Editorial Team – [2026] 185 taxmann.com 57 (Article)
Global Financial Insights is a weekly feature for the Accounts and Audit Module subscribers of Taxmann.com. It provides you with the latest updates on financial reporting and auditing practices from across the globe. Here is this week’s financial update:
1. Financial Reporting Council Issues Guidance on Use of Generative and Agentic AI in Audits
The Financial Reporting Council (FRC) has released new guidance to support audit firms in the responsible use of generative and agentic AI tools during audit engagements, balancing innovation with the need to safeguard audit quality.
The guidance provides a structured framework to help firms assess and build appropriate confidence in AI-generated outputs, while recognising that the extent of safeguards will depend on professional judgement, the nature of the tool, and its intended use. It also highlights the potential of AI to enhance audit efficiency and quality when used appropriately.
Importantly, the FRC clarifies that accountability remains firmly with the human auditor, and the use of AI does not alter existing responsibilities under auditing standards. Firms are therefore expected to integrate AI usage within their broader quality management frameworks, particularly in line with ISQM (UK).
As the first guidance of its kind issued by a global audit regulator, it aims to promote consistent practices, build confidence in emerging technologies, and support firms in adopting AI responsibly.
Source – Financial Reporting Council
2. IASB March 2026 Update – Focus on IFRS 16 Costs, Equity Method, and SMEs
The International Accounting Standards Board (IASB), in its March 2026 meetings, discussed key areas including the post-implementation review of IFRS 16, re-deliberations on the Equity Method, and amendments to the IFRS for SMEs Standard.
2.1 IFRS 16 – Addressing Cost Concerns
Acknowledging concerns over the high ongoing costs for lessees, the IASB decided to undertake a research project to explore simplifications in areas such as lease liability re-measurements and discount rates. However, it chose not to make changes to disclosures, recognition exemptions, or guidance on key judgements, indicating that the existing framework remains largely effective.
2.2 Equity Method – Consistency with Practical Relief
The Board reaffirmed that changes in ownership interests, while retaining significant influence, should follow purchase and disposal principles. It also introduced optional relief from fair value measurement for additional acquisitions, subject to materiality, while retaining a principles-based approach without adding detailed guidance.
2.3 IFRS for SMEs – Proposed Consolidation Exemption
To address an application issue, the IASB plans to introduce a consolidation exemption for certain intermediate parent entities. An exposure draft is expected shortly, with a proposed effective date of 1st January 2027 and early adoption permitted.
Source – IFRS Foundation
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