As 2022 draws to a close, organisations will reflect on the challenging operating environment they have had to navigate and report. It includes the impact of geopolitical crisis, high inflation, rising interest rates, high commodity prices and an extremely uncertain business environment. While some of these conditions remain going into the new year, there are key reporting reminders organisations should take note of going into 2023.
Organisations should understand the emerging reporting themes and regulations that will impact their reporting in the new year. Specific accounting standards are mandatorily applicable by organisations from 1 January 2023, such as IFRS 17 — the new insurance standard and IPSAS 41 — the new public sector standard on financial instruments.
Organisations should plan their resources to enable them to provide quality reports and disclosures depending on the level of impact these new standards have on them from a financial reporting perspective.
Organisations should also continue to expect increased demand for environmental, social, and governance reporting in 2023, with a sharp focus on climate and social reporting.
Organisations should anticipate impact reporting through SMART — specific, measurable, achievable, realistic and timely — disclosures on financial and non-financial performance indicators.
Increased capacity-building activity on the various non-financial reporting frameworks will be a common theme in 2023. It will aid decision-making by organisations when selecting a non-financial reporting framework and compliance with local reporting regulations.
The impact of pillar two legislation in different jurisdictions on minimum tax could also affect tax reporting and disclosures in the new year.
Organisations operating in economies that have recently become hyperinflationary as of December 2022 would have to apply the hyperinflation accounting standard — IAS 29.
While the level of uncertainty in the operating environment remains extreme, organisations would have to pay close attention to the level of disclosures provided in their financial statements to assist users in comprehending the impact of the fast-changing environment on their business.
Measurement and disclosure concerns on the pervasive effects of inflation on aspects of financial reporting ranging from valuation to performance will be critical in the new year.
Disclosures on how organisations manage credit risk and liquidity risk associated with their financial assets and financial liabilities will be invaluable information for investors and stakeholders in general in the new year.
Lastly, organisations should ensure that reporting is approached from a ‘beyond compliance’ mindset in the new year to build trust with their stakeholders and increase transparency.
Akinyemi Awodumila is an Associate Director at PwC Kenya. An author who writes and speaks widely on corporate reporting topics.