ESMA announces enforcement priorities for 2021 financial statements

The common enforcement priorities related to 2021 IFRS financial statements include:

• careful assessment and transparency in accounting for longer-term impacts of the COVID-19 pandemic and the recovery phase;
• consistency between the information disclosed within the IFRS financial statements and the non-financial information concerning climate-related matters, consideration of climate risks, disclosure of any significant judgements and estimation of uncertainty regarding climate risks while clearly assessing materiality; and
• enhanced transparency regarding the measurement of Expected Credit Loss (ECL), particularly in relation to management overlays, significant changes in credit risk, forward-looking information, changes in loss allowances, credit risk exposures and collateral, and the effect of climate-related risk on ECL measurement.

ESMA also reminds issuers that starting from the financial year 2021, all annual financial reports shall be prepared in compliance with the European Single Electronic Format, or ESEF (xHTML or inline XBRL).

ESMA and European national enforcers will monitor and supervise the application of the IFRS requirements outlined in the priorities, with national authorities incorporating them into their reviews and taking corrective actions where appropriate. ESMA will collect data on how European listed entities have applied the priorities and will publish its findings in a separate report.

Please click for the following documents on the ESMA website:

• Press release
• Public statement on enforcement priorities, providing more background on each of the focus areas