AICPA & CIMA comment on ISSB drafts of sustainability disclosures

By Bryan Strickland

The Association of International Certified Professional Accountants, representing AICPA & CIMA, Tuesday showed support in comment letters for a pair of exposure drafts developed by the International Sustainability Standards Board (ISSB): IFRS S1: General Requirements for Disclosure of Sustainability-Related Financial Information and IFRS S2: Climate-Related Disclosures.

The IFRS Foundation announced the formation of the ISSB in November 2021 to take on the development of global standards for disclosing sustainability information.

The two draft standards were the first from the ISSB.

The comment letter on IFRS S1 and IFRS S2 applauds the ISSB's objectives and calls the exposure drafts "consistent with how preparers already organize financial statement information."

While generally praising both drafts, AICPA & CIMA provided feedback and suggestions on each.

Highlights of the comments on IFRS S1

Scope: AICPA & CIMA commented that sustainability standards should be demanding yet achievable, stating: "We support the scope of the standards being akin to the entity targeted for financial statement disclosures by the IASB or jurisdictional equivalents. … We believe this will enable a more comprehensive understanding of the enterprise value of the reporting entity, as well as enabling connectivity between sustainability and traditional financial information." The letter lauded the draft for taking value-chain reporting into account.

Materiality: The letter acknowledged that IFRS S1 defines material information in alignment with financial reporting standards but noted there may be a need for more specific information on how materiality of sustainability information is to be dealt with to guard against obscuring the usefulness of the disclosures.

Definitions: The letter asked the ISSB to consider, along with its definition of "enterprise value," including "a non-exhaustive list of indicative risks and opportunities that a preparer may wish to include" as well as more guidance about what "significant" means to better inform what should be reported. The letter also expressed concerns with the ability of companies to quantify future impacts in a way that would be auditable and suggested that the ISSB consider developing further guidance on the timelines and information for disclosure.

Risk management: The letter noted that it is crucial that organizations have sound risk management procedures in place to monitor, assess, and act on any risks as they arise because of the difficulties and encouraged the ISSB to consider promoting the use of the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework or a similar framework to guide companies on how to report risk. COSO is a joint initiative of private-sector organizations, including the AICPA, that develops thought leadership to enhance internal control, risk management, governance, and fraud deterrence. The letter also mentioned the CGMA Business Model Framework as a possible tool for identifying risks and opportunities.

Global standard setting: The letter expressed AICPA & CIMA's support of the alignment with existing frameworks, such as the recommendations from the Task Force on Climate-Related Financial Disclosures (TCFD), to create a global sustainability standard that will enable production of "consistent, comparable, reliable and therefore decision-useful information" and recommended that the concept of planetary boundaries help frame the structure of sustainability disclosures.

Assurance and audit: The letter advocated for sustainability assurance provided by audit firms as a means of enhancing the reliability of sustainability disclosures.

Connected reporting: The letter said it is imperative that the ISSB adopt a "robust" reporting framework that connects traditional financial disclosures and sustainability-related financial disclosures, mentioning the International Integrated Reporting Framework as a viable option.

The role of management accountancy in sustainability reporting: The letter advocated for the role that management accountants can play by using their unique skills and competencies in organizing and disseminating sustainability information and making the business case for companies to act on the information.

Highlights of the comments on IFRS S2

After welcoming the ISSB's and the IFRS Foundation's work developing the climate-related disclosure exposure draft, the letter commented on six of the remaining 16 questions posed in the request for comment.

Identification of climate-related risks and opportunities: As in the comments on IFRS S1, AICPA & CIMA asked the ISSB to consider going further in defining differences between the terms "significant" and "material" as they pertain to reporting short-, medium-, and long-term risks (time frames, the letter said, for which preparers could also benefit from more clarity).

Current and anticipated effects: The letter suggested a three-year global trial period for the reporting of the impact of future events to enable organizations to develop best practices in adhering to this standard.

Risk management: As in the comments on IFRS S1, AICPA & CIMA asked that the ISSB consider using the COSO framework.

Cross-industry metric categories and greenhouse gas emissions: The letter noted the challenge companies presently face when reporting indirect emissions from their value chains, supporting exemptions in appropriate situations and recognition of good-faith efforts to comply with sustainability standards.

Global baseline: The letter stressed the importance of global standards for reporting climate information and expressed concerns about the possibility of the ISSB and the European Financial Reporting Advisory Group (EFRAG) creating competing standards: "It is important that a global sustainability taxonomy is consistent across jurisdictions."

Other comments: While acknowledging the building-blocks approach to creating sustainability reporting standards, the letter warned that "in the short term it may promote siloed sustainability thinking" in a world facing "a three-fold crisis of a climate emergency, dramatic nature loss, and rising social inequality" and emphasized the importance of the alternative systems thinking approach to this initiative.

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at

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