Australian sustainability reporting standards expected soon

With climate reporting legislation passing both Houses of Parliament on 9 September 2024, there is now urgency for the Australian Accounting Standards Board (Board) to finalise and issue sustainability reporting standards in Australia. 

The Board’s initial proposals for Australian climate reporting were significantly different to global standards and would have prevented Australian companies from claiming compliance with IFRS^® Sustainability Reporting Standards. We are pleased to see the Board’s continued progress in aligning Australian and international climate-related disclosures.

August 2024 meeting

At its August 2024 meeting, the Board discussed working drafts of Australian Sustainability Reporting Standards, AASB S1 General Requirements for Sustainability-related Financial Information and AASB S2 Climate-related Disclosures.

AASB S1

AASB S1 will have the same scope and content as IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information except that it will be a voluntary standard. Additional paragraphs will be added regarding general purpose financial reports of not-for-profit (NFP) entities and their primary users to assist NFPs electing to apply AASB S1.

AASB S2

AASB S2 will be a mandatory standard and include all the requirements of IFRS S2 Climate-related Disclosures. However:

• The effective date will be 1 January 2025 rather than 1 January 2024 for IFRS S2.
• Appendix D General Requirements for Disclosure of Climate-related Financial Information will be added so that AASB S2 can function as a standalone mandatory standard. Appendix D will include all the IFRS S1 conceptual paragraphs whose content would otherwise be missed because AASB S1 is a voluntary standard.
• The requirements in IFRS S2, paragraphs 7 (governance) and 26 (risk management), will be amended to avoid unnecessary duplication of disclosures where an entity voluntarily applies AASB S1 to sustainability-related topics beyond climate.
• The IFRS S1 requirements in Appendix D regarding the reporting entity will be changed to 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 climate legislation, which relieves a subsidiary from preparing climate disclosures if its parent entity chooses to prepare consolidated climate disclosures.
• The definition of ‘disclosure topic’ will be deleted from the defined terms in Appendix A of AASB S2 Appendix to modify or omit the industry-based requirements set out in IFRS S2 paragraphs 12, 23, 28(b), 32, 37, B65(d) and B67.
• 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 Statements when applying AASB S2. Additional guidance regarding materiality will also be added for NFPs (paragraphs AusB14.1 and AusB15.1 are added to Appendix D of AASB S2).
• The relevant versions of external documents will be directly specified in AASB S2 rather than using a service standard as initially proposed.

Disclosure of industry-based information

The Board will also undertake a new project, Climate-related Disclosures: Industry-based Information. Preliminary stakeholder consultation will occur in March 2025. The intention is to finalise mandatory requirements for industry-based disclosures by 2030.

The project will focus on determining the appropriate basis and content of the industry-based disclosures, including assessing the industry-based classification system, and the industry-based disclosure topics and metrics set out in the Industry-based Guidance on Implementing IFRS S2.

Previous meetings

Please refer to our previous article for an update of key decisions taken by the Board at previous meetings.

How BDO can help

Climate reporting requirements in Australia continue to evolve. Understanding what is required, and then preparing your first climate report can seem overwhelming. Our sustainability reporting experts can help you to understand what this might mean for your organisation.

Contact us today.