Cheatsheet

 This is site map for all the resources on this blog

Discussion Topics

1. Overview of IFRS S1 and S2 standards

2. IFRS S1 : Conditions for not disclosing SRRO

Practice tests:

1. Quiz#101: Free practice tests on IFRS S1

Quiz#101: Free practice tests on IFRS S1

Dear Reader:

Test Your Knowledge of IFRS S1 Standards!

Are you familiar with the IFRS S1 sustainability disclosure standards? Put your knowledge to the test with our short quiz! 

This test is designed to challenge your understanding of the key principles, disclosure requirements, and application of IFRS S1. Whether you're revising for exams or just curious to see how well you know the standards, this is a great way to assess your skills.

Ready to take on the challenge? Click below to start the quiz and see where you stand! 

📌 Take the Test Now 

#IFRSS1 #SDS #Sustainability #Disclosure

IFRS S1: Conditions for not disclosing information

IFRS S1 provides certain conditions where an entity need not disclose quantitative information about the current or anticipated financial effects of a sustainability-related risk or opportunity. These conditions are mentioned in the paragraphs 38-40.

I would like to describe paragraph 38 in more detail. Below is the description of paragraph 38.

An entity need not provide quantitative information about the current or  anticipated financial effects of a sustainability-related risk or opportunity if:

the entity determines that:

(a) those effects are not separately identifiable; or

(b) the level of measurement uncertainty involved in estimating those effects is so high that the resulting quantitative information would not be useful.

Let me elaborate on point (a) and (b).

The provision under IFRS S1 regarding the disclosure of quantitative information about the financial effects of sustainability-related risks and opportunities can be broken down as follows:

 (a) "Those effects are not separately identifiable"

This means that an entity is not required to provide specific numerical data on how a sustainability-related risk or opportunity impacts its financial performance if the effects cannot be clearly isolated from other factors. In many cases, sustainability-related risks and opportunities may influence multiple areas of a company's operations, making it difficult to determine their individual financial impact. 

For example:

1. Integrated Effects: A company’s revenue may be influenced by both sustainability initiatives (like reducing carbon emissions) and other strategic factors (such as cost-cutting measures or market expansion). If these effects are deeply intertwined, it may not be feasible to isolate the financial impact attributable solely to the sustainability-related initiative.

2. Complex Interdependencies: In industries like agriculture or manufacturing, sustainability-related risks (e.g., water scarcity or supply chain disruptions) can affect operations in ways that are interconnected with other operational challenges. If a company cannot distinguish the financial impact of sustainability factors from other influencing variables, it is not required to quantify those effects separately.

 (b) "The level of measurement uncertainty involved in estimating those effects is so high that the resulting quantitative information would not be useful"

This point addresses situations where there is a significant degree of uncertainty in estimating the financial effects of a sustainability-related risk or opportunity, to the extent that any quantitative information provided would be unreliable or misleading. High measurement uncertainty can arise due to:

1) Lack of Reliable Data: For emerging risks like climate change, there may be insufficient data to make accurate financial estimates. For instance, predicting the long-term financial impact of potential regulatory changes or shifts in consumer behavior related to sustainability can be challenging.

2) Long-Term Projections: Sustainability-related risks and opportunities often involve long-term time horizons, making it difficult to forecast their financial impact with precision. For example, estimating the financial effects of transitioning to a net-zero business model over the next 20 years may involve so many assumptions and variables that the resulting figures are speculative at best.

3) High Variability: The financial impacts of certain sustainability-related factors (like the effects of extreme weather events) may vary significantly based on unpredictable conditions, leading to a high level of estimation uncertainty. In such cases, any quantitative disclosures might not provide meaningful insights to stakeholders

Together, these provisions acknowledge the complexities involved in quantifying sustainability-related financial effects, especially when data is limited or projections are uncertain. However, even if quantitative disclosures are not possible, entities are still encouraged to provide qualitative information that helps users of financial reports understand the nature of these risks and opportunities.

#IFRSS1 #Disclosure #Sustainability #Conditions 

Overview of IFRS S1 and S2 standards

Hello All, 

 Please find below a short video that explains IFRS Sustainability disclosure standards - S1 and S2 standards.  I have shared the transcript of the same below the video. 

 Transcript:

How does the ISSB serve as an anchor in the sustainability disclosure landscape?

 The ISSB was founded by the IFRS foundation in 2021 at COP 26 in Glasgow supported by investors and international policy makers including G20 the financial stability board and IOSCO the ISSB builds on the legacy of its sister board the IASP which sets the IFRS accounting standards used by more than 140 jurisdictions the IFRS foundation which is accountable to a monitoring Board of Capital Market authorities has a mission to develop high quality IFRS standards that bring transparency accountability and efficiency to financial markets around the world 

ISSB is working with key players in the sustainability disclosure landscape to deliver an efficient reporting landscape as a global Baseline of sustainability related Financial disclosures is established through the ISSB standards in July 2023. IOSCO endorsed the ISSB standards and called on its 130 member jurisdictions Capital Market authorities that regulate more than 95% of the world's security markets to consider how they can incorporate IFRS S1 and IFR SS2. 

Already over 25 jurisdictions that make up around 55% of global gross domestic product have decided or are consulting on using ISSB standards jurisdictions such as Brazil,Canada,Japan and Nigeria. 

IFRS S1 provides a set of disclosure requirements designed to enable companies to communicate material information to investors about the sustainability related risks and opportunities that they face over the short medium and long term. IFRS S2 sets out specific climate related disclosures and is designed to be used with IFRS SS1. 

The ISSB standards fully incorporate the Task force on climate related Financial disclosures or TCFD recommendation. This led to TCFD being disbanded in 2023. The ISSB standards require industry specific disclosures to support this. SASB standards are required to be considered for topics beyond climate. Other sources of guidance include CDSB materials.IFRS S2 incorporates industry specific disclosures based on SASB standards to secure an efficient disclosure system.SASB, TCFD recommendations and CDSB materials have been consolidated into our standards. 

Another vital aspect of achieving an efficient reporting system is through supporting better connections between sustainability related disclosures and a company's financial statements IFRS S1 provides that companies disclose sustainability related financial information connected to and alongside financial statements. The ISSB standards are designed to be used with financial statements based on any GAAP but the standards work particularly well with with IFRS Accounting Standards. 

An integrated report or the management commentary can be a suitable occasion for companies for information provided using IFRS S1 and S2. The integrated reporting framework can help companies communicate holistically to investors. IFRS S1 builds on concepts in the integrated reporting framework. 

Interoperability with leading standards in the landscape is integral to reducing duplication enabling companies to collect,govern and control decision useful data once. GRI standards help companies meet the information needs of a broad range of stakeholders including investors about an organization's impacts. Companies can use GRI standards with ISSB standards when they want to meet the information needs of both investors and a broader range of stakeholders. Companies required to use the European sustainability reporting standard (ESRS) can start with ISSB standards as a global baseline and add other disclosures to meet ESRS. For companies operating in the US, there are significant similarities between the US SEC climate Rule and IFRS S2. Several Frameworks and standard setters with different mandates to the ISSB have used the ISSB standards as a basis for their requirements theyby reducing complexity and fragmentation. Companies around the world respond to the CDP questionnaire to provide information to investors this questionnaire is now aligned to IFRS S2. The BASEL committee on banking supervision sets standards for credential regulation of banks. It has proposed that its climate disclosures build on IFRS S2. The international public sector Accounting Standards Board set public sector disclosure standards it has proposed that its climate standard will be built on IFRS S2. the ISSB seeks to deliver harmonization of the sustainability disclosure landscape and reduce complexity involved in varying sustainability reporting initiatives. IFRS S2 requires GHG emissions to be measured in accordance with the GHG protocol corporate standard 2004. ISSB will be actively engage in any updates to the protocol including having an observer on the GHG protocol Standard setting board. 

Companies with transition plans are required to disclose information about them when applying IFRS S2. The IFRS foundation is now responsible for the Transition Plan Taskforce's disclosure-specific materials that can help companies with these disclosures. The task force on nature related Financial disclosures (TNFD) recommendations have been designed to help companies disclose nature related information. The ISSB is considering how to build upon the TNFD recommendations as part of ISSB's project on nature. The ISSB was called on by the market and international policy makers to deliver an efficient reporting landscape ending the alphabet soup of voluntary initiatives and meeting investor demand for decision-useful comparable information. As such the ISSB remains committed to serving as an anchor in the sustainability disclosure landscape working closely with partners around the world to drive efficiencies.

Hello World!

 Welcome to this blog—your trusted resource for mastering sustainability disclosure standards. 

This blog is designed for professionals, students, and enthusiasts seeking to stay informed on the latest in sustainability reporting frameworks, including IFRS, ISSB, GRI, and SASB standards. Dive into in-depth articles, practical guides, and learning resources that simplify complex disclosure requirements. 

With a focus on transparency and compliance, this blog helps you keep up with evolving sustainability standards and build your expertise in sustainable reporting. Start your journey toward impactful, compliant reporting today!

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