Sustainability Reporting and Accounting Standards

Study Notes

Sustainability Reporting

Accounting Profession (AP) has significant experience in materiality assessment, crucial for user decisions in sustainability reporting (SR).
Consolidation of existing sustainability reporting frameworks began after the AP's formal involvement, reducing confusion.
The AP's historical role in financial statement assurance translates to a valuable SR assurance experience. Trust in SR information is as important as trust in financial accounting.
The AP's established standard-setting process can be applied to SR standards.
The International Organization of Securities Commissions (IOSCO) recommended incorporating regulation for SR reporting, recognizing the importance of regulation to encourage usage, instead of relying on voluntary adoption.
SR is essential for sustainable businesses and economies and a sustainable planet – aligning with the AP's public interest objective.

Book Value vs. Market Value (Intangibles)

Maintaining consistency in adjusting book values to market values presents challenges.
Concerns exist about the widening gap between book and market values.
Consideration of bringing more intangibles onto the balance sheet is required.
The potential for estimation error is a concern, particularly when estimating firm-wide or intangible asset market values (e.g., brands, R&D).
Exploring potential journal entries for such adjustments is necessary.
Disclosure as an alternative to recognition (within or outside financial statements) needs consideration.
Auditor concerns about market value estimations are significant.
Financial statements do not need to provide all potential information, but disclosure should be relevant and trustworthy.

Non-GAAP Reporting

The concept of multiple income statements within financial statements is a topic of debate.
Income measurement is a socially constructed process, not a factual "discovery."
Non-GAAP earnings' value relevance versus perception management is contested.
There's no limit on non-GAAP adjustments.
The question of regulation between regulators (like SOX) and professional bodies needs addressing.
IFRS 18 is a relevant framework for understanding and applying non-GAAP earnings.
New standards for operating income are under discussion, as non-GAAP earnings typically aim to measure operating income.
Professional bodies are now implementing controls on non-GAAP reporting.
An audit of non-GAAP reporting enhances trust and credibility.
Auditors experience concerns about auditing specific items (e.g., "one-time" items) in non-GAAP earnings.
Disclosure of alternative performance measures will be presented in the notes.

Description

This quiz explores the role of the Accounting Profession in sustainability reporting and the importance of materiality assessment for decision-making. It also examines the shift towards formal regulations in sustainability reporting and how these standards align with the objectives of sustainable businesses. Test your knowledge on the integration of accounting practices into sustainability frameworks.