The Financial Sector Supervisory Commission (CSSF) on 5 December issued a highlighting the themes and issues to be monitored specifically in 2025 when it comes to enforcement of the 2024 annual reports published by issuers subject to the Transparency Law. This 2008 law concerns issuers whose securities are admitted to trading on a regulated market. The European Securities and Markets Authority (Esma), together with the European national accounting enforcers (including Luxembourg’s CSSF), have identified European common enforcement priorities (ECEPs) which financial market players should pay close attention to--in addition to the enforcement priorities outlined by the CSSF.

“As issuers are now preparing their reporting for the 2024 financial year, the CSSF wishes to draw the attention to a number of topics and issues that will be the subject of specific monitoring during the CSSF’s enforcement campaign planned for 2025.” There are three main categories to keep an eye on: IFRS financial statements; sustainability reports; and common markup errors.

Liquidity considerations

When it comes to financial statements under the International Financial Reporting Standards (IFRS), “it is crucial for issuers to provide relevant information on their liquidity risk in their financial statements, as it allows investors to assess the issuers’ ability to meet their short-term obligations and have a clear view on potential risk factors,” said the CSSF. Transparent disclosures on liquidity risk allows people to understand issuers’ financial resilience, particularly when the market is volatile or there’s economic uncertainty.

The CSSF recommends that issuers pay special attention to covenants (commitments in a debt agreement that certain activities will or will not be undertaken) and the statement of cash flows. It also “urges issuers to maintain a high level of transparency regarding the accounting policies and judgments applied when classifying cash flows--such as those related to interest, dividends, leases, supplier finance arrangements, and other complex or infrequent transactions--and the components of cash and cash equivalents.”

Accounting policies, judgements, significant estimates

Disclosures of material accounting policies should be entity-specific and consistent with other information in the issuer’s financial statements, noted the CSSF. Issuers should also clearly disclose key judgements with significant impact on the financial statements and “assumptions about the future and other major sources of estimation uncertainty that carry a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next financial year.”

“When preparing financial statements, management must assess the entity's ability to continue as a going concern and disclose any material uncertainties that may cast significant doubt on this ability. Depending on the circumstances (e.g., low profitability, limited access to financing), management may need to conduct a thorough analysis to justify the going concern assumption,” added the CSSF. It expects issuers to “provide detailed, entity-specific disclosures about the significant judgments made in this regard, supported by clear information on the potential consequences if expectations are not met, including the possible impact on the issuer’s ability to continue as a going concern.” Transparency is critical, the regulator emphasised.

Disclosures around how control or significant influence is determined should also provide clear insights on how these judgements were reached.

Materiality considerations

“The double materiality assessment, which considers both impact materiality and financial materiality, is fundamental in determining the information that must be disclosed in the sustainability report,” said the CSSF. The idea of ‘double materiality’ means that companies have to assess the financial impact of sustainability-related matters on their performance but as well as the company’s own impacts on people and the environment. It encourages issuers to use Efrag Implementation Guidance on Materiality Assessment (IG1) when applying the relevant requirements of the European Sustainability Reporting Standards (ESRS).

The disclosure should reflect the outcome of the materiality assessment as well as explain the process itself. Here again, “full transparency” around identifying and prioritising the stakeholders with which they engage is key.

“The CSSF would also like to draw the issuers’ attention to the fact that all DR and datapoints laid down in ESRS 2, including those related to DR IRO-1 in topical standards, are mandatory, irrespective of the materiality assessment,” the report added.

Scope and structure of the sustainability report

A company’s sustainability report must cover the same reporting entity as the financial statements, said the CSSF, but the scope of sustainability disclosures “should extend to the issuer’s entire value chain.”

Connectivity between the sustainability report and financial statements is also important. “Direct references to amounts disclosed in the sustainability report should link to relevant sections of the financial statements, ensuring consistency and transparency across both reports.”

Common markup errors

The last section of the CSSF’s report related to the examination of annual financial reports subject to European Single Electronic Format (ESEF) requirements. The CSSF will focus, amongst other things, “on common ESEF markup errors affecting the issuers’ statements of financial position.” Common mistakes have been observed in the “correctness of markups; extension of taxonomy elements and anchoring; consistency and completeness of markups; correctness of signs, scaling and accuracy; and consistency of calculations.”

The CSSF’s full publication can be found .