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General requirements for disclosure of sustainability-related financial information prototype

  • ISSB Image

Nov 03, 2021

On November 3, 2021, the IFRS Foundation released a general requirements prototype that is the proposal of the Technical Readiness Working Group (TRWG) for a general presentation standard of the ISSB.

The TRWG was created in March 2021 to facilitate a running start of the ISSB. It was designed to integrate and build on the work of relevant initiatives focused on meeting investors’ information needs, with the purpose of providing technical recommendations for consideration by the ISSB. The general requirements for disclosure of sustainability-related financial information prototype published today is inspired by IAS 1,Presentation of Financial Statements and sets out the overall requirements for sustainability-related disclosures to investors:

  • Objective and scope: The recommended objective of sustainability-related financial disclosures is described as providing information about the significant sustainability-related risks and opportunities to which the reporting entity is exposed that is useful to primary users of general purpose financial reporting in deciding whether to provide resources to the entity. The recommended standard would apply when an entity prepares and discloses sustainability-related financial information in accordance with IFRS Sustainability Disclosure Standards.
  • Materiality: An entity would disclose all information on sustainability matters that is material for investors and other providers of capital in respect of a reporting entity. Sustainability-related financial information is described as material if omitting, misstating or obscuring that information could reasonably be expected to influence decisions that the primary users of general purpose financial reports make on the basis of those reports.
  • Reporting entity boundary and connectivity: The reporting entity's boundary for its general purpose financial reporting is recommended to be the same for its financial statements and sustainability-related financial disclosures. The disclosures provided must enable users to understand the connections, dependencies and trade-offs between sustainability-related financial disclosures and other information in general purpose financial reporting.
  • General features: Applying the general requirements prototype an entity would disclose information that focuses on matters critical to the way an entity operates following the four pillars of governance, strategy, risk management, and metrics and targets. The prototype sets out objectives for each of these pillars and disclosure requirements to achieve these objectives.
  • Comparative information and frequency of reporting: Under the prototype, an entity would present comparative information regarding the previous period for all amounts including metrics and key performance indicators reported in the current period. An entity would report at least every 12 months and at the same time as its financial statements.
  • Reporting channel: Sustainability-related disclosures to investors would be disclosed as part of a reporting entity's general purpose financial reporting that is targeted at investors and other providers of capital and encompasses financial statements and sustainability-related financial information.
  • Identifying the related financial statements: Sustainability-related financial disclosures would identify the financial statements to which they relate. If the related financial statements are not prepared in accordance with IFRSs, the sustainability-related financial disclosures would disclose the basis on which the financial statements are prepared.
  • Using financial data and assumptions: When sustainability-related financial disclosures incorporates financial data and assumptions, such financial data and assumptions would be consistent with the corresponding financial data and assumptions incorporated in the entity’s financial statements.
  • Fair presentation: A complete set of sustainability-related financial disclosures would present fairly the sustainability-related risks and opportunities to which the entity is exposed. A fair presentation requires an entity to disclose information that is relevant, reliable, comparable and understandable and would include additional disclosures when the information provided is insufficient to enable users to understand the impact or potential impact of significant sustainability-related risks and opportunities on the entity’s enterprise value.
  • Sources of estimation uncertainty: When sustainability-related financial disclosures cannot be directly quantified and can only be estimated, the use of reasonable estimates is an essential part of preparing sustainability-related financial disclosure and does not undermine the usefulness of the information if the estimates are clearly and accurately described and explained.
  • Errors: The general requirements prototype describes prior period errors as omissions from, and misstatements in, the entity’s sustainability-related financial disclosures for one or more prior periods. Unless impracticable, an entity would correct material prior period errors retrospectively in the first general purpose financial reporting authorized for issue after their discovery.
  • Statement of compliance: An entity whose sustainability-related financial disclosures comply with all of the relevant requirements of IFRS Sustainability Disclosure Standards would include an explicit and unqualified statement of compliance.

There are four appendices to the general requirements prototype. Appendix A explains the defined terms used in the general requirements prototype; Appendix B sets out a general-purpose financial report that includes sustainability-related financial information and financial statement information; Appendix C provides an application guidance on materiality; and Appendix D describes qualitative characteristics of useful sustainability-related financial information.

Review the general requirements prototype on the IFRS Foundation's website.

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