The Australian Accounting Standards Board (AASB) is working on reviewing certain sustainability reporting rules (IFRS S1 and S2) and has shared some important information about how companies in Australia will disclose climate-related information.
Recently, the Australian Government announced a plan that would require many companies in Australia to disclose climate-related financial information. On 27 June 2023, the Australian Treasury released a second round of discussions, and the proposal suggests that over a three-year period, companies meeting at least 2 of the 3 criteria (these include on a consolidated basis a turnover of over $50 million, assets over $25 million and more than 100 employees) would have to report. The following table summarises the scope of application and timing defined in the proposal.
Source, Australian Treasury Consultation on Climate-related financial disclosure – 27 June 2023
The proposal also states that these companies would need to obtain assurance on their disclosures (first year, a limited assurance; later years, a reasonable assurance). The AASB’s role is to create the standards for how companies will disclose climate-related information.
What will these standards look like?
During a meeting on 8 August 2023, the AASB has decided not to fully adopt IFRS S1. Instead, they will be developing an Australian version of the IFRS S1 that provides basic guidelines specifically for disclosing climate-related financial information. This means they will be focusing only on climate issues for now, and not broader sustainability topics.
The AASB also decided that its draft version of the climate-related financial disclosure standards will closely follow IFRS S2. However, a few deviations are already envisaged:
- The Australian climate-related standards won’t reference the Sustainability Accounting Standards Board (SASB) in its first version.
- This decision will be revisited after the International Sustainability Standards Board (ISSB) made the SASB industry-based standards fully international.
- Some terms in IFRS S2 will also be changed to fit the Australian context. For example, the term “executive” will be replaced by “key management personnel” to be consistent with AASB 124 Related Party Disclosures. IFRS S1 and S2 terms will also be adjusted so that not-for-profit entities in Australia’s private and public sectors can apply the standards.
What are the implications for Australian companies?
These recent decisions make it clear that reporting on climate-related risks and opportunities is a top priority. For Australian companies that have not started reporting on environmental, social and governance (ESG) matters; a good first step is to calculate their carbon footprint.
For companies that have already done this and are currently reporting on their carbon emissions, the recent AASB decisions suggest that IFRS S2 could be a useful starting point for understanding how prepared they are to disclose climate-related financial information under the upcoming Australian standards.
If you require assistance or would like to know more, please contact your usual Mazars advisor or alternatively our experts via the form below or on:
Consultation treasury - Climate-related financial disclosure - consultation paper (treasury.gov.au)
Alert AASB - AASB Action Alert No. 224, for Meeting 197, Aug 2023
Author: Damien Lambert
Published date: 21 August 2023
All rights reserved. This publication in whole or in part may not be reproduced, distributed or used in any manner whatsoever without the express prior and written consent of Mazars, except for the use of brief quotations in the press, in social media or in another communication tool, as long as Mazars and the source of the publication are duly mentioned. In all cases, Mazars’ intellectual property rights are protected and the Mazars Group shall not be liable for any use of this publication by third parties, either with or without Mazars’ prior authorisation. Also please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice. Content is accurate as at the date published.