History of IFRS S1

Related In­ter­pre­ta­tions

• None

Amendments under consideration by the ISSB

• None

Summary of IFRS S1

Objective

The objective of IFRS S1 is to require an entity to disclose information about its sustainability-related risks and opportunities that is useful to the primary users of general purpose financial reports in making decisions relating to providing resources to the entity. [IFRS S1:1]

Information about sustainability-related risks and opportunities is useful to primary users because an entity’s ability to generate cash flows over the short, medium and long term is inextricably linked to the interactions between the entity and its stakeholders, society, the economy and the natural environment throughout the entity’s value chain. Together, the entity and the resources and relationships throughout its value chain form an interdependent system in which the entity operates. The entity’s dependencies on those resources and relationships and its impacts on those resources and relationships give rise to sustainability-related risks and opportunities for the entity. [IFRS S1:2]

The value chain is defined in IFRS S1 as the full range of interactions, resources and relationships related to a reporting entity’s business model and the external environment in which it operates. A value chain encompasses the interactions, resources and relationships an entity uses and depends on to create its products or services from conception to delivery, consumption and end-of-life, including interactions, resources and relationships in the entity’s operations, such as human resources; those along its supply, marketing and distribution channels, such as materials and service sourcing and product and service sale and delivery; and the financing, geographical, geopolitical and regulatory environments in which the entity operates. [IFRS S1:Appendix A]

IFRS S1 requires an entity to disclose information about all sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, its access to finance or cost of capital over the short, medium or long term. [IFRS S1:3]

IFRS S1 prescribes how an entity prepares and reports its sustainability-related financial disclosures. It sets out general requirements for the content and presentation of those disclosures so that the information disclosed is useful to primary users in making decisions about providing resources to the entity. [IFRS S1:4]

Scope

An entity is required to apply IFRS S1 in preparing and reporting sustainability-related financial disclosures in accordance with IFRS Sustainability Disclosure Standards. [IFRS S1:5] An entity may apply IFRS Sustainability Disclosure Standards irrespective of whether the entity’s related general purpose financial statements are prepared in accordance with IFRS Accounting Standards or other generally accepted accounting principles or practices (GAAP). [IFRS S1:8]

Conceptual foundations

For sustainability-related financial information to be useful, it must be relevant and faithfully represent what it purports to represent. These are fundamental qualitative characteristics of useful sustainability-related financial information. The usefulness of sustainability-related financial information is enhanced if the information is comparable, verifiable, timely and understandable. These are enhancing qualitative characteristics of useful sustainability-related financial information. [IFRS S1:10]

Fair presentation

A complete set of sustainability-related financial disclosures presents fairly all sustainability-related risks and opportunities that could reasonably be expected to affect an entity’s prospects. [IFRS S1:11]

Fair presentation requires disclosure of relevant information about sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s prospects, and their faithful representation in accordance with the principles set out in IFRS S1. To achieve faithful representation, an entity is required to provide a complete, neutral and accurate depiction of those sustainability-related risks and opportunities. [IFRS S1:13]

Fair presentation also requires that an entity: [IFRS S1:15]

• (a) to disclose information that is comparable, verifiable, timely and understandable; and
• (b) to discloses additional information if compliance with the specifically applicable requirements in IFRS Sustainability Disclosure Standards is insufficient to enable users of general purpose financial reports to understand the effects of sustainability-related risks and opportunities on the entity’s cash flows, its access to finance and cost of capital over the short, medium and long term

Applying IFRS Sustainability Disclosure Standards, with additional information disclosed when necessary, is presumed to result in sustainability-related financial disclosures that achieve fair presentation. [IFRS S1:16]

Materiality

An entity is required to disclose material information about the sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s prospects. [IFRS S1:17]

In the context of sustainability-related financial disclosures, information is material if omitting, misstating or obscuring that information could reasonably be expected to influence decisions that primary users of general purpose financial reports make on the basis of those reports, which include financial statements and sustainability-related financial disclosures and which provide information about a specific reporting entity. [IFRS S1:18]

When an entity applies IFRS Sustainability Disclosure Standards, it is required to consider all facts and circumstances and decide how to aggregate and disaggregate information in its sustainability-related financial disclosures. The entity is not permitted to reduce the understandability of its sustainability-related financial disclosures by obscuring material information with immaterial information or by aggregating material items of information that are dissimilar to each other. [IFRS S1:B29]

Law or regulation might specify requirements for an entity to disclose sustainability-related information in its general purpose financial reports. In such circumstances, the entity is permitted to include in its sustainability-related financial disclosures information to meet legal or regulatory requirements, even if that information is not material. However, such information should not obscure material information. [IFRS S1:B31]

If an entity determines that information about a sustainability-related opportunity is commercially sensitive, the entity is permitted in limited circumstances to omit that information from its sustainability-related financial disclosures. Such an omission is permitted even if information is otherwise required by an IFRS Sustainability Disclosure Standard and the information is material. [IFRS S1:B34]

Reporting entity and connected information

An entity’s sustainability-related financial disclosures are required to be for the same reporting entity as the related financial statements. [IFRS S1:20]

An entity is required to provide information in a manner that enables users of general purpose financial reports to understand the following types of connections: [IFRS S1:21]

• (a) the connections between the items to which the information relates—such as connections between various sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s prospects; and
• (b) the connections between disclosures provided by the entity:
  • (i) within its sustainability-related financial disclosures—such as connections between disclosures on governance, strategy, risk management and metrics and targets; and
  • (ii) across its sustainability-related financial disclosures and other general purpose financial reports published by the entity—such as its related financial statements.

An entity is required to identify the financial statements to which the sustainability-related financial disclosures relate. [IFRS S1:22]

Data and assumptions used in preparing the sustainability-related financial disclosures are required to be consistent—to the extent possible considering the requirements of IFRS Accounting Standards or other applicable GAAP—with the corresponding data and assumptions used in preparing the related financial statements [IFRS S1:23]

When currency is specified as the unit of measure in the sustainability-related financial disclosures, the entity is required to use the presentation currency of its related financial statements. [IFRS S1:24]

Core content

Unless another IFRS Sustainability Disclosure Standard permits or requires otherwise in specified circumstances, an entity is required to provide disclosures about: [IFRS S1:25]

• (a) governance—the governance processes, controls and procedures the entity uses to monitor and manage sustainability-related risks and opportunities;
• (b) strategy—the approach the entity uses to manage sustainability-related risks and opportunities;
• (c) risk management—the processes the entity uses to identify, assess, prioritise and monitor sustainability-related risks and opportunities; and
• (d) metrics and targets—the entity’s performance in relation to sustainability-related risks and opportunities, including progress towards any targets the entity has set, or is required to meet by law or regulation.

IFRS S1 sets out objectives for each of these aspects, and disclosure requirements to achieve those objectives.

General requirements

Sources of guidance

Identifying sustainability-related risks and opportunities

In identifying sustainability-related risks and opportunities that could reasonably be expected to affect an entity’s prospects, an entity is required to apply IFRS Sustainability Disclosure Standards [IFRS S1:54]

In addition to IFRS Sustainability Disclosure Standards: [IFRS S1:55]

• (a) an entity is required to refer to and consider the applicability of the disclosure topics in the SASB Standards; and
• (b) an entity may refer to and consider the applicability of:
  • (i) the CDSB Framework Application Guidance for Water- and Biodiversity-related Disclosures;
  • (ii) the most recent pronouncements of other standard‑setting bodies whose requirements are designed to meet the information needs of users of general purpose financial reports; and
  • (iii) the sustainability-related risks and opportunities identified by entities that operate in the same industry(s) or geographical region(s).

Identifying applicable disclosure requirements

In identifying applicable disclosure requirements about a sustainability-related risk or opportunity that could reasonably be expected to affect an entity’s prospects, an entity is required to apply the IFRS Sustainability Disclosure Standard that specifically applies to that sustainability-related risk or opportunity [IFRS S1:56]

In the absence of an IFRS Sustainability Disclosure Standard that specifically applies to a sustainability-related risk or opportunity, an entity is required to apply judgement to identify information that: [IFRS S1:57]

• (a) is relevant to the decision‑making of users of general purpose financial reports; and
• (b) faithfully represents that sustainability-related risk or opportunity.

In making that judgement, an entity: [IFRS S1:58]

• (a) is required to refer to and consider the applicability of the metrics associated with the disclosure topics included in the SASB Standards
• (b) may—to the extent that these sources do not conflict with IFRS Sustainability Disclosure Standards—refer to and consider the applicability of:
  • the CDSB Framework Application Guidance for Water- and Biodiversity-related disclosures;
  • the most recent pronouncements of other standard‑setting bodies whose requirements are designed to meet the information needs of users of general purpose financial reports; and
  • the information, including metrics, disclosed by entities that operate in the same industry(s) or geographical region(s).
• (c) may—to the extent that these sources assist the entity in meeting the objective of IFRS S1 and do not conflict with IFRS Sustainability Disclosure Standards—refer to and consider the applicability of the Global Reporting Initiative (GRI) Standards and the European Sustainability Reporting Standards (ESRS)

An entity is required to identify: [IFRS S1:59]

• (a) the specific standards, pronouncements, industry practice and other sources of guidance that the entity has applied in preparing its sustainability-related financial disclosures, including, if applicable, identifying the disclosure topics in the SASB Standards; and
• (b) the industry(s) specified in the IFRS Sustainability Disclosure Standards, the SASB Standards or other sources of guidance relating to a particular industry(s) that the entity has applied in preparing its sustainability-related financial disclosures, including in identifying applicable metrics.

Location of disclosures and timing of reporting

An entity is required to provide disclosures required by IFRS Sustainability Disclosure Standards as part of its general purpose financial reports. [IFRS S1:60]

Subject to any regulation or other requirements that apply to an entity, there are various possible locations in its general purpose financial reports in which to disclose sustainability-related financial information. Sustainability-related financial disclosures could be included in an entity’s management commentary or a similar report when it forms part of an entity’s general purpose financial reports. Management commentary or a similar report is a required report in many jurisdictions. It might be known by or included in reports with various names, such as ‘management report’, ‘management’s discussion and analysis’, ‘operating and financial review’, ‘integrated report’ or ‘strategic report’. [IFRS S1:61]

An entity is required to report its sustainability-related financial disclosures at the same time as its related financial statements. The entity’s sustainability-related financial disclosures are required to cover the same reporting period as the related financial statements. [IFRS S1:64]

Comparative information

Unless another IFRS Sustainability Disclosure Standard permits or requires otherwise, an entity is required to disclose comparative information in respect of the preceding period for all amounts disclosed in the reporting period. If such information would be useful for an understanding of the sustainability-related financial disclosures for the reporting period, the entity is also required to disclose comparative information for narrative and descriptive sustainability-related financial information. [IFRS S1:70]

Statement of compliance

An entity whose sustainability-related financial disclosures comply with all the requirements of IFRS Sustainability Disclosure Standards is required to make an explicit and unreserved statement of compliance. An entity is not permitted to describe sustainability-related financial disclosures as complying with IFRS Sustainability Disclosure Standards unless they comply with all the requirements of IFRS Sustainability Disclosure Standards. [IFRS S1:72]

Judgements, uncertainties and errors

An entity is required to disclose information to enable users of general purpose financial reports to understand the judgements, apart from those involving estimations of amounts, that the entity has made in the process of preparing its sustainability-related financial disclosures and that have the most significant effect on the information included in those disclosures. [IFRS S1:74]

In addition, an entity is required to disclose information to enable users of general purpose financial reports to understand the most significant uncertainties affecting the amounts reported in its sustainability-related financial disclosures. [IFRS S1:77]

An entity is required to: [IFRS S1:78]

• (a) identify the amounts that it has disclosed and that are subject to a high level of measurement uncertainty; and
• (b) in relation to each amount identified, disclose information about:
  • (i) the sources of measurement uncertainty—for example, the dependence of the amount on the outcome of a future event, on a measurement technique or on the availability and quality of data from the entity’s value chain; and
  • (ii) the assumptions, approximations and judgements the entity has made in measuring the amount.

Furthermore, an entity is required to correct material prior period errors by restating the comparative amounts for the prior period(s) disclosed unless it is impracticable to do so. [IFRS S1:83]

Effective date and transition

An entity is required to apply IFRS S1 for annual reporting periods beginning on or after 1 January 2024. Earlier application is permitted. If an entity applies IFRS S1 earlier, it is required to disclose that fact and apply IFRS S2 at the same time. [IFRS S1:E1]

An entity is not required to provide the disclosures specified in IFRS S1 for any period before the beginning of the annual reporting period in which an entity first applies IFRS S1. Accordingly, an entity is not required to disclose comparative information in the first annual reporting period in which it applies IFRS S1. [IFRS S1:E3]

In the first annual reporting period in which an entity applies IFRS S1, the entity is permitted to report its sustainability-related financial disclosures after it publishes its related financial statements. In applying this transition relief, an entity is required to report its sustainability-related financial disclosures: [IFRS S1:E4]

• (a) at the same time as its next second-quarter or half-year interim general purpose financial report, if the entity is required to provide such an interim report;
• (b) at the same time as its next second-quarter or half-year interim general purpose financial report, but within nine months of the end of the annual reporting period in which the entity first applies IFRS S1, if the entity voluntarily provides such an interim report; and
• (c) within nine months of the end of the annual reporting period in which the entity first applies IFRS S1, if the entity is not required to and does not voluntarily provide an interim general purpose financial report;

In the first annual reporting period in which an entity applies IFRS S1, the entity is permitted to disclose information on only climate-related risks and opportunities (in accordance with IFRS S2) and consequently apply the requirements in IFRS S1 only insofar as they relate to the disclosure of information on climate-related risks and opportunities. If an entity uses this transition relief, it is required to disclose that fact. [IFRS S1:E5]

If an entity uses that transition relief: [IFRS S1:E6]

• (a) in the first annual reporting period in which the entity applies IFRS S1, it is not required to disclose comparative information about its climate-related risks and opportunities; and
• (b) in the second annual reporting period in which the entity applies IFRS S1, it is not required to disclose comparative information about its sustainability-related risks and opportunities, other than its climate-related risks and opportunities.