29 October 2021

ESMA: European enforcers target COVID-19 and climate-related disclosures

This year’s priorities cover the impact of COVID-19 and climate-related matters,provide guidance on the measurement of expected credit losses and highlight disclosureobligations pursuant to Article 8 of the Taxonomy Regulation.

ESMA will collect data on how European listed entities have applied the recommendations in
the Statement and will communicate its findings in its report on the enforcement activities of
2022, to be published in spring 2023.
ESMA has issued its annual Public Statement on European Common Enforcement Priorities
(Statement). This year’s priorities cover the impact of COVID-19 and climate-related matters,
provide guidance on the measurement of expected credit losses and highlight disclosure
obligations pursuant to Article 8 of the Taxonomy Regulation.

The areas covered will be considered by national enforcers when monitoring and assessing
the 2021 annual financial reports of listed companies. The Statement contains priorities linked
to financial statements prepared in accordance with International Financial Reporting
Standards (IFRS), priorities relating to non-financial statements and other considerations
related to Alternative Performance Measures (APMs).

Anneli Tuominen, Interim Chair, said:
“This year’s ECEP Statement reflects the continued volatility and uncertainty in the context of
the COVID-19 pandemic and the need for transparency on its impacts, which is key to ensuring
the stability of EU financial markets.”
“The identified priorities also highlight how vital the inclusion of any material financial and non-
financial information on climate-related matters is, in light of the growing importance for
investors.”

Priorities related to IFRS financial statements

The 2021 key enforcement priorities for financial statements prepared in accordance with IFRS
are:
• 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.

Priorities related to non-financial statements

The recommendations concerning non-financial information refer to:
• impacts of COVID-19 on sustainability-related goals and non-financial key performance
indicators, as well as information on any structural changes; and
• climate-related policies and their outcomes.
In addition, issuers are reminded to make the necessary preparations to fulfil the disclosure
requirements foreseen by Article 8 of the Taxonomy Regulation, which will come into force as
of 1 January 2022.

Considerations related to APMs

Regarding APMs, the Statement highlights that issuers are expected to exercise caution when
adjusting, labelling and/or creating new APMs to depict the impacts of COVID-19.
Other aspects
The Statement underlines that starting from the financial year 2021 and pursuant to Article 4
of the Transparency Directive, all financial reports should be prepared in compliance with the
European Single Electronic Format. More information here.
Next steps
ESMA and national enforcers will monitor and supervise the application of the
recommendations for preparing IFRS financial statements and non-financial statements as
well as any other relevant provisions outlined in the Statement, with national enforcers
incorporating them into their reviews and taking corrective actions where appropriate.
ESMA will collect data on how European listed entities have applied the recommendations in
the Statement and will communicate its findings in its report on the enforcement activities of
2022, to be published in spring 2023.

ESMA

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