally consider that a broader definition of materialityfocusing on enterprise value creation should be the goal for the ISSB, as has beenproposed by the Trustees.
3.We have two drafting comments on the proposed objective:
a.The ISSB’s objective focuses on investors and other participants of capitalmarkets. This aligns to the Trustees’ strategic focus on investors andenterprise value. The ISSB’s objective lacks reference to “other users” ofinformation as is in the IASB’s objective. It is unclear whether this implies anyrestriction in scope.b.TheISSB’sobjectiveincludes“connect[ing]withmulti-stakeholdersustainability reporting”. This presumably is to support the Trustees’ strategicbuilding blocks approach and the strategy to build on existing initiatives. It maybe helpful for the Trustees’ to provide a definition of “sustainability” and “multi-stakeholder sustainability reporting”.
4.We have also noted feedback from certain stakeholders that the existence ofAppendixPage 3 of 4dynamic materiality (sustainability matters can move between three reportingregimes noted on page 26 of the CP feedback statement1) means that challengescan arise for entities if substantially different standards are required for eachreporting regime. As such, the interdependency between enterprise valuesustainability reporting and broader multi-stakeholder sustainability reportingshould be considered carefully. In particular, interoperability – the ability for entitiesto use the same information for enterprise value and multi-stakeholder sustainabilityreporting – should be promoted where possible. We appreciate that the Trustees’have created working groups on technical readiness and the multilateral workinggroup in this regard.Question 1(b) – Amendments to reflect the structure and function of the new board(sections 43-56 of the Constitution)
5.We generally consider that the proposed amendments, placing the ISSB within thethree-tier structure of the IFRS Foundation, provide adequate oversight of thestandard-setting activities of a new board. We have the following comments:
a.ED section 46 addresses stakeholder activities and references maintainingliaison with stakeholders with an interest in sustainability standard-setting. Thisaligns with the IASB’s functions and helps to support the objective ofleveraging off existing initiatives. We would however note that the concept ofsustainability includes a wide range of topics, and hence it will be important forthe IFRS Foundation to interpret such stakeholders broadly. For example, withregard to climate-related risks the ISSB should consider the need to establishexplicit engagement with international organizations involved in climatescience. We note that the IFRS Foundation has acknowledged such points inits CP feedback statement and through the establishment of groups such asthe multi-stakeholder expert consultative committee.b.ED section 47 may more appropriately refer to “IFRS sustainability standards"instead of “Standards”.c.ED section 54 proposes that publication of an ED or IFRS sustainabilitystandard shall require approval by a simple majority of the ISSB. The IASBhowever requires approval by at least 60% of the members for such decisions.It is unclear why the ISSB should have a lower threshold for such major actions,particularly given that the ISSB is purportedly to stand at par with the IASB andthe ED’s proposals are designed to reflect the structure of the IASB wherepossible. We suggest the approval requirements be made congruent tosupport full and fair consultation unless the IFRS Foundation has rationale todiverge.d.ED section 54 allows for the initial proposed work plan for the ISSB to bepublished for comment with the approval of the Chair and Vice-Chair of theISSB. The ISSB’s initial work plan is likely to be of importance for setting thescope and tone of the board’s work in the near future. We suggest that thistemporary exception to standard due process be considered carefully so as toensure adequate transparency and full and fair consultation.Proposal 2 – Create the International Sustainability Standards Board under theFoundation’s governance structure to set IFRS sustainability standardsQuestion 2 – Potential naming of the new board and its associated standards1 The three reporting regimes as per the ‘Prototype climate disclosure standard’ noted in the EDare (1) monetary amounts recognised in the financial statements, (2) sustainability matters thataffect enterprise value, and (3) all sustainability matters that reflect significant impacts onpeople, the environment and the economy.Page 4 of 4
6.We think that the proposal to name the new board as “the InternationalSustainability Standards Board (ISSB)” appropriately reflects the function of thenew board. However, as noted in our response to the CP, some of our stakeholdershave suggested that the term “sustainability” should be defined. Additionally, giventhat the Trustees’ strategic direction is towards enterprise-value reporting relevantto investors, we suggest that the IFRS Foundation take care to be clear in itscommunications and labelling so as to avoid engendering misperceptions andconfusion amongst certain stakeholders who view sustainability matters morebroadly.
7.We note that the ED proposes to retain the IFRS Foundation’s current name, andhave two boards setting IFRS standards – “IFRS sustainability standards” by theISSB, and “IFRS accounting standards” by the IASB. We consider that thesenaming conventions describe the relevant functions of the boards and also note theIFRS Foundation’s branding considerations. However, we suggest that the IFRSFoundation should consider:
a.Will existing IFRS Standards (proposed to become “IFRS accountingstandards”) need to be renamed to avoid confusion with IFRS sustainabilitystandards? E.g. will IFRS 9 be renamed IFRS Accounting Standard 9?b.What acronyms or abbreviations does the IFRS Foundation expect practicewill use? Stakeholders are familiar with using the terms “IFRS” and “IFRSs” todescribe international accounting standards – will such practice be expectedto change under the proposed branding? Will stakeholders find it awkward touse the full IFRS acronym along with the posterior qualifiers and hence resortto alternative abbreviations?Proposal 3 – Consequential amendment to the Foundation’s governanceQuestion 3 – Proposed consequential amendment to sections 60 and 61 of theConstitution
8.We agree with the proposed consequential amendment to stipulate that theExecutive Director of the IFRS Foundation should be appointed by the Trusteesafter consultation with the chairs of the IASB and ISSB. This is a reasonableamendment to clarify reporting lines and establish the ISSB’s position within thegovernance structure.
9.We note that paragraph 61 of the Constitution has been amended to state that theChairs of the IASB and ISSB are “responsible for establishing the senior technicalteam”. As drafted, it is unclear whether this means that the Chairs of each boardhave equal authority for staffing decisions over both boards’ technical team (e.g.the Chair of the IASB would have equal authority for ISSB staffing decisions andvice-versa) or whether the Chairs will be responsible for staffing their board’srespective team.Question 4 – Any other matters
10.As noted in our response to the CP, we think that there should be due process inplace to enable each board to leverage off the other’s expertise, and considerationshould be given to scope and how overlapping issues will be resolved. At presentis it not fully clear how this will be accomplished, or what interim measures will bein place (if any) in advance of a sustainability interpretations committee or otherformal solution.~ End ~
IFRS Foundation Exposure Draft Proposed Targeted Amendments to the IFRS Foundation Constitution to Accommodate an International Sustainability Standards Board to Set IFRS Sustainability Standards
下载原件Page 1 of 4Our Ref.: C/FRSCSent electronically through the IFRS Foundation Website (www.ifrs.org)
27 July 2021Mr Erkki LiikanenIFRS FoundationColumbus Building7 Westferry CircusCanary WharfLondon E14 4HDUnited KingdomDear Mr. Liikanen,IFRS Foundation Exposure DraftProposed Targeted Amendments to the IFRS Foundation Constitution toAccommodate an International Sustainability Standards Board to Set IFRSSustainability StandardsThe Hong Kong Institute of Certified Public Accountants (HKICPA) is the only bodyauthorised by law to set and promulgate standards relating to financial reporting, auditingand ethics for professional accountants, in Hong Kong. We are grateful for theopportunity to provide you with our views on this IFRS Foundation Exposure Draft (ED).The HKICPA has responded to the Consultation Paper on Sustainability Reporting (CP).In that response, we noted there is an urgent need for a global set of sustainabilityreporting standards, and that the development of a sustainability standards board underthe structure of the IFRS Foundation is an appropriate approach.As such, we broadly support the IFRS Foundation’s proposed governance structure toprovide adequate oversight of a new sustainability standards board, and consider thatthe amendments are proportionate to the Trustees’ strategic direction. We remain of theview that it is important that the IFRS Foundation advance quickly on this initiative giventhe international demand.Our detailed comments are provided in the Appendix.If you have any questions regarding the matters raised in this letter, please contact me,Cecilia Kwei, Director (ceciliakwei@hkicpa.org.hk) or Tiernan Ketchum, Deputy Director(tiernanketchum@hkicpa.org.hk) of the Standard Setting Department.Sincerely,Chris JoyExecutive Director, Standards and RegulationPage 2 of 4Work undertaken by HKICPA in forming its viewsThe Hong Kong Institute of Certified Public Accountants:
(i)
issued an Invitation to Comment on the ED on 3 May 2021 to its members andother stakeholders;
(ii)
sought input from its Sustainability Committee, which is comprised of a diverseselection of senior-level sustainability experts; and(iii)
developed its views through its Financial Reporting Standards Committee. TheCommittee comprises academics, preparer representatives from various industrysectors, regulators, as well as technical and industry experts from small, mediumand large accounting firms.This submission outlines the HKICPA's views and summarises our stakeholders'comments on the ED. You may access our stakeholder responses here:
https://www.hkicpa.org.hk/en/Standards-and-regulation/Standards/Open-for-comment-documents/fred/fin-report-archives/2021arDetailed comments on the EDProposal 1 – Expand the Foundation’s remit to create a new board that will setIFRS sustainability standardsQuestion 1 – Do the amendments proportionately reflect the Trustees’ strategicdirection?
1.In our response to the CP, we noted that the Institute and the majority of itsstakeholders considered that establishing a new sustainability standards boardwithin the structure of the IFRS Foundation would be an appropriate way forward.We continue to think that the IFRS Foundation offers a robust governance structurewith requisite processes, experience and relationships. We furthermorerecommended that the IFRS Foundation leverage on the expertise of existinginitiatives, and appreciate that this has been captured in the Trustees’ strategy.Question 1(a) – Amendments to the objectives of the Foundation (section 2b of theConstitution)
2.We consider that the proposed objective of the International SustainabilityStandards Board (ISSB) is broadly proportionate to the Trustee’s strategic directionas laid out in the ED. We appreciate that the proposed objective broadly aligns tothat of the IASB, and according to the ED is drafted to provide the ISSB with thebroadest possible objective within the Trustees’ strategic scope. As noted in ourresponse to the CP, we generally consider that a broader definition of materialityfocusing on enterprise value creation should be the goal for the ISSB, as has beenproposed by the Trustees.
3.We have two drafting comments on the proposed objective:
a.The ISSB’s objective focuses on investors and other participants of capitalmarkets. This aligns to the Trustees’ strategic focus on investors andenterprise value. The ISSB’s objective lacks reference to “other users” ofinformation as is in the IASB’s objective. It is unclear whether this implies anyrestriction in scope.b.TheISSB’sobjectiveincludes“connect[ing]withmulti-stakeholdersustainability reporting”. This presumably is to support the Trustees’ strategicbuilding blocks approach and the strategy to build on existing initiatives. It maybe helpful for the Trustees’ to provide a definition of “sustainability” and “multi-stakeholder sustainability reporting”.
4.We have also noted feedback from certain stakeholders that the existence ofAppendixPage 3 of 4dynamic materiality (sustainability matters can move between three reportingregimes noted on page 26 of the CP feedback statement1) means that challengescan arise for entities if substantially different standards are required for eachreporting regime. As such, the interdependency between enterprise valuesustainability reporting and broader multi-stakeholder sustainability reportingshould be considered carefully. In particular, interoperability – the ability for entitiesto use the same information for enterprise value and multi-stakeholder sustainabilityreporting – should be promoted where possible. We appreciate that the Trustees’have created working groups on technical readiness and the multilateral workinggroup in this regard.Question 1(b) – Amendments to reflect the structure and function of the new board(sections 43-56 of the Constitution)
5.We generally consider that the proposed amendments, placing the ISSB within thethree-tier structure of the IFRS Foundation, provide adequate oversight of thestandard-setting activities of a new board. We have the following comments:
a.ED section 46 addresses stakeholder activities and references maintainingliaison with stakeholders with an interest in sustainability standard-setting. Thisaligns with the IASB’s functions and helps to support the objective ofleveraging off existing initiatives. We would however note that the concept ofsustainability includes a wide range of topics, and hence it will be important forthe IFRS Foundation to interpret such stakeholders broadly. For example, withregard to climate-related risks the ISSB should consider the need to establishexplicit engagement with international organizations involved in climatescience. We note that the IFRS Foundation has acknowledged such points inits CP feedback statement and through the establishment of groups such asthe multi-stakeholder expert consultative committee.b.ED section 47 may more appropriately refer to “IFRS sustainability standards"instead of “Standards”.c.ED section 54 proposes that publication of an ED or IFRS sustainabilitystandard shall require approval by a simple majority of the ISSB. The IASBhowever requires approval by at least 60% of the members for such decisions.It is unclear why the ISSB should have a lower threshold for such major actions,particularly given that the ISSB is purportedly to stand at par with the IASB andthe ED’s proposals are designed to reflect the structure of the IASB wherepossible. We suggest the approval requirements be made congruent tosupport full and fair consultation unless the IFRS Foundation has rationale todiverge.d.ED section 54 allows for the initial proposed work plan for the ISSB to bepublished for comment with the approval of the Chair and Vice-Chair of theISSB. The ISSB’s initial work plan is likely to be of importance for setting thescope and tone of the board’s work in the near future. We suggest that thistemporary exception to standard due process be considered carefully so as toensure adequate transparency and full and fair consultation.Proposal 2 – Create the International Sustainability Standards Board under theFoundation’s governance structure to set IFRS sustainability standardsQuestion 2 – Potential naming of the new board and its associated standards1 The three reporting regimes as per the ‘Prototype climate disclosure standard’ noted in the EDare (1) monetary amounts recognised in the financial statements, (2) sustainability matters thataffect enterprise value, and (3) all sustainability matters that reflect significant impacts onpeople, the environment and the economy.Page 4 of 4
6.We think that the proposal to name the new board as “the InternationalSustainability Standards Board (ISSB)” appropriately reflects the function of thenew board. However, as noted in our response to the CP, some of our stakeholdershave suggested that the term “sustainability” should be defined. Additionally, giventhat the Trustees’ strategic direction is towards enterprise-value reporting relevantto investors, we suggest that the IFRS Foundation take care to be clear in itscommunications and labelling so as to avoid engendering misperceptions andconfusion amongst certain stakeholders who view sustainability matters morebroadly.
7.We note that the ED proposes to retain the IFRS Foundation’s current name, andhave two boards setting IFRS standards – “IFRS sustainability standards” by theISSB, and “IFRS accounting standards” by the IASB. We consider that thesenaming conventions describe the relevant functions of the boards and also note theIFRS Foundation’s branding considerations. However, we suggest that the IFRSFoundation should consider:
a.Will existing IFRS Standards (proposed to become “IFRS accountingstandards”) need to be renamed to avoid confusion with IFRS sustainabilitystandards? E.g. will IFRS 9 be renamed IFRS Accounting Standard 9?b.What acronyms or abbreviations does the IFRS Foundation expect practicewill use? Stakeholders are familiar with using the terms “IFRS” and “IFRSs” todescribe international accounting standards – will such practice be expectedto change under the proposed branding? Will stakeholders find it awkward touse the full IFRS acronym along with the posterior qualifiers and hence resortto alternative abbreviations?Proposal 3 – Consequential amendment to the Foundation’s governanceQuestion 3 – Proposed consequential amendment to sections 60 and 61 of theConstitution
8.We agree with the proposed consequential amendment to stipulate that theExecutive Director of the IFRS Foundation should be appointed by the Trusteesafter consultation with the chairs of the IASB and ISSB. This is a reasonableamendment to clarify reporting lines and establish the ISSB’s position within thegovernance structure.
9.We note that paragraph 61 of the Constitution has been amended to state that theChairs of the IASB and ISSB are “responsible for establishing the senior technicalteam”. As drafted, it is unclear whether this means that the Chairs of each boardhave equal authority for staffing decisions over both boards’ technical team (e.g.the Chair of the IASB would have equal authority for ISSB staffing decisions andvice-versa) or whether the Chairs will be responsible for staffing their board’srespective team.Question 4 – Any other matters
10.As noted in our response to the CP, we think that there should be due process inplace to enable each board to leverage off the other’s expertise, and considerationshould be given to scope and how overlapping issues will be resolved. At presentis it not fully clear how this will be accomplished, or what interim measures will bein place (if any) in advance of a sustainability interpretations committee or otherformal solution.~ End ~