Reporting framework, sustainability and ethics Flashcards
What are financial statements used for?
Deciding to buy/sell/hold equity investment
Assess stewardship/accountability of management
Assess ability to pay benefits to employees
Assess security for amounts lent
Determine tax policies
Determine profits and dividends
Prepare national income stats
Regulate activities of entity
What are the key limitations of financial statements?
Backward-looking
Exclude non-financial data
Highly standardised
Aggregated info
What are the key aspects of the Conceptual Framework for Financial Reporting?
Objective - gather info on economic resources, claims against them
Qualitative characteristics - fundamental and enhancing
Bases - accruals or going concern
Elements - assets, liabilities, equity, income, expenses
Recognition or derecognition - has / loses control of asset, no obligation for liability
Measurement - historical cost, fair value, value in use, current cost
What are the fundamental qualitative characteristics?
Relevance
Faithful representation
What are the enhancing qualitative characteristics?
Comparability, verifiability, timeliness and understandability
What is relevance?
Can make a difference to user’s decisions if it has:
Predictive value
Confirmatory value
Affected by nature and materiality
What is sustainability?
Fulfilling the needs of the current generation without jeopardising the ability of future generations to meet their own
What are the 2 aspects of sustainability reporting?
Reporting on ESG
Dependencies - factors influence financial statements
What bodies have issued sustainability guidelines and which one must be followed?
Taskforce on Climate-related Financial Disclosures - must be followed
ISSB
Global Reporting Initiative
What disclosures are required by IFRS S1 and S2?
Governance - processes to monitor & manage
Strategy - approach
Risk management - process to identify
Metrics and targets - performance
S1 - Sustainability
S2 - Climate-related
What are the climate-related risks?
Physical - acute or chronic
Transition
What is greenwashing?
Exaggerating, misleading or unsubstantiated claims about sustainability of products/services
What is greenhushing?
Deliberately underreport or avoid publicly sharing sustainability efforts
What are the steps in the standard setting process?
Consultation on issue
Advisory group formed
Discussion paper for public
Exposure draft to public
Consideration of comments 120 days
Approval
Publication
