C626 Issuers - ESMA Public Statement 'European common enforcement priorities for 2023 annual financial reports'

TO: Issuers with securities admitted to trading on a regulated market FROM: Cyprus Securities and Exchange Commission (CySEC) DATE: 29 March 2024 CIRCULAR NO: E626 SUBJECT: European Securities and Markets Authority (ESMA) Public Statement on 'European common enforcement priorities for 2023 annual financial reports'

The Cyprus Securities and Exchange Commission (the "CySEC") would like to draw the attention of Issuers, whose securities are admitted to trading on the Cyprus Stock Exchange or any other regulated market, to the Public Statement of the European Securities and Markets Authority (ESMA) with reference number ESMA32-193237008-1793 and subject "European common enforcement priorities for 2023 annual financial reports" (ESMA Public Statement – European common enforcement priorities for 2023 annual financial reports).

The Public Statement sets out the common European priorities determined by ESMA, jointly with the national Supervisory Authorities of the European Economic Area (the "Supervisory Authorities"), regarding the supervision of Issuers' annual financial reports for the year 2023. The priorities reflect the main issues which the Supervisory Authorities will assess when examining the annual financial reports for the year 2023, particularly concerning the application of information requirements, and relate to:

• Common European supervisory priorities regarding financial statements prepared in accordance with International Financial Reporting Standards ("IFRS") for the year 2023.
• Common European supervisory priorities regarding non-financial statements1 for the year 2023.
• Issues relating to Alternative Performance Measures ("APMs") and the European Single Electronic Format ("ESEF").

The common European supervisory priorities regarding financial statements prepared in accordance with IFRS for the year 2023 are presented in Section 1 of the Public Statement and are as follows:

• Climate and other environmental issues - Impact on financial statements.
• Macroeconomic environment.

1 Articles 151A and 151B of the Companies Law.

The common European supervisory priorities regarding non-financial statements for the year 2023 are presented in Section 2 of the Public Statement and are as follows:

• Climate and other environmental issues:
  • Disclosures regarding Article 8 of the Taxonomy Regulation2.
  • Disclosures on targets, measures, and relevant progress on climate issues.
  • Scope 3 emissions.

Section 3 of the Public Statement reminds Issuers of the following issues which must be taken into account:

• Alternative Performance Measures ("APMs") and ESMA's Guidelines on Alternative Performance Measures3 (Guidelines on Alternative Performance Measures), and
• The European Single Electronic Format4 and specifically the correct markup of all numerical data included in the main consolidated financial statements as well as block tagging of notes.

In each of the above Sections, the Public Statement presents ESMA's assessments and recommendations regarding the aforementioned issues/priorities.

Furthermore, the Public Statement also reminds Issuers of the following:

• Transparency regarding the application of IFRS 17 'Insurance Contracts' ahead of its first year of application.
• Amendments to IAS 12 'Income Taxes': International Tax Reform – Pillar Two Model Rules, and specifically the assessment of the application of the mandatory temporary exemption from recognizing and disclosing deferred taxes arising from the application of the OECD's Pillar Two Model Rules.
• Directive (EU) 2022/2464 regarding corporate sustainability reporting (Corporate Sustainability Reporting Directive), the requirements of which will apply to annual financial reports for financial years beginning on 1 January 2024.

CySEC calls on Issuers with securities admitted to trading on a regulated market to duly take into account the issues and detailed recommendations referred to in ESMA's Public Statement when preparing their annual financial reports for the year 2023.

ESMA, together with the Supervisory Authorities, including CySEC, will assess the application by Issuers of the issues included in the aforementioned priorities. The Supervisory Authorities will incorporate these priorities into their assessments regarding Issuers' annual financial reports for the year 2023 and will take appropriate measures where deemed necessary.

CySEC will include the priorities and issues mentioned above in the areas it will focus on when assessing Issuers' annual financial statements for the year 2023 regarding their compliance with IFRS and the annual financial report regarding compliance with various legal requirements.

Yours faithfully,

Dr. George Theochares
Chairman, Cyprus Securities and Exchange Commission

2 Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment and amending Regulation (EU) 2019/2088.
3 CySEC Circular to issuers with reference number E310.
4 CySEC Circulars to issuers with reference numbers E498 and E505.