ISSB: Sustainability Standards requirements – a quick overview

ISSB: Sustainability Standards requirements – a quick overview

• 05 January 2024
• Sustainability Reporting
• South African Accounting Academy

These standards take effect for annual reporting periods beginning on or after 1 January 2024.

South Africa is used to reporting the annual financial statements first, followed by its sustainability report after a few months.

Here is a summary of the new sustainability standards:

IFRS S1:

• Introduced a 1-year transition period in the first year of reporting
• No need for comparative reporting in the first year of reporting.
• Disclosure of strategies, governance, processes and processes
• Assessment and monitoring of risks and opportunities
• Progress made toward reaching regulatory targets
• Performance of a company concerning sustainability metrics

IFRS S2:

• Disclose risks and opportunities by IFRS 2 for the first year of application
• Disclosure about decarbonization strategies and climate resilience, governance, processes and processes
• Information related to both physical and transitional risks i.e. impact of regulation of carbon emissions
• Impact of climate-related factors on a company’s valuation – Guidance provided
• Required to use climate scenarios to report on climate resilience and guidance to be provided on scenarios to use
• ISSB to take over the remit of TCFD (Task Force on Climate-Related Financial Disclosures) from 2024

The ISSB supports individual jurisdictions to ensure comparability and interoperability with national regulations

The Standards base their definition of ‘materiality’ on the IFRS Accounting Standards approach.

Click here to download IFRS S1 and IFRS S2:

• https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards-issb/english/2023/issued/part-a/issb-2023-a-ifrs-s1-general-requirements-for-disclosure-of-sustainability-related-financial-information.pdf  
• https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards-issb/english/2023/issued/part-a/issb-2023-a-ifrs-s2-climate-related-disclosures.pdf 

Relevance to Auditors, Independent Reviewers & Accountants:

• As an auditor and independent reviewer, you need to comply with International Standards on Auditing and other Assurance Services, and thus you need knowledge of the impact of amendments to IFRSs that are approved as well as when they become effective.
• Failure to adhere to ISAs may be interpreted as negligence and you could be held liable.
• As an auditor and independent reviewer, you should be aware of proposed changes to existing standards issued by the standard-setting bodies, e.g. the IAASB.

Relevance to Your Clients:

• Applies to any entity that is required, or chooses, to prepare general purpose financial statements.
• General purpose financial reporting encompasses—but is not restricted to—an entity’s general purpose financial statements and sustainability-related financial disclosures.
• Compilers of annual financial statements must know the impact of amendments to IFRSs that are approved as well as when they become effective.

Technical Summary Video:

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