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IASB Chair says Trustees are "considering" sustainability reporting

  • IFRS - IASB Image

Sep 28, 2020

On September 28, 2020, the International Accounting Standards Board (IASB) released a speech by Chairman Hans Hoogervorst given at the IFRS Foundation Virtual Conference, where he talked spoke about sustainability reporting and how "traditional" financial reporting can help to make climate-related financial issues more visible.

In his speech, which also touched briefly on COVID-19 matters, Mr. Hoogervorst noted that the growing urgency of climate change has intensified interest in sustainability reporting in recent years. Exploring the relationship between financial reporting and non-financial reporting, he made the following points:

  • None of the IFRSs even mentions ‘climate change’ or ‘sustainability’. Financial reporting merely seeks to neutrally describe economic reality as it is.
  • However, that does not mean that there is a disconnect between IFRSs and sustainability issues and financial reporting based on current IFRSs can be more reflective of sustainability issues than many people realize.
  • The principle-based approach of IFRSs means that many issues can be captured by the requirements, both in terms of recognition and measurement and disclosure. In fact, separate disclosures on the effects of climate change might already be required based on the materiality requirements.
  • Sustainability reporting has important added value to the financial statements. However uncertain this information may be, it can very well be material to investors.
  • Sustainability reporting may also serve to make a company aware of the financial consequences of such issues much earlier.
  • There is hope that in the future financial reporting and sustainability reporting will come even closer together.

Mr. Hoogervorst also noted that, as a separate piece of work that is complimentary to the requirements in IFRSs and the IASB’s work on Management Commentary, the Trustees of the IFRS Foundation are currently considering sustainability reporting. They are in the process of preparing for their next five-yearly strategy review and a working group of Trustees has done research into sustainability reporting. Mr. Hoogervorst explained that the Trustees plan to build on that work by consulting on the topic more broadly shortly.

Review the full transcript of Mr. Hoogervorst's speech on the IASB's website.

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