Companies need to disclose if they are subject to a regulatory investigation if there is a possibility that it could lead to a fine or other financial settlement, the Irish accounting watchdog has warned.
The Irish Auditing and Accounting Supervisory Authority (Iaasa) clarified its view on such disclosures in its latest annual observations paper on issues companies and their auditors should be mindful of when preparing annual financial statements.
The authority said that a contingent liability stemming from a regulatory investigation should be disclosed in financial statements when the possibility of financial impact is “other than remote”.
Iaasa highlighted that the criteria for disclosing matters such as regulatory investigations came up as it engaged with “certain” unnamed companies during its routine examination this year of company reports.
READ MORE
The watchdog also said it had identified companies not disclosing or addressing reputational risks in the management reports section of their annual financial report.
“Iaasa notes that [companies] may publicly indicate that they disagree with regulatory outcomes. It is not always apparent to Iaasa as to why such information is not included in the management report as part of the fair review of the development of the issuer’s business,” it said.
“It is Iaasa’s expectation that information which is sufficiently significant to warrant inclusion in, for example, a press release, is likely also relevant for disclosure in the management report.”
The authority also highlighted new environmental, social and governance (ESG) reporting that is being phased in from this year which amounts to “arguably the most significant change to corporate reporting” since the so-called International Financial Reporting Standards (IFRS) were introduced two decades ago.
The new EU Corporate Sustainability Reporting Directive (CSRD), signed into Irish law in July, applies from this year to banks, insurers and companies whose shares or debt are listed on a stock exchange – together known as public interest entities – with more than 500 employees.
The sustainability reporting obligations are being phased in to include other Irish large companies from next year, and small-and medium-sized businesses (SMEs) with listed bonds or equities between 2026 and 2028.
[ Two of Ireland’s main professional accounting bodies complete mergerOpens in new window ]
Iaasa chief executive Kevin Prendergast wrote in August to the audit committee chairpersons of companies in the first wave subject to the reporting requirements.
“Iaasa notes that the preparation of a sustainability report in compliance with European Sustainability Reporting Standards is an extensive process and obtaining assurance on the sustainability report will also be an extensive and time-consuming exercise,” he said.
“As such, Iaasa expects that achieving CSRD compliance may significantly impact a company’s annual reporting timelines. Iaasa encourages audit committee chairs to carefully consider their reporting timelines and provide realistic expectations to investors in this regard.”
- Sign up for the Business Today newsletter and get the latest business news and commentary in your inbox every weekday morning
- Opt in to Business push alerts and have the best news, analysis and comment delivered directly to your phone
- Join The Irish Times on WhatsApp and stay up to date
- Our Inside Business podcast is published weekly – Find the latest episode here
