Financial reporting enforcement – listed companies

Financial reporting enforcement

In its financial reporting enforcement in 2022, Finanstilsynet gave priority to following up the consequences of the Covid-19 pandemic, climate risk, recognition of expected credit losses in credit institutions in accordance with IFRS 9 and related disclosures in accordance with IFRS 7, and IFRS 16 Leases.

Finanstilsynet applies several criteria to select entities for review. Some entities are selected on the basis of signals given or by rotation, others on the basis of risk assessments. Risk-based analyses rely partially on data reported by companies via the Altinn internet portal.

Finanstilsynet reviewed all or parts of the financial reporting of 18 entities. Particular attention was focused on issuers of shares and equity certificates, but also on some bond issuers. In addition, Finanstilsynet reviewed the audit reports of all listed companies. 13 companies were subject to closer scrutiny. 11 of these cases have yet to be finalised. In addition, two cases from previous years were brought to completion.

Finanstilsynet received no reports from auditors or issuers indicating that the financial reporting of the issuers concerned failed to provide a true and fair view.

The most important cases brought to completion in 2022

Endúr ASA

In its supervision of Endúr ASA's half-yearly report for the first half of 2021, Finanstilsynet found errors in the classification of the company's bond issues as a consequence of breaches of covenants as at 30 June 2021. It was also revealed that the audit committee had not made the necessary preparations to enable the board of directors to follow up the financial reporting process in accordance with the requirements of the Public Limited Liability Companies Act with respect to the breach of covenants described in the half-yearly report. The company agreed with Finanstilsynet's assessment of the breach of covenants and presented a new half-yearly report and new half-yearly financial statements for the first half of 2021.

Atlantic Sapphire ASA

In its supervision of Atlantic Sapphire ASA's annual financial report for 2020 and half-yearly report for the first half of 2021, several weaknesses and errors were revealed. Among other things, Finanstilsynet found errors in the classification of the company's loans as a result of breaches of covenants as at 30 June 2021.

It was also considered whether the company's board of directors had fulfilled its duties related to  the responsibilities of the audit committee in connection with the breaches of the provisions on financial covenants as at 30 June 2021.

The company came into line with Finanstilsynet's assessment of the breach of covenants and presented a new half-yearly report and new half-yearly financial statements for the first half of 2021.

Ice Group ASA

In its supervision of Ice Group ASA's interim financial statements for the third and fourth quarters of 2021, several weaknesses related to disclosures about events after the reporting period, the going concern assumption and the company's leases were identified.

The company had not provided sufficient information about the its financial challenges and the uncertainty related to its ability to continue as a going concern in its interim financial statements for the third and fourth quarters of 2021, including information on liquidity needs, various solutions that were considered to raise the necessary capital, and the discretionary judgement exercised by management when reaching the conclusion that the going concern assumption is appropriate.

The company confirmed that it would rectify its disclosures in future financial reporting.

Follow-up of information on expected credit losses

Accounting for expected credit losses in credit institutions in accordance with IFRS 9 Financial instruments and related disclosures in accordance with IFRS 7 was a prioritised area when reviewing the annual financial statements for 2021. In order to follow up these priorities through 2022, Finanstilsynet reviewed a number of annual financial reports for 2021 for savings banks and residential mortgage companies. The review of the financial reporting has not been limited to accounting matters related to IFRS 7 and IFRS 9. Conclusions after the reviews are published on Finanstilsynet's website on an ongoing basis.

Survey of the audit committees’ work

The audit committees of listed companies and other public interest entities shall help ensure a high level of quality in the companies’ financial reporting.

On the basis of amendments to the provisions of the Public Limited Liability Companies Act concerning audit committees, Finanstilsynet carried out a review during 2021 of how audit committees fulfil the requirements and tasks following from the Public Limited Liability Companies Act. Finanstilsynet published a thematic report on the work of the audit committees in May 2022.

The survey included just over 130 companies, and its purpose was to check:

• whether the audit committees had fulfilled their duties and tasks in accordance with rules prevailing as at 31 December 2020.
• how far the audit committees had come in adapting to the new rules that entered into force on 1 January 2021.

The results of the survey showed that there were wide differences in how the audit committees had fulfilled their duties and tasks, and in how far they had come in adapting to the new rules. A number of audit committees have an improvement potential when it comes to acknowledging the scope of statutory duties and tasks, as well as the importance of having the right expertise and sufficient capacity. Finanstilsynet also observed some cases where the audit committees do not comply with the rules.

Finanstilsynet will follow up the work of the audit committees where relevant in its future supervision. The results and observations in the report may be of use to the audit committees in their pursuit to comply with the rules and to compare their work with the practices of other audit committees.

Thematic review of climate-related issues

Good reporting of climate-related information enables the company's stakeholders to understand the risks and opportunities facing the company.

In 2022, Finanstilsynet carried out a thematic review in which information on climate-related issues provided in the companies’ annual financial reports, and the auditor's work related to this, were assessed. The thematic review included a selection of annual financial reports for the 2021 reporting year. Climate-related information provided both outside the annual financial statements and within the annual financial statements was reviewed. The thematic review encompassed eleven companies and was based on the companies’ publicly available annual financial reports. Key observations from the thematic review: 

• The information provided by the companies on climate risk outside the annual financial statements is often of a general nature and not directly related to the company's activities. On the other hand, they provided comprehensive descriptions of climate opportunities and green business, even though this activity constitutes a small of total operations. 
• The companies have established overall climate-related targets, but most of them do not provide clear information as to how the targets are to be reached. 
• Several of the companies have given extensive descriptions of climate-related matters outside their annual financial statements, while only general or no information is included in their annual financial statements.  
• Several of the companies have provided incomplete information on climate-related matters in their annual financial statements.  
• Significant improvements are required in the auditors' assessments and documentation of how climate risk affects financial reporting.

Finanstilsynet has published its observations in a separate report. This may be useful for the companies and their auditors in their further efforts to ensure that future reporting on climate-related matters provides relevant, consistent, complete and material information.

Deficiencies in ESEF and the publication and filing of annual financial reports and audit reports

In 2022, Finanstilsynet reviewed the companies' financial reporting in terms of the requirements of the European Single Electronic Format (ESEF) and the publication and filing of annual financial reports and audit reports with the Officially Appointed Mechanism (OAM). The review encompassed all companies listed on a regulated market on Oslo Børs.

Finanstilsynet noted that a significant number of companies did not comply with the ESEF requirements and the requirements for publication and filing of annual financial statements for 2021.

Based on the scope of the shortcomings, Finanstilsynet chose to send an identical letter to all companies listed on Oslo Børs. The letter summarised the observations made by Finanstilsynet during its review of selected parts of the companies' reporting obligations according to the new rules. The letter was also published on Finanstilsynet's website.

After the identical letter was sent, Finanstilsynet has observed that a number of companies have published new versions of their annual financial report for 2021 where the shortcomings have been corrected and the requirements complied with.

Late publication of periodic financial reports

Finanstilsynet issued administrative fines to two companies in 2022 for late publication of annual financial reports.

Deficiencies in financial reporting

In August 2022, Finanstilsynet published an overview of deficiencies in listed companies’ annual financial reports after reviewing the reports for 2021. Five companies had failed to publish a statement from persons within the issuer who are responsible for the financial statements and management report (statement of responsibility).

In October 2022, Finanstilsynet published an overview of deficiencies in listed companies’ half-yearly financial reports. Nine companies had not published a statement from persons within the issuer who are responsible for the half-yearly financial statements and the half-yearly financial report (statement of responsibility). All the companies have now corrected the deficiencies.

Finanstilsynet observes that fewer companies have deficiencies in their annual and half-yearly financial reports for 2021 and the first half of 2022 than in the preceding period.

Communication and guidance

Finanstilsynet's reports were published on finanstilsynet.no on an ongoing basis in 2022.

Finanstilsynet arranged a seminar for companies listed on regulated markets in November 2022. The seminar mainly addressed the topics described above. A recording of the seminar is available on Finanstilsynet’s website (in Norwegian only). Such seminars are part of Finanstilsynet’s guidance initiatives. In addition, letters, decisions, public consultations, surveys and reports from thematic inspections are published on Finanstilsynet’ website.