IFRS: Definition
The IFRS Foundation is a non-profit, public interest organisation established to create high-quality, understandable, enforceable, and globally accepted accounting and sustainability disclosure standards. These standards are developed by two standard-setting bodies, the International Accounting Standards Board (IASB) and the International Sustainability Standards Board (ISSB).
For Sustainability Managers
Understanding IFRS helps you select the right frameworks and meet evolving disclosure requirements.
For CFOs
IFRS affects investor confidence, risk assessment, and the financial credibility of your climate disclosures.
For Sustainability Reporting
IFRS is a core element of sustainability reporting that auditors and regulators expect to see addressed.
Related Terms
IFRS S1
The primary objective of IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information is to mandate entities to provide information concerning their sustainability-related risks and opportunities. This information should be valuable to the primary users of general-purpose financial reports when making decisions related to allocating resources to the entity.IFRS S1 establishes fundamental criteria for the content and presentation of sustainability-related information, particularly when adhering to IFRS sustainability disclosure standards. These provisions aim to assist primary users in making financial decisions that pertain to the entity. It's worth noting that IFRS S1 can also be applied when financial statements are prepared in accordance with generally accepted accounting principles (GAAP).Countries such as Australia have developed their Mandatory Climate Reporting legislation through IFRS guidance and companies have to disclose in line with AASB S2 and ASSB S1 .The essential components of this Standard include:Conceptual Foundation: The effectiveness of sustainability-related financial information is enhanced when it possesses qualities such as comparability, verifiability, timeliness, and understandability. These attributes are fundamental characteristics of quantitative information.Core Content: This comprises four key elements—governance, strategy, risk management, and metrics and targets.While identifying sustainability-related risks and opportunities that could impact the entity's prospects, report preparers are obligated to consider both IFRS sustainability-related disclosure standards and the disclosure topics outlined in the Sustainability Accounting Standards Board (SASB) standards, which are categorised by industry. In cases involving water and biodiversity matters, the CDSB Framework Application Guidance may also be applicable. Additionally, organisations may utilise standards from other standard-setting bodies (such as GRI) and industry-standard guidance. It is crucial that all sources of guidance are disclosed and clearly identified.
IFRS S2
The primary aim of IFRS S2 Climate-related Disclosures is to compel an organisation to provide information concerning its climate-related risks and opportunities. This information should prove valuable to the primary users of general-purpose financial reports when deciding how to allocate resources to the entity.IFRS S2 focuses specifically on climate-related physical and transition risks, along with climate-related opportunities. The disclosure requirement pertains only to those climate risks and opportunities that have a direct impact on the entity's future outlook.The Core Content of IFRS S2 closely aligns with the four key topics found in IFRS S1. However, it necessitates additional depth and detail to adhere to the Standard's reporting requirements.Countries such as Australia have developed their Mandatory Climate Reporting legislation through IFRS guidance and companies have to disclose in line with AASB S2 and ASSB S1 .
IFRS Sustainability Disclosure Standards
In June 2023, the International Sustainability Standards Board (ISSB) issued its inaugural pair of IFRS® Sustainability Disclosure Standards: IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures. These standards are applicable for annual reporting periods commencing on or after January 1, 2024. Companies are mandated to apply both IFRS S1 and IFRS S2 together to demonstrate compliance with IFRS Sustainability Disclosure Standards. Nevertheless, the ISSB offers transitional relief for some requirements during the first year of application of IFRS S1 and IFRS S2.
1.5°C
The Paris Agreement commits countries to limit global warming to well below 2°C above pre-industrial levels, with an even more ambitious target of 1.5°C to avert severe climate changes. Achieving the 1.5°C trajectory necessitates halving emissions by 2030 and reaching net-zero emissions by 2050.
AASB
The Australian Accounting Standards Board (AASB) is a government agency in Australia responsible for developing and maintaining financial reporting standards applicable to entities in both the private and public sectors of the Australian economy. This includes the development of accounting and external reporting standards and guidance related to sustainability-related financial information, which is aligned with principles, caters to external report users' needs, and can be subject to assurance and enforcement.