ISSB Guide 2 — Questions and Answers
Question 1: Under IFRS S1, which group is identified as the primary audience for sustainability-related financial disclosures?
- Internal management and executives
- Primary users of general purpose financial reports (Correct answer)
- Regulatory agencies and governments
- Credit rating agencies exclusively
Correct answer: Primary users of general purpose financial reports
IFRS S1 targets primary users of general purpose financial reports — investors, lenders, and other creditors — who need information to make resource allocation decisions.
Question 2: What does the IFRS S1 concept of 'proportionality' allow smaller entities to do?
- Omit all quantitative sustainability disclosures
- Apply standards in a manner commensurate with their resources and capabilities (Correct answer)
- Delay reporting by up to five years
- Use only local GAAP rules instead of ISSB standards
Correct answer: Apply standards in a manner commensurate with their resources and capabilities
Proportionality recognizes that entities should apply IFRS S1 in a way that reflects their size, the complexity of their operations, and available resources.
Question 3: According to IFRS S1 guidance, over which time horizons must entities consider sustainability-related risks and opportunities?
- Current financial year only
- One year and five years
- Short, medium, and long term (Correct answer)
- Perpetual and indefinite horizons only
Correct answer: Short, medium, and long term
IFRS S1 requires entities to assess and disclose sustainability-related risks and opportunities across short-, medium-, and long-term planning horizons.
Question 4: When IFRS Sustainability Disclosure Standards do not address a specific sustainability topic, what should an entity do?
- Omit the disclosure entirely with no explanation
- Apply judgment using a prescribed hierarchy of sources such as SASB Standards (Correct answer)
- Wait for the ISSB to issue new guidance before disclosing
- Default to local statutory reporting rules
Correct answer: Apply judgment using a prescribed hierarchy of sources such as SASB Standards
Entities use a hierarchical sources list — including SASB Standards, CDSB Framework, and other established frameworks — to fill gaps not covered by existing ISSB standards.
Question 5: In ISSB guidance, what does 'connected information' require entities to ensure?
- Digital XBRL tagging of all sustainability data
- Consistency and linkage between sustainability disclosures and financial statements (Correct answer)
- Social media publication of material sustainability risks
- Database integration between ERP and ESG reporting software
Correct answer: Consistency and linkage between sustainability disclosures and financial statements
Connected information means sustainability disclosures must be consistent with and linked to information in the entity's financial statements to give a coherent picture.
Question 6: How does IFRS S1 describe the role of scenario analysis in strategy disclosures?
- It is prohibited as too speculative for financial reporting
- It is a mandatory quantitative method for all entities
- It is a useful tool for assessing how resilient strategy is under different sustainability conditions (Correct answer)
- It applies only to financial projections, not sustainability topics
Correct answer: It is a useful tool for assessing how resilient strategy is under different sustainability conditions
IFRS S1 identifies scenario analysis as a practical method for testing the resilience of an entity's strategy against plausible future sustainability-related conditions.
Question 7: Under ISSB guidance, when may an entity omit information about a sustainability-related opportunity?
- When the opportunity relates to a future reporting period
- Always — opportunities are voluntary disclosures
- When the information is not material to an assessment of enterprise value (Correct answer)
- When the opportunity involves a competitor's strategy
Correct answer: When the information is not material to an assessment of enterprise value
Materiality is the threshold for all ISSB disclosures; entities may omit opportunity information that would not influence primary users' decisions about enterprise value.
ISSB Guide 2
Under IFRS S1, which group is identified as the primary audience for sustainability-related financial disclosures?