On 5 December 2024, the CSSF published a press release for the attention of issuers of securities subject to the law of 11 January 2008 on transparency requirements for issuers of securities, as amended (the "Transparency Law") and their auditors.
With this press release, the CSSF highlights several key points that will be specifically monitored in 2025, in the context of issuers preparing their financial statements for the financial year ending 31 December 2024 (“FY2024”) in accordance with IFRS and/or their sustainability report in accordance with the Commission Delegated Regulation (EU) 2023/2772 (“ESRS”).
European common enforcement priorities
As in previous years, ESMA together with the European national accounting enforcers, including the CSSF, have identified European common enforcement priorities (the "ECEPs") for the 2024 annual reports, which are detailed in ESMA's public statement of 24 October 2024.
Focus points of CSSF enforcement campaign
The CSSF noted the following with respect to its upcoming enforcement campaign:
IFRS financial statements: liquidity considerations
Amid economic uncertainties driven by inflation and fluctuating interest rates, the CSSF highlights:
- the need to comply with IAS 1 and IFRS 7 disclosure requirements for loans, especially in cases of defaults, breaches, or renegotiations. Recent IAS 1 amendments provide guidance for assessing the risk of liabilities becoming repayable within twelve months after the reporting period;
- the importance of accurate classification and disclosure in the statement of cash flows. The CSSF urges issuers to ensure transparency by clearly communicating the accounting policies and judgments used in classifying cash flow.
IFRS financial statements: accounting policies, judgements, and significant estimates
The CSSF reminds issuers of the following:
- Disclosures of material accounting policies, judgements, and estimation uncertainties should be tailored to the entity, aligned with the financial statements, and avoid generic restatements of IFRS requirements.
- Any material uncertainties that could raise significant doubt about the ability to continue as a going concern must be disclosed. Issuers should provide detailed, entity-specific information about the significant judgments involved.
- IFRS 12 Disclosure of Interests in other entities requires customised disclosures about significant judgments made when determining control, joint control, or significant influence.
- issuers must ensure compliance with IAS 1 (paragraphs 122 and 125) by providing appropriate disclosures when a provision is not recognised because the obligation cannot be reliably estimated.
Sustainability report: materiality considerations when reporting under ESRS
The CSSF reminds issuers of the following:
- issuers are encouraged to use EFRAG’s Implementation Guidance on Materiality Assessment to effectively apply the relevant ESRS requirements, particularly for double materiality assessments.
- all disclosure requirements and data points specified in ESRS 2 are mandatory, regardless of the materiality assessment.
Sustainability report: scope and structure of the sustainability report
The CSSF emphasises the following:
- the sustainability report must cover the same entity as the financial statements and include the full value chain. Issuers must outline efforts to gather value chain information during the three-year transitional relief period.
- ESRS 1 (Section 8 and Appendix D) offers guidelines for structuring sustainability reports, allowing incorporation by reference under certain conditions. Alternative formats must meet general presentation objectives.
- there must be clear connectivity, consistency, and transparency between the sustainability report and the financial statements, with direct references aligning with relevant sections.
ESEF Reporting: common mark-up errors
The CSSF wishes to make issuers aware of common errors seen in previous years that will be focused on in this year's enforcement campaign. These issues are:
- correctness of mark-ups;
- extension of taxonomy elements and anchoring;
- consistency and completeness of mark-ups;
- correctness of signs, scaling and accuracy;
- consistency of calculations.
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