In response to the increasing demand for consistent and comprehensive sustainability-related financial information, the International Sustainability Standards Board (ISSB) is finalizing IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information. The board aims to establish a framework that guides entities in disclosing their sustainability-related risks and opportunities, enabling them to provide a complete set of sustainability-related financial disclosures. This article explores the current stage of the initiative and provides updates on recent developments.
Current Stage and Timeline:
In March 2022, the ISSB published the Exposure Draft IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information. This draft proposed overall requirements for entities to disclose sustainability-related financial information, emphasizing the need for a comprehensive set of disclosures. Taking into account feedback received on the Exposure Draft, the ISSB embarked on a redeliberating process to refine the proposed standards.
The ISSB aims to issue an IFRS Sustainability Disclosure Standard around the end of Q2 2023, following the completion of the redeliberating process. This timeline reflects the board’s commitment to developing robust and practical sustainability reporting standards.
Supplementary ISSB Update – April 2023:
On April 4, 2023, the ISSB convened to discuss transition reliefs for the forthcoming IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information.
The board tentatively decided to introduce a transition relief in IFRS S1 that allows entities to initially report only on climate-related risks and opportunities, as outlined in IFRS S2 Climate-related Disclosures. In the first year of applying IFRS S1 and IFRS S2, entities availing this transition relief would be required to provide information solely on climate-related aspects. However, they would need to disclose their other sustainability-related risks and opportunities in the second year of implementing the two standards.
It is important to note that this one-year transition relief does not alter the effective date of IFRS S1. As decided in February 2023, IFRS S1 is scheduled to be effective for annual reporting periods commencing on or after January 1, 2024. Nevertheless, entities opting for this transition relief would be required to comply with the disclosure requirements of IFRS S1 exclusively for climate-related financial information during the first year. The application of IFRS S2 and its requirements remain unaffected by this transition relief decision.
The ISSB also tentatively agreed that entities utilizing this transition relief should disclose this fact in their reports. Additionally, entities may extend the previously agreed-upon transition relief in IFRS S1 concerning the disclosure of comparative information, allowing them not to disclose comparative information related to other sustainability-related financial information in the first year. However, it should be noted that comparative information for climate-related financial information would still be required in the second year.
The ISSB’s efforts in finalizing the General Requirements for Disclosure of Sustainability-related Financial Information reflect the growing importance of sustainability reporting. The ongoing development and refinement of these standards demonstrate the board’s commitment to providing entities with a robust framework for disclosing sustainability-related risks and opportunities. As the proposed IFRS Sustainability Disclosure Standard nears completion, entities can anticipate greater guidance and clarity in their reporting practices, fostering transparency and accountability in the assessment of enterprise value.