On June 26, the International Sustainability Standards Board (ISSB) unveiled two new sustainability standards: “IFRS S1, General Requirements for Disclosure of Sustainability-related Financial Information” and “IFRS S2, Climate-related Disclosures.” These standards provide a comprehensive framework for organizations to communicate sustainability-related information in their financial reporting.
Breaking down the standards
IFRS S1 outlines the overarching necessities for organizations to disclose sustainability-related financial data. This encompasses crucial details about an organization’s governance, strategy, and risk management, as well as related metrics and targets. Effective for periods commencing on or after January 1, 2024, IFRS S1 obliges organizations to reveal significant sustainability-related risks and opportunities they encounter.
Organizations are prompted to assess a variety of sources, including industry-specific Sustainability Accounting Standards Board (SASB) standards, ISSB’s non-mandatory guidance, pronouncements from other relevant standard-setting bodies, and insights from peer organizations in the same industries or regions. This approach ensures a comprehensive and insightful disclosure.
IFRS S2 climate-related disclosures sets the stage for identifying, quantifying, and divulging climate-related risks and opportunities. The IFRS S2 standards facilitate an organization’s ability to convey vital information, enabling users of general-purpose financial reporting to understand key aspects such as governance processes, climate-influenced strategy, risk management procedures, and performance metrics. By providing this comprehensive data, organizations support the evaluation of future cash flows, contributing to a nuanced understanding of an organization’s enterprise value.
Both IFRS S1 and IFRS S2 play a pivotal role in elevating the transparency and relevance of sustainability-related disclosures in financial reporting. These standards reflect a collective effort to ensure that businesses communicate their sustainability initiatives clearly and intelligently, fostering informed decision-making for stakeholders.
The significance of IFRS S1 and IFRS S2 standards to CPAs
Organizations across the capital markets are set to incorporate IFRS S1 and IFRS S2 into their financial reporting for periods commencing on or after January 1, 2024. CPAs will be tasked with comprehending these standards and guiding organizations to precisely present their sustainability-related data within their financial reports.
Alberta CPAs must be poised to play a crucial role to aid a diverse array of organizations—from global multinationals to emerging startups—in comprehending the impact of sustainability reporting on their operations and business strategies.
Gain deeper insights into IFRS S1 and S2
Starting this fall, CPA Alberta will offer courses that include content on the new Sustainability Standards that will help you help the organizations and business that rely on your business expertise.
Courses and their dates will be available for registration on CPA Alberta’s PD Portal starting in September.
