In January 2023, the European Union (EU) adopted the Corporate Sustainability Reporting Directive (CSRD), which requires companies operating in EU or activities in the EU to provide information regarding the impacts on sustainability matters and how sustainability matters affect a company’s development, performance and position. This information would form part of the management’s report. In this regard, the European Financial Reporting Advisory Group (EFRAG) developed European Sustainability Reporting Standards (ESRS). The final text of first set of 12 ESRSs was published on 31 July 2023. It covers general principles for sustainability reporting (ESRS 1), overarching disclosure requirements (ESRS 2) and specific disclosure requirements under 10 topic-specific ESRS which lays down the disclosure requirements on environmental, social and governance topics. The ESRS would be applicable in a phased manner from financial year starting on or after 1 January 2024. This edition of the Accounting and Auditing Update (AAU) contains an article on this topic which aims to provide a brief overview of the key elements of the standard that companies should consider with respect to the implementation of the new sustainability reporting standards.

The publication also carries an article on determination of functional currency as per Ind AS 21, The Effects of Changes in Foreign Exchange Rates. As per Ind AS 21, functional currency is the currency of the primary economic environment in which an entity operates. Therefore, entities are required to record all transactions undertaken by them i.e. all income and expenses, and measure their assets, liabilities and equity in the functional currency. Thereafter, entities should present the financial statements in a currency, which may or may not be the functional currency (referred to as the presentation currency). Thus, currencies other than the functional currency could be considered as ‘foreign currencies’. Therefore, it becomes important to determine the functional currency. The determination of functional currency requires assessment of certain factors and indicators, as prescribed in Ind AS 21. The article on this topic aims to highlight the key principles to be considered when determining the functional currency of a first-time adopter of Ind AS.

As is the case each month, we have also included a regular round-up of some recent regulatory updates in India and internationally.

We would be delighted to receive feedback/suggestions from you on the topics we should cover in the forthcoming editions of the AAU.

For more information on this update, please write to