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Reporting Standards Update

By Michael Kraten, PhD, CPA, Director of Accounting Program Initiatives, C.T. Bauer College of Business, University of Houston

In the sustainability sector, some accounting professionals believe that business-sponsored organizations should establish new disclosure expectations. Others argue that government agencies should issue mandatory reporting requirements. Currently, though, both activities are proceeding simultaneously.

IFRS Sustainability Standards S1 and S2

In the private sector, the International Sustainability Standards Board (ISSB) issued the final versions of IFRS Sustainability Standards S1 and S2 at the end of June. IFRS S1 and IFRS S2 – respectively defining (1) General Requirements for Disclosure of Sustainability-Related Financial Information and (2) Climate-Related Disclosures – are effective for annual reporting periods beginning on or after January 1, 2024.

Although the standards are “final” from the perspective of the ISSB, they are not necessarily “final” from the perspectives of the individual national jurisdictional bodies that utilize the IFRS standards. For companies with a global presence, it’s important to understand jurisdictional requirements that apply to each of their subsidiaries. CPA Canada, for instance, reminds us that:

“Even if a jurisdiction requires the application of IFRS Accounting Standards, it will decide whether companies under its jurisdiction will be required to comply with IFRS Sustainability Disclosure Standards.” Click here for CPA Canada’s perspective on ISSB Standards adoption.

For a deeper discussion on the new ISSB Standards, please see our related article here.

SEC Role

Meanwhile, earlier in June, the U.S. SEC announced its contributions to the U.S. Office of Information and Regulatory Affairs’ Spring 2023 Unified Agenda of Regulatory and Deregulatory Actions. The SEC’s related Reg Flex Agenda was updated to confirm that the agency expects to issue its Final Action on Climate Change Disclosure regulations in October 2023. Click here for the SEC Fact Sheet on the Enhancement and Standardization of Climate-Related Disclosures.

Corporate Sustainability Reporting Widens

Thus, in less than 12 months, the American accounting profession will likely need to address new sustainability disclosure requirements from both the private and public sectors. Indeed, corporate sustainability disclosures may soon represent the greatest expansion in accounting reporting since the advent of Sarbanes-Oxley.

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