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2024 heralds the start of a somewhat bumpy journey in the implementation of the EU CSRD and ESRS, small entities in Cyprus find complying with the requirements of full IFRS something of a burden, while Vietnam plans IFRS adoption.


Why a united voice is needed in EU CSRD adoption

Time to finish what’s been started. That was the clear message issued recently by Commissioner Mairead McGuinness to more than 3,000 in-person and online participants at the European Financial Reporting Advisory Group’s (EFRAG) annual conference. She was referring, of course, to implementation of the EU Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS) – the main topic of conversation for the profession across Europe these days. 

As EU member states move ahead at quite differing speeds to transpose the Directive into national law, companies of all sizes are being urged to not lose time in grappling with the implications of the CSRD. Companies, on the other hand, are pushing the European Commission and EFRAG to urgently provide more guidance, support and tools to aid implementation. Some material is on its way. EFRAG is consulting on the first three implementation guidance (IG) documents on ESRS datapoints, value chain and materiality assessment. EFRAG’s FAQ platform (see the Technical round-up for more information), live since October, continues to collect and publish a growing number of often very detailed queries – although the responses are not being shared publicly. Interoperability maps relating to other standards are expected to follow rapidly. Work continues on ESRSs for small- and medium-sized entities (SMEs), with two versions focusing on listed and voluntary SMEs. Drafts for each are likely to be put out for exposure in early 2024.

Despite the many concerns over the complexity, usability and timing of the requirements, there is consensus that 2024 marks the start of a (bumpy) journey. Successful implementation will require all actors in the ecosystem to come together. Therein may lie the rub. The voices calling for greater focus on competitiveness continue to grow louder across Europe – and are heard in Brussels. Feedback to the Commission’s call for evidence during the autumn on rationalisation of reporting requirements may make a growing pushback on the EU’s greening efforts, including the CSRD, more conspicuous.

Susanna di Feliciantonio, Head of European Policy, ICAEW

Moving towards a financial reporting framework for small-sized entities in Cyprus

IFRS Accounting Standards (IFRSs) have been adopted by all companies in Cyprus since 1981. However, IFRSs are written by the International Accounting Standards Board (IASB) with consolidated and publicly accountable entities in mind. With their relatively limited resources, small-sized entities (SEs) find complying with the requirements of full IFRSs burdensome. 

The Institute of Certified Public Accountants of Cyprus (ICPAC), by applying the European Accounting Directive (2013/34/EU) (the Directive), is proposing that a financial reporting framework is developed for SEs. ICPAC believes the IASB’s IFRS for SMEs Accounting Standard is the most suitable solution to move away from the complexity of full IFRSs while maintaining high-quality financial statements. 

Ensuring the preparation of globally consistent and comparable financial statements that are useful for investment decisions is important to Cyprus. As an international business and financial centre of credible standing, Cyprus is sensitive to foreign investments, to anti-money laundering procedures and to transparency. Adopting an internationally recognised accounting standard while avoiding disproportionate administrative burdens on small-sized entities balances such concerns.

When the European Commission (EC) considered the adoption of the IFRS for SMEs Accounting Standard across the European Union, it concluded that it was not compatible with EU regulations. Nevertheless, the EC notes that Member States can permit or require adoption of the IFRS for SMEs Accounting Standard for all or some of their unlisted companies provided that the Directive is fully implemented, and the standard is modified to comply with any accounting requirement of the Directive that departs from the IFRS for SMEs Accounting Standard.

Accordingly, ICPAC has proceeded with obtaining the legal rights to adopt the IFRS for SMEs Accounting Standard and is in the process of finalising its development of Cyprus’ Financial Reporting Standard for Small-sized Entities. This includes modification of the IFRS for SMEs Accounting Standard to make it compatible with the Directive as well as work to fully transpose the Directive into national law. ICPAC plans to publish a consultation on the proposed changes to the IFRS for SMEs Accounting Standard with questions for constituents to respond to.

While ICPAC is not a standard-setter itself, it has initiated this project through its capacity as the sole accounting member body in Cyprus, to support the government accomplish this development. 

Eleni Ashioti, Head of Technical and Professional Matters, Institute of Certified Public Accountants of Cyprus

Southeast Asia

Roadmap and plan for IFRS adoption in Vietnam

Vietnam, a country with a population of nearly 100 million people, has an open economy with turnover from importing and exporting in 2022 reaching US$732.5bn – equal to 180% of the country’s gross domestic product. As part of a plan to develop a financial and accounting legal framework in the country, the Vietnamese government is pursuing the adoption of IFRS Accounting Standards (IFRS). In addition to the legal framework, the plan aims to create effective and efficient corporate governance tools for management and supervision of regulators in implementing socio-economic policies.

The Vietnamese government believes that the adoption of IFRS will improve the transparency of financial information and corporate accountability, thereby helping protect the business environment and the legitimate interests of investors. It is believed that adopting IFRS will facilitate the integration of the Vietnamese economy into the Southeast Asia region and the rest of the world.

A scheme under which IFRS would be applied was issued by the Minister of Finance in 2020, and included the following key points:

  • Scope: entities covered by the scheme are those with sufficient capacity and resources to apply IFRS and with a need to apply IFRS. Under the scheme, public interest entities are strongly encouraged to apply IFRSs. Medium, small and micro enterprises however, are not regulated by the scheme. 
  • Roadmap: IFRS implementation will be in two phases. Phase 1, between 2022 and 2025, will see voluntary application. Domestic businesses can opt to apply IFRS instead of Vietnamese Accounting Standards to consolidated financial statements. Entities that are 100% foreign-owned can voluntarily apply IFRS to their separate financial statements.

Around 2025, after assessing phase 1 and based on the needs and readiness of enterprises and actual circumstances at the time, the Ministry of Finance will announce plans and timelines for the mandatory adoption of IFRS for categories of entities.

  • Requirements for entities applying IFRSs: entities applying IFRS must apply the standards consistently throughout their fiscal year. They must also disclose in detail, within the financial statements, any discrepancies between accounting profit and taxable profit.

With the transition to adopting IFRS starting in 2022, 2023 is the first year that entities will publish financial statements prepared in accordance with IFRS. While it was expected that only a small number of entities would voluntarily apply IFRS, data obtained by the Ministry of Finance indicates there has been many more than expected using IFRS to prepare financial statements. This has particularly been the case when there is a specific reason in mind, such as wishing to list and raise capital on international markets.

Trinh Duc Vinh, Deputy General Director, Accounting and Auditing Supervisory Department, Vietnamese Ministry of Finance

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