IFRS S1: What, How, Where, How much it costs
As its title says, it is about the general requirements for disclosure of sustainability-related financial information.
As a result, you will not find any specific rules for the disclosures, because IFRS S1 serves as a framework for your reporting.
In other words, it is YOU (or the related company) who shall develop its own sustainability disclosures and IFRS S1 just gives you guidance for doing so.
Let me brief you a bit.
#1 Which information should you provide?
Not ALL possible.
That would be time and cost demanding, and not very useful.
Instead, you should provide only material information about sustainability-related risks and opportunities that can affect your (entity’s) cash flows, access to finance or cost of capital, etc.
Also, please note the focus on “material” – that is, the one that can affect the decisions of the users of your financial statements.
#2 Where should you report sustainability-related information?
Directly in the general-purpose financial reports, for example in the management commentary, annual reports, etc..
And, make it all connected to these financial statements. It means using the same assumptions and estimates, using the same presentation currency, providing the connections between the information on sustainability and financials, etc.
#3 So what’s the process?
The process of developing your IFRS S1 disclosures has two basic steps:
Step 1: Identify which risks and opportunities you will report on
Here, IFRS S1 does not tell you which specific risks and opportunities you need to report on.
Instead, it primarily refers you to SASB standards, but you can use the other guidance, too.
SASB standards are developed by The Sustainability Accounting Standards Board (hence the abbreviation SASB) and they are industry-specific.
Currently, there are 77 different SASB standards for 77 different industries, so what you need to do is to use the SASB standard applicable for your own industry.
For example, if you work for internet media&services organization, then you just apply the SASB standard for that industry.
You can download these standards from SASB website at no cost.
Step 2: Identify applicable disclosure requirements
Once you identified what you are going to report about, you need to identify what information you are going to provide about it.
Your information must be relevant, true and should include the disclosures about governance of that risk, the strategy used to manage risks and opportunities, risk management and different metrics and targets.
And then, of course, you need to gather the relevant data.
#4 How much will this cost us?
Of course, the total costs of gathering data in line with IFRS S1 will depend on the specifics of your company, but let me give you the estimate.
According estimates made by AI, companies with turnover of 20 million USD can expect to incur costs in the range of 10 000 to 100 000 USD annually, just to meet the requirements of IFRS S1.
Any questions or comments? Please let me know below, thank you!
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