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World Accounting Report


No shortage of accounting challenges for the year ahead

Now, in early 2023, the world seems more unstable and less secure than at any other time during the lives of many of us. There are risks and threats arising in many areas, and the interrelationships between them are complex and hard to analyse. Perhaps the most immediate cause of instability is the ongoing war in the Ukraine, now entering its second year, but concerns surrounding the impact of climate change are also playing a part. Inflationary pressures, with accompanying labour disruption, and breakdowns in services are symptoms of the underlying tensions. The financial world is no exception. 2023 has already heralded some significant changes in corporate reporting. The Corporate Reporting Sustainability Directive has now entered into force in the European Union (EU), and it will be underpinned by detailed European Sustainability Reporting Standards, to be adopted by the European Commission later this year. The directive and the standards cover all aspects of environmental, social and governance reporting, and require companies to use the so-called "double-materiality" approach, under which they report on the impacts to which their activities give rise, and the extent to which they are affected by ESG matters. Since climate-risk and other environmental and social issues cannot be resolved by companies in Europe in isolation, the legislation pulls into scope some non-EU companies doing business in Europe, in addition to the value chains (customers and suppliers) of EU companies. These innovative requirements could ultimately affect trade relations between the Union and other jurisdictions. These developments are covered in an article below.

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