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CSSF announces main supervision topics for its upcoming transparency supervision campaign

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    On 2 January 2023 the Luxembourg financial supervisory authority CSSF published a press release in which issuers' attention is drawn to the CSSF's transparency enforcement campaign with respect to the reporting and disclosure obligations in accordance with the law of 11 January 2008 on transparency requirements for issuers whose securities have been admitted to trading on a regulated market (the “Luxembourg Transparency Law”) in the context of the 2022 annual financial report.

    In this context, issuers who are preparing their financial statements in accordance with IFRS under article 3 of the Luxembourg Transparency Law and/or specific non-financial information in accordance with the Luxembourg law of 23 July 2016 on disclosure of non-financial and diversity information for certain large undertakings and groups (the "Luxembourg Non-financial Information Law"), as well as these issuers' auditors, are required to sufficiently address certain topics and issues in their financial and non-financial information.

    The CSSF informs issuers that in its 2023 enforcement campaign it will be focusing specifically on various major topics such as climate-related matters, the Ukraine invasion, the macroeconomic environment and compliance with article 8 of Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 (the "Taxonomy Regulation").

    Furthermore, the CSSF will be placing an additional focus on alternative performance measures (APMs) and European Single Electronic Format (ESEF) related subjects. Therefore, issuers whose securities have been admitted to trading on a regulated market and for which Luxembourg is the home Member State under the Luxembourg Transparency Law must make sure that the topics applicable to them are sufficiently addressed in their 2022 annual financial report.

    In order to analyse what topics will be applicable and to what extent information on such topics needs to be provided issuers must also take into account the European common enforcement priorities for 2022 (the “ECEPs”) as published by ESMA.

    Priorities related to IFRS Financial Statements

    In relation to the disclosures required for financial reporting in accordance with IFRS, three areas of particular focus have been highlighted: (i) climate-related matters, (ii) the direct financial impact of Russia's invasion of Ukraine and (iii) the current macroeconomic environment.

    (i) Climate-related matters

    To the extent the effect of climate-related matters is material to an issuer, appropriate disclosures must be provided. In this respect the CSSF expects the topics to be tailored to the particular situation of an issuer and emphasizes the fact that climate related topics cannot be covered by simple boilerplate disclosure.

    In addition the CSSF stresses that it will continue to focus on the climate aspects covered by the enforcement priorities during the 2022 campaign and follow up on its previous observations. In other words, the recommendations and requirements regarding climate-related matters for the financial year 2021 remain relevant.

    (ii) Direct financial impacts of Russia’s invasion of Ukraine

    Issuers that have been affected by Russia's invasion of Ukraine must provide clear and detailed information on the financial impact thereof and present such information both at the balance sheet level as well as the comprehensive income level.

    The following points, as outlined by ESMA in the ECEPs, must be duly considered: (1) presentation of the impact of Russia’s invasion in the financial statements, (2) loss of control, joint control or the ability to exercise significant influence, (3) discontinued operations, non-current assets and disposal groups held for sale and (4) impairment of non-financial assets.

    (iii) Macroeconomic environment

    In light of the current macroeconomic situation and the ongoing uncertainties in various markets, issuers must also provide clear and detailed disclosure relating to macroeconomic risks. In line with ESMA's observations in the ECEPs, issuers must in particular consider the increase in inflation, interest rates and energy costs.

    In this respect, the CSSF will in particular focus on two main topics:

    • Discount Rate

      The discount rate constitutes one of the major assumptions when it comes to determining the present value of future cash flows and an increase in discount rates is likely to have an impact on the value of individual assets and can lead to them being impaired. Consequently, adequate disclosure is required in order to reflect such situation.
    • Inflation

      Inflation, having reached record numbers in the euro area in recent months, has the potential to affect businesses in various ways. The CSSF therefore emphasizes the requirement for issuers to disclose in either the management report or the financial statements sufficient information on how inflation affects their business, including impact on profits, margins, liquidity, their overall level of activity as well as how the forecasts have been revised to accommodate the surge in prices.

      In addition to the standards mentioned in the ECEPs by ESMA, the CSSF requests that issuers take into consideration the current macroeconomic environment when applying the following standards:
      • IAS 1 Presentation of Financial Statements;
      • IAS 2 Inventories;
      • IAS 10 Events after the Reporting Period;
      • IAS 12 Income Taxes;
      • IAS 37 Provisions, Contingent Liabilities and Contingent Assets;
      • IFRS 2 Share-based Payment;
      • IFRS 13 Fair Value Measurement;
      • IFRS 16 Leases.

    Priorities related to non-financial statements

    In relation to the requirements for reporting under Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 (the "Non-Financial Reporting Directive"), the ECEPs outline three main priorities to be considered by issuers: (i) climate-related matters, (ii) disclosures relating to Article 8 of the Taxonomy Regulation as well as (iii) reporting scope and data quality.

    Currently, the Non-Financial Reporting Directive as implemented into Luxembourg law by the Luxembourg Non-financial Information Law is applicable to public-interest companies with more than 500 employees (on average). Undertakings falling within its scope need to include in their management report a non-financial statement containing certain information concerning:

    • Environmental matters;
    • Social matters and treatment of employees;
    • Respect for human rights;
    • Anti-corruption and bribery; and
    • Diversity on company boards (in terms of age, gender, educational and professional background).

    (i) Climate-related matters

    In order to increase transparency on climate-related matters the non-financial statements shall include information on the impact of climate change in both application of the Non-Financial Reporting Directive and anticipation of requirements under the forthcoming Corporate Sustainability Reporting Directive.

    (ii) Disclosures relating to Article 8 of the Taxonomy Regulation

    Furthermore as the financial year 2022 is the first year for which non-financial undertakings are required to disclose both the taxonomy eligibility and the alignment of their economic activities with climate change mitigation objectives as set forth in the Taxonomy Regulation the CSSF will examine compliance with such requirements closely.

    For more information on Taxonomy Regulation related aspects please feel free to refer to our previous legal update on the 2022 CSSF enforcement campaign.

    As mentioned in our previous legal update extended obligations will apply when assessing the environmental objectives of a given economic activity for the financial year 2022. This means that pursuant to items c) to f) of article 9 of the Taxonomy Regulation issuers must now consider the full list of environmental objectives including, among others, the sustainable use and protection of water and marine resources as well as pollution preventions and control.

    Issuers should also take note of the new FAQs published in December 2022 by the EU Commission on the application of article 8 of the Taxonomy Regulation (link).

    (iii) Reporting scope and data quality

    In addition, the CSSF expects issuers to benchmark their ESG performance across the entire supply chain against competitors and entities active in other sectors and encourages them to provide additional background on the robustness of their data collection process with an aim to ensure that the non-financial reporting is based on quality data.

    Other Considerations


    As issuers use alternative performance measures (APMs) a lot the CSSF also informs issuers that such use must reflect compliance with three important criteria. (i) The APM labels should be meaningful and sufficiently clear so that no misunderstandings or any confusion with respect to their interpretation arise. (ii) Furthermore, APMs must be identified in the management report or press releases and (iii) finally they must not be given more prominence than other IFRS measures. Such prominence will not only be judged by the way they are presented but also by the place given to them in issuers' communications.


    Finally, the CSSF reminds issuers that for the 2022 annual financial reports further mandatory elements with respect to the requirement to mark up information contained in the consolidated financial statements will be applicable under the European Single Electronic Format (ESEF). These are the elements referred to as "text block" in table 2 of Annex II in the Regulatory Technical Standards (RTS) on ESEF, i.e. Commission Delegated Regulation (EU) 2019/815 of 17 December 2018, as amended.

    For more information on the above please feel free to contact a member of our Ashurst Luxembourg banking and finance team.


    Authors: Fabien Debroise, Partner; Katia Fettes, Counsel; Anna Kozakiewicz, Associate





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