Guidance on disclosing comparatives for sustainability disclosures

At its June meeting, the TIG discussed two issues relating to requirements to disclose comparative information, which we summarise briefly below:

• Revision of preceding period estimated amounts when estimating information from an entity in the value chain
• Application of the requirements on comparative information when acquiring or disposing of a subsidiary.

Revision of preceding period comparatives

In some cases, entities must estimate the amount disclosed for a metric because precise information is unavailable when sustainability disclosures are prepared. In a subsequent year, new information may become available about the estimated metric disclosed in the preceding period, and the new information provides evidence of circumstances that existed in that period. Unless it is impracticable to do so, or the estimated metric is forward-looking, IFRS S1, paragraph B50 requires the entity to:

• Disclose a revised comparative amount that reflects that new information
• Disclose the difference between the amount disclosed in the preceding period and the revised comparative amount, and
• Explain the reasons for revising the comparative amount.

Example

Investment Entity XYZ is measuring its Category 15 Scope 3 greenhouse gas (GHG) emissions for the year ended 30 June 20X1 for Investee ABC, in which it has a 20% interest.

Investee ABC has the same year-end as Investment Entity XYZ, but its GHG emissions for the year ended 30 June 20X1 are unavailable when Investment Entity XYZ finalises its sustainability report. As a result, Investment Entity XYZ uses prior period information (for the year ended 30 June 20X0) to estimate Investee ABC’s Category 15 Scope 3 emissions for the 30 June 20X1 period.

Assume Investee ABC’s actual CO2 equivalent (CO2_e) GHG emissions were:

• 100 tonnes for the year ended 30 June 20X0
• 180 tonnes for the year ended 30 June 20X1.

Investment Entity XYZ reported Category 15 Scope 3 GHG emissions for Investee ABC in its 30 June 20X1 sustainability report as follows:

	Year ended 30 June 20X2	Year ended 30 June 20X1
20% of 100 tonnes of CO2e GHG emissions	N/A	20

Unless it is impracticable to do so, the TIG discussions noted that Investment Entity XYZ applies IFRS S1, paragraph B50 when estimating current period metrics using prior period information. That is, they must restate the comparative information. Therefore, in its 30 June 20X2 sustainability report, Investment Entity XYZ will report Category 15 Scope 3 GHG emissions as shown below:

	Year ended 30 June 20X2	Year ended 30 June 20X1
20% of 180 tonnes of CO2e GHG emissions	36	361
1: Investment Entity XYZ should also disclose the difference between the amount disclosed in the preceding period (20 tonnes) and the revised comparative amount (36 tonnes), and explain the reasons for revising the comparative amount (IFRS S1, paragraph B50(b) and (c)).

Comparative information when acquiring or disposing of a subsidiary

The requirement to choose a ’base year’ in the GHG Protocol Corporate Accounting and Reporting Standard (2004), and then recalculate base year emissions when there is a structural change in the organisation (such as for mergers, acquisitions and divestments), is inconsistent with IFRS S1:

• IFRS S1, paragraph 70 requires disclosure of comparative information for the preceding period for all amounts disclosed in the reporting period
• IFRS S1, paragraph 20 requires sustainability-related disclosures for the same reporting entity as the related financial statements.

Recalculating ‘base year’ emissions under the GHG Protocol results in entities having to restate prior GHG emissions to include emissions of subsidiaries acquired, or to remove emissions of subsidiaries sold by an entity during the year. These emissions would not reflect the reporting entity’s structure for financial reporting purposes. To avoid doubt, IFRS S2, paragraph B23 stresses that entities must only apply the GHG Protocol to the extent that they do not conflict with the requirements in IFRS S2.

The TIG discussions noted examples and clarified what, if any, comparative disclosures are required when subsidiaries are acquired or disposed of during the current reporting period.

Scenario	Current period	Comparative period
Entity acquires a subsidiary during the current reporting period. It previously did not hold an interest in this entity. The subsidiary is included in the consolidated financial statements from the date of acquisition. Prior year consolidated financial statements did not include amounts related to the newly acquired subsidiary.	Disclose sustainability information from the acquisition date (when a subsidiary is included in the consolidated financial statements).	No. Subsidiary was not part of the reporting entity during the prior period.
Entity disposes of its entire interest in a subsidiary during the current reporting period. The subsidiary is only included in the consolidated financial statements up until the date of disposal.	Disclose sustainability information until the disposal date (when a subsidiary is removed from the consolidated financial statements).	Yes. Comparative information will include amounts related to the subsidiary for twelve months because it was part of the reporting entity during the prior period.
Extreme case example 1: Entity disposes of its entire operations in a specific industry (Industry X) on the first day of the current reporting period. In the comparative period, some industry metrics were disclosed that only applied to Industry X.	Industry-specific metrics for Industry X were not disclosed because disposal was on the first day of the current reporting period.	No. Comparative information is only required for amounts disclosed in the current reporting period. As Industry X metrics are not disclosed in the current period, no comparative information is required.
Extreme case example 2: Entity disposes of its entire interest in a subsidiary two months into the current reporting period.	Scope 2 GHG emissions disclosed until disposal date.	Yes. Comparative information for Scope 2 GHG emissions is required for the subsidiary for twelve months because it was part of the reporting entity during the prior period.

More information

You can find more details about the TIG discussions in the June 2024 TIG summary.

How BDO can help

Given that climate reporting will soon be mandatory in Australia, it’s vital to start measuring your carbon footprint now. Determining Scope 1, Scope 2 and Scope 3 GHG emissions in accordance with the GHG Protocol takes time, and that’s without the added complexity of some of the TIG discussions noted above. Our sustainability reporting experts can help you get started. Contact us today.