Sustainability and Climate Change | Financial reporting

Frequently asked questions to help identify and address climate change impacts on your financial statements.
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• What might a company that purchases carbon credits voluntarily need to consider?
• What’s the impact on useful lives and residual values of PP&E and intangible assets?
• What’s the impact on cash flow projections used for impairment testing of non-financial assets?
• What are the potential impacts on inventories?

• Net-zero commitments
• Have you recorded all of your environmental and decommissioning obligations?
• How do you account for emissions or ‘green’ schemes?
• How might employee benefit arrangements be affected by climate-related risks?
• What's the impact on restructuring provisions?

• How do you account for different forms of government assistance?
• Do green bonds contain embedded derivatives?
• Do you have a lease of green technology?
• What are the potential impacts of leasing polluting assets?

Lenders

• Lessors – How will climate-related risks impact operating and finance leases?
• What's the impact on expected credit losses?
• Do green loans meet the SPPI criterion?

• What’s the impact on the going concern assessment and related disclosures?
• Have you disclosed the impacts of climate-related matters clearly?

Understand the rapid and converging developments in sustainability reporting.

International Sustainability Standards Board

The IFRS Foundation is aiming to put sustainability reporting on the same footing as financial reporting through the establishment of a sister body to the International Accounting Standards Board. The International Sustainability Standards Board (ISSB) will develop baseline sustainability disclosure standards to enable globally consistent, comparable and reliable sustainability reporting using a building blocks approach. This approach will allow national and regional jurisdictions to build on that global baseline to set supplemental standards that serve their specific jurisdictional needs.  Read more >

Global sustainability reporting standards

Sustainability reporting continues to develop at a fast pace across the globe. Three different bodies are developing sustainability standards across the globe: the ISSB, the US Securities Exchange Commission (SEC) and the European Financial Reporting Advisory Group (EFRAG).

The ISSB published the first two IFRS^® Sustainability Disclosure Standards (IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures) on 26 June 2023. The IFRS Sustainability Disclosure Standards are designed to meet the needs of all organisations, not just the most sophisticated. They provide a clear idea of what organisations need to report to meet the needs of global capital markets – providing investors with globally comparable information.

Read more about the new ISSB sustainability disclosures standards >

The EFRAG and SEC standard requirements share numerous commonalities with the ISSB standards, however there are a differences that are important to understand when organisations are required to, or are considering reporting under multiple frameworks.

Our Comparing sustainability reporting proposals guide provides further insight on some of the practical challenges you may encounter as you prepare for the new sustainability reporting standards.

Sustainability-related disclosures – heightened expectations for current reporting periods 

Regulator and government activities in Australia in late 2022/early 2023 reinforced the increasing focus and heightened expectations surrounding sustainability reporting, particularly climate. Exposed organisations need to act now rather than later in considering their reporting and communications.

In the absence of requirements mandating climate-related disclosures in Australia, the TCFD recommendations continue to be supported by all Australian standard-setters and regulators and are currently considered to be the basis for best practice disclosures in Annual Reports. 

Read more in Reporting Update 23RU-02 >

AASB releases exposure draft on climate reporting

In October 2023, the Australian Accounting Standards Board (AASB) released an exposure draft for disclosure of climate-related financial information. The ED includes three proposed Australian Sustainability Reporting Standards (ASRS Standards) that include modifications to the baseline of the ISSB™ Standards with a climate-first approach. It is proposed to be applicable for both profit and not-for-profit entities. 

The AASB is proposing the ASRS Standards would apply to annual reporting periods beginning on or after 1 July 2024. However, the financial period in which an entity is first required to apply these ASRS Standards will be subject to decisions of the Australian Government – see below. 

Read more in Reporting Update 23RU-13 >

Mandatory climate related-financial reporting expected in Australia from December 2025

On 27 March 2024, the climate-related financial disclosures Treasury Bill was introduced into Parliament. Given the Parliamentary timetable, debate will be in May 2024 at the earliest.

The Bill is largely consistent with Treasury’s exposure draft legislation released in January 2024. The main change is the commencement date for reporting is now proposed to be financial years beginning on or after 1 January 2025 (or later). Subject to Parliamentary processes, this means:

• 31 December 2025 year ends will report first, and
• First mandatory reporting date for 30 June year ends will now be 30 June 2026 not 30 June 2025.

The Bill is the culmination of a series of consultations and proposes amendments to legislation.

Read more in Reporting Update 24RU-04 >

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