Transitional relief to support companies applying IFRS S1 & S2

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Transitional relief to support companies applying IFRS S1 & S2

• 24 April 2023
• Accounting
• South African Accounting Academy

The ISSB met on 4 April 2023 to discuss further the transition reliefs to be provided in IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information.

The ISSB tentatively decided to introduce a transition relief in IFRS S1 that would allow an entity to report on only climate-related risks and opportunities (as set out in IFRS S2 Climate-related Disclosures) in the first year it applies IFRS S1 and IFRS S2. The entity would be required to provide information about its other sustainability-related risks and opportunities in the second year it applies the two Standards.

This one-year transition relief would not change the effective date of IFRS S1. The ISSB tentatively decided in February 2023 to require that IFRS S1 be effective for annual reporting periods beginning on or after 1 January 2024. However, for an entity applying this transition relief in the first year it applies IFRS S1, the requirements in IFRS S1 would apply only insofar as they relate to the disclosure of climate-related financial information.

This transition relief would have no effect on the application of or requirements in IFRS S2.

The ISSB also tentatively decided that if an entity uses this transition relief, it:

• would be required to disclose that fact.
• could extend the previously agreed transition relief in IFRS S1 related to disclosing comparative information such that the entity would not be required to disclose comparative information related to its other sustainability-related financial information in the first year it discloses that information. For the avoidance of doubt, comparative information for climate-related financial information would be required in the second year.

The ISSB expects to issue the two Standards towards the end of the second quarter of 2023.

Click here to access more information:

https://www.ifrs.org/news-and-events/updates/issb/2023/supplementary-issb-update-april-2023/

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 have knowledge of the impact of amendments to IFRSs that are approved as well as when they become effective.

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