ISSB IFRS S1 General Requirements 2 — Questions and Answers
Question 1: How does IFRS S1 define 'sustainability-related risks and opportunities'?
- Risks and opportunities arising from sustainability-related issues that could affect entity value over short, medium, or long term (Correct answer)
- Only risks directly causing financial losses in the current reporting period
- Regulatory sustainability compliance obligations
- Environmental risks listed in EPA guidance documents
Correct answer: Risks and opportunities arising from sustainability-related issues that could affect entity value over short, medium, or long term
IFRS S1 defines sustainability-related risks and opportunities broadly as those that could affect the entity's value over any time horizon.
Question 2: What reporting location does IFRS S1 recommend for sustainability-related financial disclosures?
- As part of the general purpose financial report, in the same document as financial statements (Correct answer)
- In a separate standalone sustainability report filed independently
- On the entity's public website updated in real time
- In the CEO letter to shareholders only
Correct answer: As part of the general purpose financial report, in the same document as financial statements
IFRS S1 recommends disclosures be included in the general purpose financial report, integrated with financial statements.
Question 3: Under IFRS S1, what must an entity disclose about its governance bodies responsible for sustainability risks?
- Identity, skills, and oversight processes of governance bodies or individuals responsible for sustainability-related risks (Correct answer)
- Only the board committee name without individual responsibilities
- Executive compensation tied to sustainability metrics
- Annual training hours completed by board members on ESG
Correct answer: Identity, skills, and oversight processes of governance bodies or individuals responsible for sustainability-related risks
IFRS S1 requires disclosure of who oversees sustainability risks, including their skills/competencies, how oversight is exercised, and how they are informed.
Question 4: What transition relief did the ISSB grant for the first reporting period under IFRS S1?
- Entities may omit comparative information in the first year of applying IFRS S1 (Correct answer)
- Full exemption from disclosing Scope 3 greenhouse gas emissions indefinitely
- Delay of all IFRS S1 requirements until IFRS S2 is also adopted
- No transition relief; full compliance required from day one
Correct answer: Entities may omit comparative information in the first year of applying IFRS S1
In the first year of applying IFRS S1, entities are not required to provide comparative period sustainability information.
Question 5: Under IFRS S1, when an entity cannot provide timely sustainability information, what alternative is permitted?
- Entities may use information available at the reporting date even if not fully aligned with the period, with appropriate disclosure (Correct answer)
- They may omit the entire sustainability report for that year
- They must request a formal extension from ISSB headquarters
- They revert to prior GAAP frameworks until information is available
Correct answer: Entities may use information available at the reporting date even if not fully aligned with the period, with appropriate disclosure
IFRS S1 allows use of the best available information at the reporting date, provided the entity discloses the nature and source of any estimation uncertainty.
Question 6: Which characteristic does IFRS S1 identify as essential for sustainability disclosures to be useful to investors?
- Connected information — sustainability disclosures must show linkages to financial statements and each other (Correct answer)
- Brevity — disclosures should be limited to one page per topic
- Audited — all disclosures must receive external assurance before publication
- Standardized — identical metrics across all industries regardless of sector
Correct answer: Connected information — sustainability disclosures must show linkages to financial statements and each other
IFRS S1 emphasizes connectivity of information, requiring entities to show how sustainability risks link to financial position, performance, and cash flows.
ISSB IFRS S1 General Requirements 2
How does IFRS S1 define 'sustainability-related risks and opportunities'?