Mha Plc · LSE:MHA
Mha — Investor Presentation (September 2023)
126 slides from Mha's investor presentation, September 2023
Slide 1: FD Update Course September 2023
Update Course ~ September 2023 An independent member of Now, for tomorrow G mha bakertilly INTERNATIONAL
Slide 2: Disclaimer & Copyright
Disclaimer & Copyright MHA is the trading name of MHCA Limited, a Company registered in England with registration number 07261811 (hereafter “MHA”). MHA is a network of independent accounting firms in the UK and is a member of Baker Tilly International (hereafter “BTI”). Each member firm of MHA and
Slide 3: Housekeeping: Thank you for joining us
HOUSEKEEPING Thank you for joining us Please keep your microphone muted & camera off. During the presentation you can ask questions using the Q&A. We will answer some as we go along, but will leave most to the live Q&A at the end with all of our presenters – so don’t go away! You will find other use
Slide 4: Feedback & CPD Certificates
HOUSEKEEPING Feedback & CPD Certificates We will send you a link to the recording from today’s webinar in the next couple of weeks, along with a short feedback survey, which we would be very grateful if you could complete. We appreciate all feedback, which helps us to plan future events to ensure th
Slide 5: Two polls will be launched in a moment
Two polls will be launched in a moment What do you feel? Want to establish a barometer Help us to tailor future courses and advice Statistically significant – influence policy? 4
Slide 6: Biggest challenge for businesses over next 12 months
The biggest challenge for businesses over the next 12 months Inflation Economic slowdown Wage increases Recruitment / skills shortages Energy costs Supply chain disruption cost-of-living impact on clients Interest rates Regulatory burden Climate, environmental, or social Global threats Technology 0%
Slide 7: Highest priorities for businesses over next 12 months
Highest priorities for businesses over the next 12 months Reducing costs / finding efficiencies Retention of staff / recruitment Increasing prices / margins Acquisition / organic growth Raising finance Product or service diversification Investment & focus on ESG Investing in technology Investing in
Slide 8: Final Session
Final Session Some interesting questions received already Especially one on the new CPD rules – but see my introduction 7
Slide 9: Presenters
Bob Trunchion Beverley Scott Carlison Morris Chairperson Tax Specialist Audit & Assurance Specialist Jonathan Main Mark Lumsdon-Taylor VAT Specialist ESG Specialist 8
Slide 10: Agenda
8.30 – 8.50am Introduction Bob Trunchion 8.50 – 9.35am VAT Update Jonathan Main 9.35 – 10.20am Tax Update Beverley Scott 10.20 – 10.35am Break 10.35 – 11.25am Audit, Accounts and Financial Standards Carlison Morris 11.25 – 12.00pm ESG Audit Considerations Mark Lumsdon-Taylor 12.00 – 12.30pm Q&A Full
Slide 11: Where are we today
Where are we today and why this Course Content?
Slide 12: The economy and current uncertainties
• The economy? • Inflation • Interest rates • International situation • Labour restrictions and costs • Forthcoming election? • Uncertainty • Cashflow • Increased regulation? • Importance of communication with stakeholders 11
Slide 13: Keeping you up to date
• Keeping you up to date – prime objective • Introduction – reminder on CPD rules change for all ICAEW members 12
Slide 14: ICAEW CPD regulations: who is affected
If you are an ICAEW member, someone regulated by ICAEW for certain activities, or a reciprocal member, you are affected by the revised CPD Regulations if: • you undertake accountancy or finance work, or reserved or non-reserved legal services, or • you are a company director, trustee, or hold a role
Slide 15: Accountancy and finance work scope
Any work that you do that relates to the profession of accountancy is likely to be considered accountancy and finance work. The scope of such activity is wide and would include work undertaken in practice and outside of practice, such as working in the finance department or the management of a busin
Slide 16: Statutory directors and CPD regulations
If you are an executive or non-executive statutory director of a company, you are within the scope of the CPD Regulations….. If you hold a similar role for another type of entity, you should consider whether that role has an equivalent level of legal or financial responsibility to that of a company
Slide 17: CPD categories and minimum hours
CPD CATEGORY MINIMUM NUMBER MINIMUM NUMBER OF OF HOURS VERIFIABLE HOURS Practice Category 1 40 30 Category 2 30 20 Category 3 20 10 Working outside practice Category 1 40 15 Category 2 30 10 Category 3 20 5 Executives/trustees of ICAEW's CPD course for charity trustees (coming soon) charities workin
Slide 18: What is verifiable CPD?
What is verifiable CPD? | ICAEW CPD ACTIVITY VERIFIABLE EXAMPLE EVIDENCE TYPE Attendance on Yes • Certificate of attendance. external courses • Booking confirmation from course supplier. Attendance on Yes – if your organisation • Attendance record. internal courses provides evidence of your • Certif
Slide 19: VAT
VAT Jonathan Main VAT and Indirect Taxes Partner T: 07760 166 802 E: jonathan.main@mooreandsmalley.co.uk
Slide 20: VAT topics covered
“VAT and indirect tax developments that will affect businesses with international operations or aspirations, and potential developments on the horizon, post the next election.” With that in mind, I have chosen to cover the following topics: • EU expansion and the digital economy • The Labour Party a
Slide 21: What is on the horizon?
What is on the horizon? • An extension of the one stop shop with a move towards a single VAT registration • Extending the liability of marketplaces to include the supply of goods cross border and wholly within the EU • VAT changes for the “platform economy” 20
Slide 22: What is a platform?
What is a platform? • It is the same concept as a marketplace for goods (Amazon, eBay etc) • Just for services • Examples would include: • Uber • Airbnb • Expedia • Vrbo • Booking.com • Sykes cottages • Hoseasons • There must be at least three parties, buyer, seller, and platform facilitating the tr
Slide 23: What is going to happen and when?
What is going to happen and when? • The platform will be liable for VAT if the underlying supplier is not registered for VAT • If the supplier is VAT registered, the platform must still report the transactions to the tax authorities • The place of supply is the place of consumption • The supplies co
Slide 24: What could this mean for my business?
What could this mean for my business? • If you operate a platform, this will be a complete change to your VAT responsibilities across the EU • Your business will be liable for third party VAT, controlling the payment flow will be critical • If the third-party supplier is registered for VAT in the ri
Slide 25: Labour mission statements
Labour published five mission statements earlier in 2023: • Breaking down the barriers to opportunity • Build an NHS fit for the future • Secure the highest sustained growth in the G7 • Make Britain a clean energy superpower • Make Britain’s streets safe Perhaps not surprising that tax raising measu
Slide 26: VAT on private school fees
• Private school fees are currently exempt from VAT • No VAT is payable, and no VAT can be reclaimed by the school on the provision of education • Labour intends to impose 20% VAT on private school fees • The Institute for Fiscal Studies (IFS) estimates that this change may raise £1.7bn per year • T
Slide 27: Cab fares and VAT
Cab fares and VAT • This is not a return to commentary on the platform economy • A long and winding road with an uncertain destination • Uber continues to disrupt the private hire market in the UK • The VAT journey began with Uber v Aslam and a Supreme Court judgment in 2021 confirming worker status
Slide 28: What does this have to do with VAT?
What does this have to do with VAT? With the possible exception of account work, a PHO will almost always treat itself as an agent acting on behalf of the driver for private journeys • The PHO will charge a fee to the driver for the introduction of business • The self-employed driver will accept the
Slide 29: Private hire agent versus principal
We know two things so far: • If the PHO acts as agent, it is not liable for VAT on the cab fare. • Following the decisions in the TFL and Sefton MBC cases, the PHO cannot be an agent in London, most of the rest of England, and Wales. There is an uncomfortable tension between those statements • If a
Slide 30: What may the future hold?
What may the future hold? • The imposition of 20% VAT on private hire? • Bear in mind that the imposition of VAT would disproportionately affect less affluent members of society • Mobility issues and lack of access to own vehicle are key reasons for using private hire transport • A reduced or zero-r
Slide 31: Recovery of VAT on professional fees
Why does this matter? The Upper Tribunal decision undermines HMRC’s position that input tax cannot be recovered on professional fees which relate to VAT exempt fund-raising activities The facts • HLT incurred VAT on professional fees relating to the sale of shares in a subsidiary • The funds would b
Slide 32: What could this mean for you?
What could this mean for you? • You are entitled to recover VAT incurred on costs for up to four years • If you believe that you have grounds to revisit blocked VAT based on this decision, now may be the time to lodge a claim with HMRC • The decision may be appealed by HMRC but lodging a claim will
Slide 33: VAT conclusion
“VAT and indirect tax developments that will affect businesses with international operations or aspirations, and potential developments on the horizon, post the next election.” In conclusion, we have covered three topics, which collectively may increase the VAT burden across the education, travel an
Slide 34: Tax
Tax Beverley Scott Tax Specialist T: 0121 2371 806 E: Beverley.scott@mha.co.uk
Slide 35: Tax topics covered
• CIR – what does high interest rates mean for your CIR calculation • Capital allowances – where are we now • Transfer pricing – have you got it covered? • R&D recap of actions 34
Slide 36: Corporate Interest Restriction
Corporate Interest Restriction
Slide 37: Corporate Interest Restriction introduction
Introduced with effect from 1 April 2017 as a result of BEPS Action 4 How much of an impact has it really had? Whilst interest rates low, minimal? Case law? Administrative burden Sharp rise in Interest rates in the last 12 months – will it now be relevant to you? 36
Slide 38: CIR calculation mechanics
Losses / CT UK > £2m insufficient entities ANTIE profits liability Fixed rate ratio – 30% of Tax EBITDA Group ratio – Only useful if it is higher than 30% (by election) Interest disallowances – carried forward indefinitely. Do you have a deferred tax asset? Interest reactivations – can be used indef
Slide 39: Negative UK EBITDA and short periods
Short period Negative UK reduces £2m de EBITDA minimis Difficult to Loss of excess reactivate interest capacity disallowances on a takeover. Identifying the CIR group 38
Slide 40: CIR opportunities and complex rules
Opportunities • The CIR rules are • Can you refile returns? complex. Turn abbreviated into full return? • Do you know your CIR • Opportunities for effective Group? Has everyone tax planning where CIR • Can you make any consented to the group issues are identified early. elections now which may repor
Slide 41: CIR elections: revocable and irrevocable
Election Notes Revocable / Irrevocable Appointing a group company Stays in place for subsequent periods until no longer eligible or revoked (must be revoked within 12 months of the end of the AP) Abbreviated return election submit a simplified return where Can be revoked and replaced with full there
Slide 42: Capital allowances
Capital allowances
Slide 43: Capital allowance pools and rates
Pool Rate Type of asset Time period Main Rate Pool (“MRP”) 18% Plant & machinery Ongoing Special Rate Pool (“SRP”) 6% Integral features Ongoing Long life Assets 6% Useful life of more than 25 Ongoing years (when new) but limited application in reality Structural Buildings 3% (straight line basis) Co
Slide 44: Qualifying expenditure
Qualifying Expenditure The conditions for Full Expensing are the same as those for the Super Deduction. • The asset must be new and unused. • The asset must not be used for leasing or hiring out to other persons (exceptions for property lessors). • Cars do not qualify. Note however that new cars wit
Slide 45: Full expensing and 50% FYA assets
Full expensing (MRP) FYA at 50% (SRP) Machines such as computers, printers, lathes Integral features of a building: Office equipment such as desks and chairs Electrical and lighting systems Vehicles such as vans, lorries and tractors (not cars) Cold water systems Tools such as ladders and drills Spa
Slide 46: Full expensing versus Annual Investment Allowance
Feature of Scheme Full Expensing Annual Investment Allowance Limit Uncapped £1 million across groups and connected companies Type of expenditure Main rate only Main rate and special rate New/Second hand Must be new and unused May be new or second hand Businesses Companies only Companies and unincorp
Slide 47: Capital allowances considerations
• Do you know your AIA group? • Are you forecasting your capital spend? • Upfront analysis has never been more important! • How does this affect your cash tax / deferred tax position and your overall ETR – can you influence the date of expenditure? Particularly important now we have marginal bands a
Slide 48: Transfer pricing documentation
Transfer pricing documentation
Slide 49: Three-tiered transfer pricing documentation
• Another BEPS knock on! • One of the Actions from BEPS 1.0 introduced a standardised three-tiered approach to TP documentation. Master file • standardised information for all MNE group members Local file • material transactions of local taxpayer Country by Country report (“CbC”) • for largest MNE g
Slide 50: Transfer pricing key points
• Enquiries have resulted in excess of £2bn in 2020-2021 for the first time – highest ever yield! Key accounting periods beginning on or after 1 April 2023 points: large MNE groups - global revenues of €750m Preserve and keep TP master file documentation: local file prescribed and standardised forma
Slide 51: Documentation, penalties and enquiries
• Kept and provided to HMRC on request within 30 days Documentation • Prepared prior to CT return filing • failing to keep records, produce them, or for errors in line with current penalty regimes Penalties • beyond doubt that the presumption will be that failures are ‘careless’. • Can be requested
Slide 52: Transfer pricing action points
• Identify and quantify cross border transactions involving taxable UK persons • Establish what existing transfer pricing documentation exists • Refresh functional analysis prior to the summary audit trail requirement • Consider recent OECD TP guideline changes • Identify areas where data access is
Slide 53: Research and Development
Research and Development
Slide 54: R&D compliance and rate changes
Compliance changes: 8 August 2023 – you must submit an Additional Information Form (“AIF”) AP commencing on or after 1 April 2023 – Notification of intention to file within 6 months of the end of the AP. Earliest notifications will be required 30 September 2024. Rate changes: Pre-April 2023 From Apr
Slide 55: Tax modelling and governance
Tax modelling: This has never been more important Can you forecast the impact quickly to enable you to make effective decisions Governance: Is your CIR documentation up to date – Returns / Elections Is your governance documentation up to date – CCO / SAO (controls and processes) / Transfer Pricing f
Slide 56: Break
Break We will resume shortly
Slide 57: Audit, Accounts and Financial Standards
Audit, Accounts and Financial Standards Carlison Morris Audit & Assurance Specialist Partner T: 020 3890 3245 E: carlison.morris@mha.co.uk
Slide 58: Audit and accounting topics covered
FRED 82 - Overview The 5- step approach revisited Right of use assets and lease liabilities Accounting for Cryptographic Assets An update on UK audit reform 57
Slide 59: FRED Overview
FRED 82 Overview
Slide 60: FRED 82 consultation
• FRED 82 issued for consultation on 15 December 2022 • Proposed some significant changes to major elements of UK GAAP INVOICE Lease ………………………… Contract ………………………… ………………………… …………………… ………………………… …………………… ………………………… …………………… ………………………… …………………… …………… £XXX …………………... • Modifications to make the standa
Slide 61: FRS 102 changes
More clarity on the disclosures for small co. Alignment of Section 2 with IASB’s conceptual framework FRS 102 IFRS 13 requirements on Fair value new Section 2A Setting stage for removal of IAS 39 Option 60
Slide 62: IFRS 15 5-step approach revisited
IFRS 15s 5-step approach revisited
Slide 63: Revenue recognition by transaction nature
• Dependent on the nature of the transaction: Substantially all risks and rewards GOODS have been transferred Percentage completion Construction Contracts Percentage completion Shares Accruals basis DIVIDENDS SERVICES Right to receive payment established ROYALTIES 62
Slide 64: IFRS 15 five steps
Step 1 – Identify the contract with the customer Step 2 – Identify the separate performance obligations in the contract Step 3 – Determine the transaction price Step 4 – Allocate price to each performance obligation Step 5 – Recognise revenue when an entity satisfies a performance obligation 63
Slide 65: Contract, performance obligations, transaction price
CONTRACT Performance obligations £ Transaction price ££££££££ 64
Slide 66: Performance obligations matched with consideration
CONTRACT £ Performance obligations £ Are matched with consideration £ received for performance £ £ 65
Slide 67: IFRS 15 as a contracts recognition standard
• IFRS 15 is not a ‘Revenue Recognition Standard’ • IFRS 15 is a ‘Contracts Recognition Standard’ - Contract Assets - Contract liabilities - Contract Expenses • Lessons learned from implementation of IFRS 15 - Who is the customer and what is the performance obligation can be tricky - Changes to timi
Slide 68: Right of use assets and lease liabilities
Right of use assets and lease liabilities
Slide 69: FRS 102 lessee leasing changes
• FRS 102’s rules for leasing by lessees is also changing • Will converge with the IFRS 16 approach • Another long overdue change • Will add more complexity to the financial statements • A new class of ‘Right of Use’ asset 68
Slide 70: Current FRS lease approach
• FRS 102 Current approach Lessor Lessee Operating Finance Operating Finance Asset On B/S None Off B/S On B/S Depreciation YES No NO YES Receivable NO YES N/A N/A Liability N/A n/a NO YES Expense NO NO YES NO Impairment YES NO NO YES 69
Slide 71: IFRS / future FRS lease approach
• IFRS 16 / Future FRS 102 Approach Lessor Lessee Operating Finance All leases Asset On B/S None On B/S Depreciation YES NO YES Receivable NO YES N/A Liability N/A N/A YES Charge NO NO NO Impairment YES NO YES 70
Slide 72: Right of use assets
• The right to use any asset whether - Land and / or Buildings - Investment property - Plant and Machinery - Motor Vehicles - Intangible Assets • If you can access it via a rental / leasing contract then it can be a ROU. • Need to separate ROU Assets in the financial statements so the user understan
Slide 73: Lessee's right to use the underlying asset
Lessee’s right to use the underlying asset for the lease term • Lease liability • Lease payments/ incentives (received) • Initial direct costs • Decamp. costs 72
Slide 74: Lease payments and discounting
Fixed lease payments Discount using (Less any incentives receivable) Implicit rate Variable lease payments (based on index at OR commencement) = PV Additional residual value payments Incremental borrowing Exercise price of a purchase option rate Penalties for early termination 73
Slide 75: Lease accounting challenges
• Identification of lease contracts can be difficult especially for leases embedded within other service contracts • When is the lease term not the lease term • Sale and leaseback accounting can be challenging • Modification of leases can have surprising results - Significant remeasurement of existi
Slide 76: Accounting and regulation of Cryptographic Assets
Accounting and regulation of Cryptographic Assets
Slide 77: What is a crypto asset?
What is a Crypto asset? …any cryptographically secured digital representation of value or contractual rights that— a) can be transferred, stored or traded electronically, and b) that uses technology supporting the recording or storage of data (which may include distributed ledger technology).”
Slide 78: Types of crypto assets
• Types of Crypto assets - Exchange tokens - used as a means of exchange or for investment purposes but do not provide the types of rights or access provided by security tokens or utility tokens e.g. Bitcoin, Ether - Utility tokens – provide digital access to a specific service or application - Secu
Slide 79: Embedding Distributed Ledger Technology
Embedding Distributed Ledger Technology A distributed ledger is a network that records ownership through a shared registry Central Database Centralised Ledger Distributed Ledger 78
Slide 80: Crypto scandals and regulation
• FTX scandal • Relationships between Crypto exchanges increase the risk of contagion • SEC regulation and fines - Ongoing Investigation of Circle - Challenges to Coinbase backed by US dollars claim - Pursuing a number of charges against Binance for unregistered sales of securities • CTFC Investigat
Slide 81: Current accounting approach for crypto assets
• Current approach based on two papers issued by the IASB - IFRIC agenda decision March 2019 - Staff Paper issued in June 2019 • No new standard or interpretation on how crypto assets should be accounted for as current standards appropriately address this area • Do not meet the definition of cash or
Slide 82: Future of crypto asset accounting
• How well does this approach to the accounting reflect the substance of how these instruments are actually used? • How might this change in the future? - A Proposed comprehensive review of IAS 38 • Potentially a new class of intangible asset or a quasi-financial instrument carried at FVTPL. 81
Slide 83: Central bank digital currency
• One of a number of similar initiatives taking place worldwide • A response to the growing presence and power of cryptographic assets • How will it work - A Central Bank issued Digital currency (CBDC) - A unique type of crypto asset denominated in sterling and having stable value with sterling - BO
Slide 84: An update on Audit reform
An update on Audit reform
Slide 85: The case for Audit reform
The case for Audit reform EY and Wirecard: anatomy of a flawed audit Financial Times October 2021 audits aces NVestigacion fe) ly 2018
Slide 86: Audit reform reviews and recommendations
• Independent Review of the Financial Reporting Council – December 2018 - FRC to be replaced as soon as possible with a new regulator ARGA with clear statutory powers and objectives - Changes to the definition of PIE and stronger regulation of PIEs by new regulator - Improvements to the enforcement
Slide 87: Audit reform progress sidetracked
• Initial flurry of activity. • Since initial engagement governments agenda for change has been somewhat sidetracked - Brexit - Negotiations on relationship with Europe and the rest of the world - The Trump presidency - Three different prime ministers with at times very different visions • The world
Slide 88: Overdue reform of auditors set to be delayed
Overdue reform of auditors is set to be delayed again Failures such as that of Carillion have increased the focus on the auditing industry DANIEL SORABJI/AFP VIA GETTY IMAGES 87
Slide 89: Government set to omit audit reform
UK government set to omit audit reform from legislative plans Overhaul of accounting regulation and corporate governance is facing fresh delay FINANCIAL TIMES 88
Slide 90: Audit overhaul unlikely before next election
Audit overhaul unlikely before next election by Richard Hattersley The government is set to delay the long-awaited overhaul of the audit regime, raising concerns that the reform is not likely to be implemented before the next general election. 1st Sep 2023 3 comments 89
Slide 91: What happens next?
• Anyone's guess really! • Urgent need for leadership and direction on this issue • Uncertainty not good for business and certainly not good for the auditing profession. 90
Slide 92: Letter: No excuse to delay audit reform
Letter: The UK has no excuse to further delay audit reform From Anne Kiem, Chief Executive, Chartered Institute of Internal Auditors, London SW4, UK 5 September 2023 It would be deeply concerning if the much-needed overhaul of audit and corporate governance regulation were further delayed, following
Slide 93: ESG Audit considerations
ESG Audit considerations Mark Lumsdon-Taylor ESG Specialist T: 020 3965 2437 E: mark.Lumsdon-taylor@mha.co.uk
Slide 94: About Us
About Us A new perspective on sustainability and ESG Our guiding principle: ‘Purpose, with Profit’ Corporate sustainability doesn’t have to come at the cost of corporate profitability. Mark J Lumsdon-Taylor. MHA Sustainability Partner
Slide 95: ESOS and SECR
ESOS and SECR Energy Savings Opportunity Scheme Streamlined Energy and Carbon Reporting
Slide 96: ESOS and SECR scope and requirements
ESOS SECR Phase 3 effective 31 December 2022 Effective since 2019, often missed by expanding companies Scope Scope • >250 employees • All UK-incorporated companies listed on LSE • Turnover >£42.5 million main market, NYSE/NASDAQ or EEA exchange • Balance sheet >£36.5 million • Unquoted large compani
Slide 97: ESOS Best Practice
ESOS Identify ‘consumed’ and ‘unconsumed’ supplies: Best Practice • ‘Unconsumed’ supplies – supplies you do not consume but provide to a third party (e.g. as property landlord). To be deducted from total consumption, data must be verifiable • Consumed supplies – all other energy supplied to and cons
Slide 98: SECR Best Practice
SECR • Identify the appropriate factor for the intensity ratio: • FTEs – may be appropriate where emissions directly related to Best Practice use of equipment or usage hours (e.g. heavy construction) • Headcount – may be appropriate where emissions directly related to number of unique individuals wo
Slide 99: CSRD and ESRS
CSRD and ESRS * Corporate Sustainability Reporting Directive * European Sustainability Reporting Standards
Slide 100: ESRS and CSRD timeline
ESRS and CSRD 2025 (on 2024 data) • ‘Large’ entities meet two of following: Entities already subject to NFDD (‘large’ listed entities, banks and • Balance sheet total >€20 million insurance entities with • Net turnover >€40 million >500 employees) • Average employees in year >250 ‘Large’ non-EU list
Slide 101: Corporate Sustainability Reporting Directive
Corporate Sustainability Reporting Directive (CSRD) On 5 January 2023, the CSRD entered into force, replacing the NFRD. The CSRD brings approximately 50,000 companies into scope, including listed small and medium-sized enterprises (SMEs), which will be required to report on sustainability under the
Slide 102: CSRD and ESRS Best Practice
Start from ‘first principles’ CSRD and ESRS • Working backwards from the reporting standards is the easiest way to Best Practice waste time and money, and may not result in compliance! • Consider how your business identifies, measures and responds to ESG risks and opportunities • Focus on your value
Slide 103: TCFD and UK Climate-Related Financial Disclosure
TCFD and UK Climate-Related Financial Disclosure (CFD) requirements
Slide 104: TCFD framework and UK CFD scope
Governance How the Board / Executive Team steward climate risks and opportunities • Public Interest Entities, premium listed groups and financial services entities already in scope of TCFD under the FCA Listing Rules Strategy • Companies Act 2006 amended last year, expanding UK CFD scope to: The bus
Slide 105: TCFD review findings and recommendations
With the FCA promising to follow up on its findings, and the FRC (through its Corporate Reporting Review Team) already including issues with climate reporting in its letters, we believe that every company should look again at their TCFD reporting. Some companies are also starting to make significant
Slide 106: TCFD & UK CFD Best Practice
“The most useful disclosures clearly stated the company’s climate- TCFD & UK CFD Best Practice related metrics and targets, explained which metrics are used to measure and manage climate-related risks and opportunities, and explained which are used to assess progress against targets.” FRC Thematic R
Slide 107: Improvements identified in climate disclosures
Improvements Identified: • the definition and reporting of company-specific metrics and targets, beyond headline ‘net zero’ statements; • better linkage between companies’ climate-related metrics and targets and the risks and opportunities to which they relate; • the explanation of year-on-year move
Slide 108: ISAE 3000
ISAE 3000
Slide 109: Assurance for corporate reports
Assurance for external corporate reports, ensuring their financial and non-financial key-performance indicators reported are aligned with strategies (under defined parameters) Providing assurance on financial and non-financial metrics and processes (ISAE 3000). Assurance services related to corporat
Slide 110: ISSA 5000 sustainability assurance
ISSA 5000 will serve as a comprehensive, stand-alone standard suitable for limited and reasonable sustainability assurance engagements. It will apply to sustainability information reported across any sustainability topic and prepared under multiple frameworks. Key areas of focus in developing the st
Slide 111: IFRS S1 and S2
IFRS S1 and S2
Slide 112: IFRS S1 and S2 disclosure requirements
IFRS S1 introduces a comprehensive range of disclosure requirements designed to provide investors with a more nuanced understanding of a company’s short, medium, and long-term exposure to sustainability-related risks and opportunities. (Excludes the double materiality principle, which requires consi
Slide 113: Assurance engagements and ISQM 1
Important note after 15th December 2022 – assurance engagements: Note: For assurance engagements beginning on or after 15 December 2022, the assurance report needs to include a statement that the firm of which the practitioner is a member applies ISQM 1 (or other professional requirements, or requir
Slide 114: Auditing Climate Risk
Auditing Climate Risk
Slide 115: Understanding audit risk
Clarity in Understanding audit risk. Physical risks - These are risks associated with Financial sector – banks, insurance groups, asset disruption to business activities arising from climate owners, asset managers change. Physical risks are further categorised into acute risk and chronic risk. Non-f
Slide 116: Understanding audit risk: physical and transition risks
Clarity in Understanding audit risk. Physical risks Policy & Legal Risks These are risks associated with disruption to Government; regulation; carbon pricing & capping. business activities arising from climate change. Physical risks are further categorised into acute Technology Risk risk and chronic
Slide 117: Specific financial statement considerations
Specific financial statement considerations Going concern Valuation – financial instruments Are there any material uncertainties over the business’ Is the fair value affected by climate risk, e.g. interest rates, sector, operating environment, suppliers or customers, inflation risk, counterparty def
Slide 118: MHA Dynamic ESG Advisory
Advisory • MHA Dynamic ESG - a complete approach to embedding ESG from companies that are taking their first ESG steps through to the operation of a fully integrated ESG programme: • Full ESG & Net zero plan: “Create; MHA Dynamic ESG Advisory Evaluate; Implement” Create an Integrated External Engage
Slide 119: Appendices: Climate Risk
APPENDICES Reference: Climate Risk
Slide 120: Dealing with uncertainties
Dealing with uncertainties (1) There is considerable uncertainty over assumptions about how far global temperatures will rise and what impact Governance & Strategy various climate change scenarios would have Embed consideration of financial risks from climate change within governance on business ope
Slide 121: Measurement of non-financial assets
Measurement of non-financial assets (3) Climate-induced changes may indicate that an asset ceases to be available, becomes commercially obsolete or needs to be replaced sooner than previously expected. Such factors affect the useful life of an asset Governance & Strategy under IFRS. If an asset is m
Slide 122: Provisions, contingent liabilities and onerous contracts
Provisions, contingent liabilities and onerous contracts (5) The speed and scale of climate change, and also political and regulatory measures by governments in response, could affect the recognition, measurement and disclosure of provisions, contingent liabilities and onerous contracts in the follo
Slide 123: Incentive schemes and pension obligations
Incentive schemes (6) Companies may introduce management incentive schemes to promote the transition to a low- carbon economy. Such programmes may fall under the scope of either IAS 19 “Employee Benefits” or IFRS 2 “Share-based Payment”, depending on the nature of the benefit. Pension obligations (7
Slide 124: Disclosure of significant assumptions and estimates
Disclosure of significant assumptions and estimates (9) If the assumptions about the effects of Governance & Strategy climate change are associated with a Embed consideration of financial risks from significant risk, meaning that a possible climate change within governance change in the assumptions
Slide 125: Presenters
Bob Trunchion Beverley Scott Carlison Morris Chairperson Tax Specialist Audit & Assurance Specialist Jonathan Main Mark Lumsdon-Taylor VAT Specialist ESG Specialist 124
Slide 126: Our next FD Update course
Save the date! Our next FD Update course Thursday 8th February 2024 MHA trading as MHA is a member of MHA, an independent member of Baker Tilly International Ltd., the members of which are separate and independent legal entities. © 2024 MHA