15 August 2022

Accountancy bodies concerned with complexity of ESRS

Accountancy professional bodies are concerned with the complexity of the draft European Sustainability Reporting Standards (ESRS) in a number of comment letters sent to EFRAG, Corporate Disclosures has found.

This echoes the feedback received by EFRAG during its outreach events conducted during the consultation period.

Accountancy Europe, which represents 50 accountancy professional bodies, said: "The ESRS architecture is unnecessarily complex. Standards lack connectivity and a coherent structure."

It added that EFRAG should streamline and simplify the standards, particularly the governance elements, to make them more user-friendly and effective.

The Norwegian Institute of Public Accountants also said they were "concerned with the complex and inconsistent internal structure in the EDs. Some disclosure requirements are preceded by an objective, others are not. Several sentences are very long, nearly 10 lines, which may impair understandability".

Other accountancy bodies argued that the volume and complexity of the standards will make it difficult to adopt them in the short time frame currently allocated.

The International Federation of Accountants (IFAC) was particularly strong in expressing this concern, saying that "the draft ESRS contain a level of granularity and complexity that challenges the readiness and ability of companies—which may result in unnecessary resistance to adoption and implementation".

The Association of International Accountants (AIA) agreed that the current complexity would make it impossible for smaller entities to evaluate the proposals and implement the reporting standards in time.

Respondents across the board advocated for a "think small and simple first approach" from which EFRAG can build in the "necessary complexity and comprehensiveness".

Better Finance said the current proposals would oblige entities to "comply with more than 1,000 pages including 116 Disclosure Requirements".

During their auditions to the European Parliament for the role of chair of EFRAG sustainability board, the three candidates were quizzed about the volume of these requirements and the potential burden on companies.

All three candidates said there was a bias towards sustainability disclosures as the equally lengthy financial disclosures don't get as much criticism for their volume.