Chapter 4: New Forms of Accounting Flashcards
Organizations interested in ESG (5)
Financial Companies
Banks/Insurance
NGOs / Public Bodies
Consulting Firms
Audit Frims
What does TCFD stand for
Task Force on Climate Related Financial Disclosures
How is the TCFD broken up? (2) Acronyms + Name
- International Sustainable Standards Board ISSB
- European Financial Reporting Advisory Group (EFRAG) Standards
What did the ISSB create and name them both
IFRS sustainability disclosure standards
IFRS 1 and IFRS 2
What information is available in ISSB and is it limited to anything?
ESG information is available for investors and limited to climate issues
What level of materiality is in ISSB
Single Materiality
IFRS S1
1. What is it
General Requirements for Disclosure of Sustainability-related Financial Information
IFRS S1
5 fields requiring information
Government, Strategy, Risk Management, Metrics, Target
IFRS S2
1. What is required
climate-related material disclosures
What did the EFRAG create and name them
12 ESRS (European Sustainability Reporting Standards)
Why was EFRAG different than ISSB/IFRS (3)
- Mandatory Reporting and Scope defined legally
- ESG information harmonized and audited by independent third party
- Publications of sustainability reporting in management report
What level of materiality is in EFRAG
Double Materiality
Single Materiality
- Also know as
- Describe it
Outside In
Impact of Environment on company’s finances
Double Materiality
- Also know as
- Describe it
Inside Out
Impact of operations on the environment and social areas and Impact of Environment and Social on the company’s finances
What are 2 main reasons for rethinking the accounting model related to vision
- Limited Scope for integrating CSR, and impact of economic activities into traditional accounting
- Short term vision of accounting and finance visions
What are 2 main reasons for rethinking the accounting model related to reporting
- Unable to evaluate intangible capital, should be in financial statement
- Does not include positive and negative externalities
What is Goodwill
Difference in Sale cost of business – business value
Describe Materiality Matrix
Build when you start a sustainability process.
Y-Axis: Stakeholders
X-Axis: Company Issues
Is there a standardized accounting model with ESG concerns around the world? Why?
No
Varies by materiality, company valuation, sustainability impact, pillars, Timeline
Examples of Sustainability Accounting Models (3)
SeMA, CARE, LIFTS
What is Care
1. Type of Model
2. Name
- Sustainability Accounting Model
- Comprehensive Accounting in Respect of Ecology Model
What is the CARE Model all about?
Preservation of triple capital that is equal important (Financial, human, environment). Company long term survival
Book Value of Care Model
budget required to maintain capitals over a given period
What costs does the CARE Model include
Prevention and Restoration
Ecological vs Financial Accounting Main Difference
Current accounting principle + manage natural human resource = Ecological Accounting (Triple Capital preservation)
Old Accounting Depreciation
renewal of productive capital as an expense
New Accounting Depreciation
preserving 3 capital assets for long term
Under New Accounting when is Profit calculated
After capital is maintained and calculated
