Dear Members and Friends of EFAA,
First of all I would like to wish you a Happy New Year!
In the current crisis, early warning, restructuring and insolvency rules are becoming even more relevant and the role SMPs play as trusted advisor to their SME clients grows ever greater, not only in connection with the topics just mentioned but also regarding sustainability and the relevance of non-financial information.
EFAA agrees with the importance of internationally recognised sustainability reporting standards. However, these standards must be designed from the bottom up, using the ‘think small first’ principle, such that they are simple and straightforward as well as scalable to suit larger entities. EFAA remains involved in ongoing discussions concerning the possible development of an EU NFR standard, particularly within EFRAG, which will play an essential role in this matter. We consider that a strong trickle-down effect is to be expected from NFR, especially in the supply chain. The involvement of SMPs and SMEs in such discussions is a key priority.
With your support, EFAA remains, as ever, unfailingly committed to making sure that the voice of SMPs is heard loud and clear in all relevant forums.
Yours sincerely,
Salvador Marin
EFAA President
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EFAA's President Activities
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Early Warning Europe Network, 10 and 15 December 2020
Salvador Marín, EFAA President, participated in two meetings on the “Early Warning Europe Network”. The project is extremely important for SMEs, who are SMPs’ main clients. Undoubtedly, SMPs have extensive knowledge of their clients’ needs and of the early warning mechanisms they need. EFAA for SMEs will be participating in the network.
EFRAG meeting with member organisations, 11 December 2020
President Marín stressed the importance of increasing the representation of SMPs and SMEs in EFRAG’s governance. He also highlighted that the "think small first" principle must always be taken into account as well as the trickle-down effect that EC regulations and projects have for SMEs and SMPs. He also highlighted the need to apply “smart regulation”. Marín stressed that the voice of SMPs and SMEs should be broadened, since these are the backbone of the economy in Europe.
Presentation of the Guide about security and strategic intelligence for SMEs, 14 December 2020
Salvador Marín contributed to the discussion in his role as co-author and as president of EFAA for SMEs. Marín stressed that SMEs are the backbone of the European economy and that they need to grow, gain size and continuously improve their professional skills. Salvador Marín highlighted that there is usually a positive correlation between the most competitive companies and those that use security tools and strategic intelligence. He also emphasised the role that SMPs and medium-sized professional companies can play to collaborate with SMEs on this.
EFRAG´s General Assembly , 15 December 2020
Salvador Marín represented EFAA for SMEs at the EFRAG General Assembly. He stressed the necessity of having organizations representing SMPs and SMEs contribute to the governance, not least in view of the key role they will play in the post-covid European economy.
XI Edition of the Audit meeting, 17 December 2020 - Spain
After having highlighted the important role that EFAA for SMEs plays, EFAA’s participation in decision-making processes and in European projects, such as Interest-EU, Salvador Marín spoke about the "Recent Developments in Non-Financial Reporting (NFR)" and the need for proportionality for SMEs.
Held in Spain, the event gathered more than 600 auditors and accountants. The event was also attended by the Spanish regulator and other relevant national and European speakers.
For more information: Please contact Salvador Marín
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EFAA Responds to Public Consultation on EFRAG’s Future Governance
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In late 2020, EFRAG Board President, Jean-Paul Gauzès, issued a Consultation Document inviting all interested stakeholders to contribute input to his preliminary proposals regarding changes to the governance structure and financing of EFRAG, given that the latter was entrusted with the development of EU non-financial reporting standards. In EFAA’s response to the Consultation Document, a follow-up consultation to a preliminary one conducted in October 2020, EFAA urges EFRAG to have significant SME and SMP representation irrespective of the outcome of the NFRD review (due in the coming month or so) and a robust nomination process to help ensure the EFRAG Board, its technical boards and technical expert groups (TEGs) have high quality members.
For more information: Please contact secretariat@efaa.com
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Developments in Non-Financial Reporting: EFAA Responds to IFRS Consultation on Sustainability Reporting
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EFAA responded to the IFRS Foundation Consultation Paper on Sustainability Reporting. The EFAA response to the IFRS consultation is included under news here and under publications here. It also appears with all others submitted on the IFRS website here. EFAA’s response expresses strong support for the IFRS Foundation establishing a new sustainability standards board alongside the IASB. EFAA also impressed on the need for this new SSB to coordinate closely with EU developments and to have substantial representation of SMEs and SMPs in view of the trickle-down and supply chain effects as well as the desire to ensure the development of scalable standards that will facilitate and encourage voluntary use of the standards by SMEs.
Earlier in December 2020, IFAC issued its response, reiterating the view expressed in September 2020 in their publication The Way Forward, that the IFRS Foundation should establish a new sustainability standards board alongside the IASB, to focus on reporting requirements that address enterprise value creation, and to deliver at speed by leveraging the expertise and standards that already exists. Since publishing its response to the IFRS Foundation, IFAC has jointly published the report ’Reporting on Enterprise Value, Illustrated with a Prototype Climate-Related Financial Disclosure Standard’, to serve as a valuable starting point for this IFRS initiative.
The EFRAG Project Task Force on non-financial reporting standards (PTF-NFRS), on which EFAA is represented through Esther Ortiz, expects to complete its preparatory work for the elaboration of possible EU NFRS with the publication of its final report in late January. The PTF-NFRS is holding a series of joint online outreach events scheduled between 13 and 22 January 2021. These online events will be the occasion to gather stakeholders’ views from different countries on the tentative proposals of the PTF-NFRS. Register here and read more here.
We can expect considerable developments in the areas of NFR and sustainability reporting in 2021. This article provides a good summary of these developments, this one a critique of developments in sustainability reporting, and this one on NFR and sustainable finance.
For more information: Please contact Paul Thompson
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COVID-19: Guidance for SMPs and Related News and Insights
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To help SMPs and their SME clients come through the COVID-19 crisis stronger, smarter and sustainable EFAA has a specially curated list of free guidance here. This guidance will enable SMPs to better manage their practices and provide high quality services to their SME clients. This list was updated on 11 January 2021
According to a new study by ACCA, Space to Grow, there are a number of innovative new business support models available to small businesses, providing a one-stop shop of support and facilitating their growth and ability to scale-up amid Covid-19 recovery. Traditionally, government initiatives and high street advice outlets provided a business support infrastructure for SMEs but Space to Grow examines how new and emerging business support models are being used to allow more SMEs to achieve rapid growth as well as to support business recovery post Covid-19. The report stresses that accountants and SMPs have an important role to play in this space, above and beyond their more traditional role in compliance. Start-ups and growth businesses need sound financial management and data as they start and grow their businesses. Accountants and SMPs can become growth partners, growing alongside their clients, and should explore new opportunities to work more closely with the developers of accelerator and incubator programmes. As the report notes accountants provide clients with the solid financials and forecast needed to enter incubation and acceleration programmes and pitch to investors. ACCA say that policymakers focused on supporting growth-oriented businesses need to do more to consider the role of finance professionals developing the start-up and small business support ecosystems.
For more information: Please contact Paul Thompson
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Developments in International Standard Setting
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Assurance, Related Services and Quality Management
During its December 2020 meeting, the International Auditing and Assurance Standards Board (IAASB) held its first public discussions on the draft of a separate standard being developed for an audit of less complex entities and the official project proposal to complete and publish the draft standard for public consultation in 2021. The IAASB approved the project proposal and early draft. Following these decisions, the IAASB published a new communique detailing plans for the new standard, including current thinking on what the standard will look like, what entities it will apply to, and the development timeline. For additional information on the IAASB’s efforts to balance the needs of all its stakeholders by addressing complexity, understandability, scalability and proportionality in the International Standards on Auditing, please see its November 2020 communique. EFAA fully supports these efforts.
The IAASB has released its three quality management standards. The standards promote a robust, proactive, scalable and effective approach to quality management and mark a significant evolution of the existing quality control standards with the emphasis on quality ‘management’ rather than ‘control’, of engagements. EFAA continues to harbor some concerns over scalability, as initially expressed in our response to the exposure drafts in July 2019, but is pleased to see the IAASB’s intensive efforts to alleviate these concerns. The suite of standards become effective on 15 December 2022. Bases for Conclusions and factsheets to support the implementation of the new standards are available on the IAASB’s website. Additional support materials, some directed at SMPs, will be published in 2021.
The IAASB is looking for highly qualified volunteers to serve as Board members for an initial term of up to 3 years, commencing 1 January 2022. For more information please see the Call for Nominations for IAASB in 2022, also available in French and Spanish. The deadline for submitting applications is 15 February 2021.
Ethics
The International Ethics Standards Board for Accountants (IESBA) is also looking for highly qualified individuals to serve as Board members for an initial term of service of up to 3 years, commencing 1 January 2022. For more information and to learn how to submit an application before the 15 February 2021 deadline, please review the Call for Nominations for IESBA in 2022, also available in French and Spanish.
The IESBA has released a Report, Ethics and Trust – Breaking New Ground summarizing the Board’s accomplishments from 1 June 2016 to 31 July 2020 including an update on the IESBA’s current projects and initiatives and efforts to promote awareness, adoption, and implementation of the International Code of Ethics for Professional Accountants (including International Independence Standards).
On 16 December 2020 the Staff of the IESBA, the IAASB and the South African Independent Regulatory Board for Auditors (IRBA) jointly released the publication, Navigating the Heightened Risks of Fraud and Other Illicit Activities During the COVID-19 Pandemic, including Considerations for Auditing Financial Statements. The publication highlights the heightened risks of fraud arising from the disruptive and uncertain COVID-19 environment and the implications for professional accountants in business, including accountants in government, and professional accountants in public practice, including auditors. Concurrently, the Staff of the IESBA and Chartered Professional Accountants of Canada (CPA Canada) jointly released a Staff Alert, COVID-19 and Evolving Risks for Money Laundering, Terrorist Financing and Cybercrime. This document highlights the heightened risks of money laundering, terrorist financing and cybercrime in the COVID-19 environment and describes the implications for both professional accountants in business and public practice. Both documents can be found on the IESBA COVID-19 resource page.
Financial and Sustainability Reporting
The December 2020 IFRS for SMEs Update focuses on the feedback on the Request for Information on the second comprehensive review of the IFRS for SMEs Standard. EFAA responded to the consultation here. Paul Thompson, EFAA Director and Jose Maria Hinojal, member of EFAA’s accounting Expert Group (AEG) will participate in the public meeting of the SME Implementation Group (SMEIG) on 4-5 February 2021.
For more information: Please contact Paul Thompson
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Brexit Update: What the EU-UK Agreement Means for Europe’s SMPs
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On 30 December 2020 the EU-UK agreement was signed – read the official press release here and the full details in multiple languages here. The UK’s departure from the EU after 47 years of EU membership means the UK has lost all the rights and benefits it had as an EU Member State, is no longer a part of the EU’s Single Market and Customs Union and is no longer covered by the EU’s international agreements. However, the agreement is a significant deal and provides the basis for a close and constructive relationship going forward. The EU Observer outlines the key points of the 1,000-page long agreement here and EU Politico provide a summary here.
What then does this mean for Europe’s SMPs? The deal offers no more than the EU-Canada agreement in terms of Mutual Recognition of Professional Qualifications (MRPQs), which allow workers such as accountants, doctors, engineers, and architects to work in member states other than where they qualified. The deal simply establishes a process by which regulators and industry bodies can work with each other to establish MRPQs in the future. Market access will depend on how this provision is implemented by member states’ industry and professional bodies. Some argue accountancy has proved more protectionist than many professions. For professions like accountancy the ability to work in another country temporarily is important. Fortunately, the deal includes a list of specified occupations, including accountancy, that are allowed visa-free travel for 90 days.
For more information: Please contact Paul Thompson
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Member Use, Feedback and Contributions
Please share this newsletter with colleagues. Members are welcome to translate and reproduce extracts from this newsletter for their own communication purposes while acknowledging this newsletter as the source.
The next issue is slated for end of January 2021. We welcome feedback on how to improve this newsletter as well as contributions from our members, especially initiatives that other EFAA members might be keen to know about.
Please contact Sara Zambelli / Paul Thompson
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24 February (11:00-12:30 CET) - ACCA-PwC Webinar ‘Diversity, Inclusion & Belonging’ - REGISTER HERE
4-25 June 2021 - EFAA Annual General Meeting and EFAA International Conference [SAVE THE DATE]
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Please note hyperlinked text to further information.
If you have any events to add please email Sara Zambelli
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Commission Consults on Digital Proposals
The Commission has launched public consultations on the recently published proposals on the Digital Services Act (DSA) 2020/0361 (COD) (consultation link) and Digital Markets Act (DMA) 2020/0374 (COD) (consultation link). SMEunited has published a press release welcoming the proposals which they say are a step in the right direction to make digital markets more open for SMEs. EFAA supports this view. Furthermore, SMEunited replied to the first Commission’s consultation by submitting a position paper. EFAA, like SMEunited, sees these initiatives as a priority as they will shape the future of the EU Digital Single Market and will provide input to SMEunited as it drafts its position paper on DSA and DMA and response to the consultation (deadline of 12 February 2021).
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