The European Securities and Markets Authority (ESMA) has released its annual Public Statement outlining the European Common Enforcement Priorities (ECEP) for the 2024 annual financial reports of issuers trading on European Economic Area (EEA) regulated markets. ESMA, along with national enforcers in the EEA, will focus on these priorities when reviewing the application of relevant reporting requirements. ESMA through these priorities aims to promote a consistent application of financial reporting and the newly effective sustainability reporting requirements. This year, as companies prepare their first set of sustainability reports under the newly effective European Sustainability Reporting Standards (ESRS), the focus is shifting. A number of financial reporting areas aimed at driving clarity on presentation and disclosures remain on the watch list; however, sustainability reporting is the main focus. ESMA also highlights the need for consistency in the annual report and the importance of similar governance over both sustainability reporting and financial reporting. This edition of Accounting and Auditing Update (AAU) summarises important considerations highlighted by ESMA for financial reporting for management of the companies, audit committees and auditors.
Ind AS 16, Property, Plant and Equipment, provides guidance on the accounting of Property, Plant and Equipment (PPE). Generally, for many companies, PPE is a significant item on the balance sheet. Spare parts are essential components of the PPE that ensure a smooth functioning of various equipment and machinery across industries. The accounting treatment of spare parts is a critical aspect of financial reporting that requires careful consideration and adherence to guidance under Ind AS requirements. The accounting of spare parts had been a subject matter of deliberation through various Expert Advisory Committees opinions (EACs) and under Ind AS Transition Facilitation Group (ITFG) bulletins issued by the Institute of Chartered Accountants of India (ICAI) in past. However, to reiterate the guidance related to accounting for spare parts, the ICAI has issued an EAC opinion recently on this topic. The publication carries an article on this topic to discuss the accounting of spares that meet the definition of PPE under 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 aaupdate@kpmg.com.
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