AASB approves final Australian sustainability reporting standards
AASB approves final Australian sustainability reporting standards
The Australian Accounting Standards Board’s (AASB’s) approval of its inaugural sustainability reporting standards means the reality of climate reporting is a step closer for Australian entities. The new sustainability standards follow the passing of the Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024, which mandates sustainability reporting in Australia, and empowers the AASB to issue sustainability standards by amending Part 2M of the Corporations Act 2001.
The Corporations Act 2001 sets out requirements for which entities must prepare sustainability reports, and when. There are three different start dates, depending on whether an entity falls into Group 1, Group 2 or Group 3. Sustainability reporting will apply for financial years beginning on or after:
- 1 January 2025 for Group 1 entities
- 1 July 2026 for Group 2 entities
- 1 July 2027 for Group 3 entities.
Our decision tree diagram will assist you in determining whether your entity is subject to mandatory sustainability reporting, and if applicable, which of the three groups it falls into.
New standards
The two new standards are:
- AASB S1 General Requirements for Disclosure of Sustainability-related Financial Information, a voluntary standard
- AASB S2 Climate-related Disclosures is mandatory.
As the Act initially only mandates climate reporting (AASB S2), AASB S1 is a voluntary standard and has not been issued for Corporations Act purposes.
AASB S1
The content in AASB S1 is essentially the same as IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information. However, the scope and transition reliefs have been amended to reflect AASB S1’s voluntary status.
AASB S1 also contains Australian-specific guidance for not-for-profit entities (NFPs). It refers to the descriptions of ‘general purpose financial reports’ and ‘primary users of general purpose financial reports’ in the Framework for the Preparation and Presentation of Financial Statements, rather than the definitions contained in Appendix A.
To be consistent with AASB S2 (the mandatory standard), the effective date for AASB S1 is for annual reporting periods beginning on or after 1 January 2025 (early application is permitted).
AASB S2
AASB S2 is a mandatory standard for Corporations Act purposes. It includes all the requirements of IFRS S2 Climate-related Disclosures except for the following:
- To align with mandatory climate reporting requirements, AASB S2 applies to annual periods beginning on or after 1 January 2025, rather than 1 January 2024 for IFRS S2.
- An Australian-specific appendix, Appendix D General requirements for disclosure of climate-related financial information, enables AASB S2 to function as a standalone mandatory standard. Appendix D includes all the IFRS S1 conceptual paragraphs whose content would otherwise be missed because AASB S1 is a voluntary standard.
- Australian paragraphs Aus7.1 and Aus26.1 clarify that entities must avoid duplicating unnecessary information if they elect to apply AASB S1 and disclose information about sustainability-related risks and opportunities in addition to climate.
- Australian paragraphs Aus20.1 and AusB38.1 in Appendix D specify that an entity’s climate-related financial disclosures must be for the same reporting entity as the related financial statements unless otherwise permitted by law. This change is necessary to facilitate the operation of s292A(2) of the Corporations Act, which relieves a subsidiary from preparing climate disclosures if its parent entity chooses to prepare consolidated climate disclosures.
- The definition of ‘disclosure topic’ is deleted from the defined terms in Appendix A of AASB S2 to modify or omit the industry-based requirements set out in IFRS S2 paragraphs 12, 23, 28(b), 32, 37, B65(d) and B67. Entities applying AASB S2 are not required to disclose industry-based metrics or to consider the disclosure topics defined in Industry-based Guidance on Implementing IFRS S2.
- There is additional content for NFPs. NFPs must refer to the definitions of ‘general purpose financial reports’ and ‘primary users of general purpose financial reports’ specified in the Framework for the Preparation and Presentation of Financial Statementswhen applying AASB S2. There is also materiality guidance for NFPs in paragraphs AusB14.1 and AusB15.1 of Appendix D.
- AASB S2 specifies the relevant versions of non-legislative Australian and other foreign documents. An example is the reference to the latest international agreement on climate change (i.e. the Paris Agreement) and the Global Industry Classification Standards (GICS).
Where to find AASB S1 and AASB S2?
You can find these standards on the AASB’s Standards Portal.
More information
Our recent article answers all your questions about mandatory sustainability reporting in Australia. Contact us if you have any additional questions.
How BDO can help
If you need support assessing the impacts of these new sustainability reporting standards our sustainability reporting experts can help.