Society comments on the IASB’s Acquisitions Reporting proposals
This IR Society response expresses concern around the risks of requiring this non-GAAP reporting in the back half of the annual report, which would significantly increase the audit burden and would be especially difficult when the reporting timetable is tight.
The Investor Relations Society
Suite 717, 70 Gracechurch Street
London, EC3V 0HR
International Accounting Standards Board (IASB)
IFRS Foundation
Columbus Building
7 Westferry Circus
Canary Wharf
London
E14 4HD
By email: commentletters@ifrs.org
15th July 2024
Dear Emmanual Faber,
Re: Acquisitions Reporting - Exposure Draft ‘Business Combinations—Disclosures, Goodwill and Impairment’
Thank you for the opportunity to respond to the Exposure Draft ‘Business Combinations—Disclosures, Goodwill and Impairment’, which proposes amendments to IFRS 3 ‘Business Combinations ‘and IAS 36 ‘Impairment of Assets’. This response is made on behalf of the UK’s Investor Relations Society (‘the IR Society’).
The IR Society represents Members working for publicly listed companies and investor relations focused service providers, to assist them in the development of effective two-way communication with the markets. It has approaching 800 Members, drawn mainly from the UK, including the majority of the UK FTSE 100 and many of the FTSE 250 constituents and some from companies listed overseas.
The IR Society’s mission is to promote best practice in investor relations; to support the professional development of its Members; to represent their views to regulatory bodies, the investment community and Government; and to act as a forum for issuers and the investment community. As such, our response has been primarily constructed through the lens of a corporate issuer.
We set out below our general comments on the proposals, rather than answering the specific questions.
We appreciate that there is a strong investor appetite for more information around the subsequent performance of business acquisitions and thank you for seeking to balance the needs of multiple, and often conflicting, stakeholders. Having reviewed the 2024 ED, we note and thank you for the consideration taken and amendments made in response to the preparer comments made to the 2021 draft. Notwithstanding this, we would bring to your attention the following key concerns pertinent to Investor Relations Officers (IROs).
The gathering and presentation of forward looking and non-GAAP information is often a complex activity for businesses where multiple work streams need to be brought together. This is especially difficult when the reporting timetable is tight, such as when acquisitions happen close to the year end as they often do. In particular, we see significant risk associated with bringing this sort of reporting, especially when hastily gathered, into the back half of the annual report where investors expect and are accustomed to standardised information which is easily compared across filers.
While we appreciate the proposal to allow businesses to report on their own metrics, as opposed to specifically predetermined ones, we note that this reporting brings with it complexity and risk which is exacerbated by the above-described time constraints.
Furthermore, including these forward-looking disclosures in the back half of the annual report could also give rise to significant issues around verification. This would unquestioningly add to the audit burden and increase the risk of a qualified audit report, especially in circumstances where current UK listing rules do not require such disclosure for a smaller acquisition.
Additionally, we would recommend close consideration of the impact for acquisitive conglomerate companies. A situation should be avoided where so many acquisitions require being reported on that the volume of information becomes overwhelming to the users of the accounts and onerous for preparers.
We note that in the UK we are required to release RNS statements at the point of acquisition. In order to avoid confusion for the users of the accounts we feel it is important that metrics across the two reports (RNS and Annual Report) should be consistent and if they are to be different then the reasoning for such must be absolutely clear to users. While we appreciate that this is a UK specific point, we expect other Markets may have similar requirements and it would be useful for the standard to reflect on this fact and promote this sort of consistency of reporting.
Finally, we note that our IRO members work closely with respective finance functions, and as a consequence we are mindful of their concerns. We are therefore also supportive of the response from the 100 Group Stakeholder Communications and Reporting Committee.
We hope you find these comments useful. Please do not hesitate to make contact if you have any questions.
Yours sincerely,
Liz Cole
Head of Policy and Communications
Investor Relations Society
(Email: enquiries@irsociety.org.uk, Tel: + 44 (0) 20 3978 1980)
Ross Hawley
Chair of the Investor Relations Society’s Policy Committee
(Email: enquiries@irsociety.org.uk, Tel: + 44 (0) 20 3978 1980)
Published 15 July, 2024