Mr Barckow began his speech by noting that in today’s financial reporting world, ‘connectivity’ was the new hot topic and one that seemed to have appeared from nowhere in the last couple of years. He acknowledged, however, that the heightened emphasis on ‘connectivity’ likely stemmed from a fundamental shift in how the purpose and context of financial reporting itself is viewed.

And he admitted, that while financial statements continue to have their place in the corporate reporting world and the information provided is considered relevant and reliable, there are limitations of the financial statements, namely that financial statements are not meant to report on the future or to demonstrate impacts or dependencies. However, he noted:

The boundaries of the financial statements are there for a purpose. Of course, that does not mean that the purpose cannot be changed — as said: financial reporting is a set of conventions. The question is, however, whether the conventions need to be changed, or whether the purpose of financial reporting would not be better served by linking the information contained in the financial statements to information provided through other sets of reporting.

Mr Barckow then explained that by creating the ISSB as a sister board to the IASB, i.e. making the ISSB subject to the same rigorous due process that governs the work of the IASB, an expectation has been created that investor-focused sustainability disclosures can be brought to the same high level of quality, rigidity and robustness that people associate with financial reporting. So would it then really be that surprising that stakeholders ask how the information produced by applying IFRS Accounting Standards connects to information that is produced by applying IFRS Sustainability Standards? 

In the end, he noted, we need to accept that traditional accounting and reporting dealing with issues that are largely outside the boundaries of the financial statements, both subject-matter and timing-wise, complement each other and are needed to convey a complete, consistent and coherent story about the entity’s existing financial position and performance, its strategy and governance, the risks and opportunities it is facing and how it is managing them.

He concluded his speech by noting that connectivity should not be viewed as a one-way street: entities that report under the standards of the ISSB are actually required by IFRS S1 to connect information in the report that houses the sustainability-related financial disclosures to information in the financial statements. And, he added, "we should start thinking about providing for a similar kind of linkage the other way around, where this is both feasible and appropriate". 

Please click to access a transcript of Mr Barckow's full speech on the IFRS Foundation website.