The International Sustainability Standards Board (ISSB) has postponed a formal decision on amending its IFRS S1 standard to enhance connectivity with the International Accounting Standards Board’s (IASB) forthcoming revisions to the Management Commentary Practice Statement.
The decision will give staff more time to factor in feedback from board members and refine their proposals.
ISSB vice-chair Sue Lloyd said: “My recommendation is, we take the feedback we’ve heard today – the positive signal in terms of direction – but don’t formalise it beyond that, and we come back to it again at a later board meeting.”
She added: “My overall takeaway is that, apart from a couple of people, most people are supportive of this direction of travel.”
Proposal aimed at enhancing connectivity
The staff had proposed amending IFRS S1 to require entities that apply the revised Management Commentary Practice Statement – voluntarily or when mandated – to include sustainability-related financial disclosures, as specified by ISSB standards, within their management commentary.
Staff said the amendment was intended to clarify the interaction or connectivity between ISSB standards and the IASB’s revised management commentary and would not apply where there is no obligation to provide a management commentary.
Timing and minimising disruption
Any changes to the IASB’s requirements would need to be proposed and approved by the IASB through its own due process.
Lloyd highlighted that any amendments to IFRS S1 would only come after the IASB has finalised its Management Commentary project. She also noted that there was no commitment at this stage to any effective date for the changes, allowing the board to minimise any potential disruption to stakeholders and jurisdictions adopting ISSB standards.
Board members express diverse views
While several board members supported the proposal, citing the importance of connectivity and alignment between the two boards, others urged caution.
ISSB chair Emmanuel Faber said the proposal fulfilled the obligation for the boards to collaborate, was of foundational importance, and would create synergies with the work of the IASB.
However, the board’s second vice-chair, Jingdong Hua, said he could not support the specific proposal because “there needs to be a very high bar” before the board changes its standards, such as identifying fatal flaws or responding to compelling calls from stakeholders.
Debate over ‘location agnostic’ standards
The discussion also touched on whether ISSB standards are ‘location agnostic’ regarding where sustainability disclosures should be included.
Former Sustainability Accounting Standards Board chair Jeff Hales argued that while some believe IFRS S1 does not specify where disclosures should be located, this is an oversimplification.
“IFRS S1 actually requires that sustainability-related financial disclosures be included in the entity’s general purpose financial reports and at the same time as the financial statements,” Hales explained.
He added that because of this timing requirement, certain documents like proxy statements – which might contain sustainability information but are issued later – would not meet IFRS S1’s criteria.
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