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• Supplier finance arrangements: new disclosure requirements under IASâ€�7 Statement of Cash Flows for supplier finance arrangements and their impact on the issuersâ€� exposure to liquidity risk. For further details, see our article. 
• Classification of loans with covenants: revised guidance on the classification of loans with covenants as current vs non-current, and the new disclosure requirements under IAS 1 Presentation of Financial Statements and IFRS 7 Financial Instruments: Disclosures about loans payable, in particular if there were defaults, breaches or renegotiations of loan agreements. For further details, see our article. 

• Gross basis: cash flows in the statement of cash flows need to be presented on a gross basis.  
• Non-cash transactions: these cannot be presented in the statement of cash flows. Material non-cash transactions related to investing and financing transactions need to be disclosed elsewhere in the financial statements. 
• Bank borrowings: generally classified as financing activities, except for some bank overdrafts. 
• Clarity on accounting policies and judgements: the financial statements need to be clear on the accounting policies and judgements made regarding the classification of cash flows and/or components of cash and cash equivalents. 

ESMA emphasises that disclosures of material accounting policies, judgements and sources of estimation uncertainty need to be company-specific and consistent with other information within the financial statements.  

The following areas are included in ESMA’s key highlights. 

• Control, joint control and significant influence: determining control or significant influence over an investee may require significant judgement, particularly when factors other than the voting rights need to be considered. Clear and detailed disclosures under
  IFRS 12 Disclosure of Interest in Other Entities about the significant judgements made when assessing control, joint control and significant influence are important. 
• Revenue from contracts with customers: clarity on: 
  • judgements on whether a long-term contract meets the definition of a contract with a customer, and whether the issuer acts as principal or as an agent â€� e.g. when operating online shopping platforms or providing services such as software licences; 
  • uncertainties about the amount and timing of the outflows of economic benefits and the major assumptions in relation to future events; and 
  • backlogs and forecasts used when measuring the progress towards complete satisfaction of a performance obligation.

A thorough materiality assessment is required to determine relevant disclosures under ESRS. ESMA highlights the importance of:

• using EFRAG² implementation guidance and, where possible, quantitative information for their assessment; 
• being transparent about the process followed when completing the materiality assessment, including: 
  • whether and how there was engagement with stakeholders; and  
  • how the assessment connects with due diligence performed on the impacts on affected stakeholders; and 
  • ensuring that company-specific disclosures provide sufficient relevant information to meet the needs of users. ESMA highlights that companies should only include these disclosures when they are material and meet the qualitative characteristics of information.

• The reporting entity for the sustainability statement is generally the same as the financial statements, inclusive of value-chain considerations if required. ESMA highlights that companies should confirm that the same companies are included, and that data for the whole group should be included when a metric is material at group level. 
• ESMA encourages companies to apply the detailed structure for the sustainability statement included in ESRS 1 General requirements, which may be a change for companies (and be particularly relevant for companies adopting multiple frameworks together). It highlights that cross-referencing and incorporation by referencing is permitted; however, companies need to make sure that they continue to meet the general presentation requirements. 
• ESMA highlights that the transitional reliefs apply for value chain information in the first three years, with an expectation of a gradual enhancement in disclosures provided.  

• ESMA reminds companies to use the templates prescribed by the taxonomy without modifications. 
• Activities are sometimes eligible under multiple environmental objectives. In this situation, ESMA highlights that companies need to assess and report on eligibility under all applicable objectives, highlighting the primary objective in bold in the template. 
• ESMA reminds companies to align disclosures in the financial statements with corresponding elements in the taxonomy disclosures.