2.5 The ISSB and IFRS S1 Sustainability-Related Financial Disclosures

ACCA Applied Skills — Financial Reporting FR

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1 Chapter 1: The Conceptual Framework & Qualitative Characteristics

1.1 Purpose of Financial Reporting & The Conceptual Framework 1.2 Qualitative Characteristics, Materiality & Prudence 1.3 Elements of Financial Statements, Recognition & Measurement Bases

2 Chapter 2: Regulatory Framework, Standard Setting & IFRS 18 Foundations

2.1 The Regulatory Framework, IASB Standard Setting & Due Process 2.2 Presentation and Disclosure Foundations & IFRS 18 2.3 Concepts and Principles of Groups & Consolidated Accounts 2.4 When Consolidation Is Required, Exemptions and Uniform Group Policies 2.5 The ISSB and IFRS S1 Sustainability-Related Financial Disclosures

3 Chapter 3: Tangible Non-Current Assets

3.1 IAS 16 Property, Plant and Equipment — Recognition and Cost 3.2 IAS 16 Revaluation Model & Asset Disposals 3.3 IAS 23 Borrowing Costs & IAS 20 Government Grants 3.4 IAS 40 Investment Property

4 Chapter 4: Intangibles, Impairment & Inventories

4.1 IAS 38 Intangible Assets — Research & Development 4.2 IAS 36 Impairment of Assets — Principles and Testing 4.3 Cash-Generating Units (CGUs) and Goodwill Impairment 4.4 IAS 2 Inventories & IAS 41 Biological Assets

5 Chapter 5: Leases and Revenue from Contracts

5.1 IFRS 16 Leases — Lessee Accounting 5.2 IFRS 16 Lessor Accounting & Sale and Leaseback 5.3 IFRS 15 Revenue from Contracts with Customers — The 5-Step Model 5.4 IFRS 15 Contract Costs and Specific Revenue Transactions

6 Chapter 6: Financial Instruments, Provisions, Tax & Currency

6.1 IFRS 9 & IAS 32 Financial Instruments 6.2 IAS 37 Provisions, Contingent Liabilities & IAS 10 Events After Reporting Period 6.3 IAS 12 Income Taxes — Current and Deferred Tax 6.4 IAS 21 Foreign Currency Transactions & IAS 33 Earnings Per Share 6.5 Factoring of Receivables and Derecognition of Financial Assets

7 Chapter 7: Financial Analysis & Ratio Performance

7.1 Profitability and Efficiency Ratios 7.2 Liquidity and Working Capital Management Ratios 7.3 Gearing, Solvency and Investor Ratios 7.4 Analytical Interpretation, Context & Reporting Limitations 7.5 EPS as a Performance Indicator: Trends and Limitations 7.6 Interpreting Not-for-Profit and Public Sector Financial Statements

8 Chapter 8: Cash Flows and Group Analysis

8.1 IAS 7 Statement of Cash Flows — Operating Activities 8.2 IAS 7 Cash Flows — Investing and Financing Activities 8.3 Analysing Cash Flows & Group Financial Statements

9 Chapter 9: Preparation of Single-Entity Financial Statements

9.1 Single-Entity Statement of Profit or Loss and OCI under IFRS 18 9.2 Statement of Financial Position and Statement of Changes in Equity 9.3 Comprehensive Single-Entity Trial Balance Adjustments 9.4 IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations 9.5 IAS 8 Accounting Policies, Estimates and Errors, and Disclosing Material Items

10 Chapter 10: Consolidated Statement of Financial Position

10.1 Group Concepts, Control & The Consolidation Framework 10.2 Working 2: Net Assets of the Subsidiary & Fair Value Adjustments 10.3 Working 3 Goodwill & Working 4 Non-Controlling Interest 10.4 Working 5 Group Retained Earnings & Intra-Group Adjustments

11 Chapter 11: Consolidated Profit or Loss and Associates

11.1 Consolidated Statement of Profit or Loss & OCI 11.2 Mid-Year Acquisitions and Non-Controlling Interest Allocation 11.3 IAS 28 Investments in Associates & The Equity Method 11.4 Consolidated Statement of Changes in Equity & Group Disclosures 11.5 Disposal of a Subsidiary and Loss of Control

12 Chapter 12: ACCA FR CBE Exam Strategy and Technique

12.1 CBE Tools, Spreadsheets and Word Processing Response Technique 12.2 Section A & B Objective Test Case Strategy 12.3 Section C Constructed Response Mastery

2.5 The ISSB and IFRS S1 Sustainability-Related Financial Disclosures

Key Takeaways Explain This Topic AI

The International Sustainability Standards Board (ISSB) was announced by the IFRS Foundation Trustees at COP26 in November 2021 to create a global baseline of investor-focused sustainability disclosure standards.

The ISSB sits alongside the IASB under the same IFRS Foundation Trustees, but issues IFRS Sustainability Disclosure Standards rather than IFRS Accounting Standards.

IFRS S1 requires an entity to disclose sustainability-related risks and opportunities that could reasonably be expected to affect its cash flows, access to finance or cost of capital over the short, medium or long term.

IFRS S1 organises disclosure around four core content pillars: governance, strategy, risk management, and metrics and targets.

Sustainability-related financial disclosures must cover the same reporting entity and the same reporting period as the financial statements and be published at the same time as them.

Last updated: September 2026

2.5 The ISSB and IFRS S1 Sustainability-Related Financial Disclosures

Exam context: Two FR learning outcomes sit here. The regulatory framework area asks you to explain the purpose and role of the ISSB , and the reporting-performance area asks you to describe the objective, scope and core content of IFRS S1 . Both are set at the knowledge and comprehension level, so the examiner wants accurate description rather than application. This is exactly the sort of two-mark objective-test material that is cheap to secure and expensive to guess at. Note the boundary: IFRS S1 is examinable in FR; IFRS S2 Climate-related Disclosures is not — IFRS S2 appears on the examinable documents list for Strategic Business Reporting only.

1. Why a Second Board Was Created

By 2020 investors faced a crowded and contradictory landscape of voluntary sustainability reporting frameworks. The same company could report emissions one way to one framework and another way to a second, and there was no equivalent of IFRS Accounting Standards to make the disclosures comparable. THE PRE-ISSB LANDSCAPE THE ISSB SOLUTION

+-----------------------------+ +-----------------------------+
| • GRI Standards | | |
| • SASB Standards | ====> | A GLOBAL BASELINE of |
| • TCFD Recommendations | | investor-focused |
| • CDSB Framework | | sustainability disclosure |
| • Integrated Reporting <IR> | | standards, issued by a |
| • Numerous national codes | | single standard setter |
+-----------------------------+ +-----------------------------+
Voluntary, overlapping, Consistent, comparable,
incomparable, investor- capable of being required
confusing by jurisdictions

The IFRS Foundation Trustees announced the creation of the ISSB at COP26 in November 2021 . To avoid adding yet another framework to the pile, the Foundation consolidated existing bodies into the new structure , absorbing the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation — the body that held the SASB Standards and the Integrated Reporting Framework . The ISSB's standards also build directly on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) , which is why the four core content pillars described below will look familiar to anyone who has read a TCFD-aligned annual report.

2. The Purpose and Role of the ISSB

Dimension The ISSB
Parent body The IFRS Foundation — the same Trustees who appoint and oversee the IASB
Output IFRS Sustainability Disclosure Standards (IFRS S1, IFRS S2 and subsequent standards)

Purpose To develop a comprehensive global baseline of sustainability-related disclosure standards that meet the information needs of investors

Target audience Primary users of general purpose financial reports : existing and potential investors, lenders and other creditors — the same audience the Conceptual Framework identifies for financial statements

Materiality lens Financial materiality — sustainability matters are disclosed because of their effect on the entity's prospects, not because of the entity's effect on the world at large

Status of its standards Voluntary unless and until a jurisdiction's authorities require their application, in the same way IFRS Accounting Standards depend on national adoption

Due process Its own public consultation process, overseen by the Trustees and the Due Process Oversight Committee, mirroring the IASB model described in section 2.1

Tip

The relationship to the IASB is parallel, not hierarchical. The ISSB does not report to the IASB and cannot amend IFRS Accounting Standards; the IASB cannot amend IFRS Sustainability Disclosure Standards. The two boards share a parent, a conceptual audience and a commitment to connectivity — sustainability disclosures and the financial statements should tell a consistent story about the same entity, using consistent data and assumptions where they overlap.

3. IFRS S1: Objective and Scope
Objective

The objective of IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information is to require an entity to disclose information about its sustainability-related risks and opportunities that is useful to primary users of general purpose financial reports in making decisions relating to providing resources to the entity .

Read that objective next to the Conceptual Framework's objective of financial reporting in section 1.1 and the parallel is deliberate: same users, same decision, different subject matter.

Scope

An entity applies IFRS S1 when preparing and reporting sustainability-related financial disclosures in accordance with IFRS Sustainability Disclosure Standards. The scope threshold is the "could reasonably be expected to affect" test: DISCLOSE a sustainability-related risk or opportunity if it could

reasonably be expected to affect the entity's:

CASH FLOWS over the
ACCESS TO FINANCE --> SHORT, MEDIUM
COST OF CAPITAL or LONG TERM

(collectively, "the entity's prospects")

This threshold does two jobs. It brings in matters that no accounting standard would recognise — a supply chain concentrated in a water-stressed region, a workforce whose skills are being made obsolete, a product line facing a future carbon levy — and it excludes matters with no plausible effect on the entity's prospects, however socially important they might be.

4. The Four Core Content Pillars

IFRS S1 requires disclosure about each sustainability-related risk and opportunity under four headings inherited from the TCFD architecture:

Pillar What the entity must disclose

1. Governance The governance processes, controls and procedures used to monitor, manage and oversee sustainability-related risks and opportunities — which body or individual is responsible, how oversight is exercised, how the relevant skills are maintained, and how sustainability considerations feed into strategy decisions and remuneration

2. Strategy The entity's approach to managing sustainability-related risks and opportunities: the risks and opportunities identified, their effects on the business model and value chain, their effects on strategy and decision-making, their current and anticipated financial effects on financial position, financial performance and cash flows, and the resilience of the strategy

3. Risk management The processes used to identify, assess, prioritise and monitor sustainability-related risks and opportunities, including the inputs and parameters used, and how those processes are integrated into the entity's overall risk management process

4. Metrics and targets The entity's performance in relation to each risk and opportunity, including progress towards any targets it has set or is required to meet by law or regulation, together with the metrics themselves and how they are measured

5. General Requirements That Bind the Disclosures to the Financial Statements

These are the rules most likely to appear as an objective-test question, because they are precise and memorable:

Same reporting entity. The sustainability-related financial disclosures must cover the same reporting entity as the related financial statements . A group that consolidates a subsidiary in its financial statements reports that subsidiary's sustainability information too.

Same reporting period. Disclosures cover the same period as the financial statements.

Same time. They must be reported at the same time as the related financial statements , forming part of the entity's general purpose financial reports rather than a separate publication issued months later.

Comparative information. Comparatives for the previous period are required for all amounts disclosed.

Statement of compliance. An entity whose disclosures comply with all applicable requirements makes an explicit and unreserved statement of compliance with IFRS Sustainability Disclosure Standards.

Sources of guidance. Where no IFRS Sustainability Disclosure Standard applies to a particular matter, the entity uses judgement, referring first to the requirements in IFRS Sustainability Disclosure Standards dealing with similar matters, and it may then consider other sources such as the SASB Standards.

Materiality. Information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions of primary users — the same threshold used throughout financial reporting.

Effective date. IFRS S1 applies to annual reporting periods beginning on or after 1 January 2024 , with earlier application permitted provided IFRS S2 is applied at the same time. Transition reliefs were provided, including a "climate-first" option allowing an entity to disclose only climate-related information in its first year of application.

6. Worked Illustration: Separating What IFRS S1 Captures
Scenario

Brackmoor Foods plc is a listed food manufacturer preparing its financial statements for the year ended 31 December 20X7. Management identifies four matters during its year-end review.

Matter In scope of IFRS S1? Reasoning

A proposed national levy on high-sugar products, expected to take effect in three years, which would apply to 40% of Brackmoor's product range Yes A medium-term risk that could reasonably be expected to affect future cash flows and therefore the entity's prospects. Disclosed under strategy (anticipated financial effects) and metrics and targets (reformulation progress)

A long-term drought risk in the single region supplying Brackmoor's principal crop input Yes A value chain risk affecting the business model; disclosed under strategy, including the resilience of the strategy, and under risk management

A charitable donation programme funding local sports clubs, with no identified effect on revenue, financing or costs beyond the donation itself No Socially valuable but no reasonably expected effect on the entity's prospects. IFRS S1 applies a financial materiality lens, not a broader societal impact lens

An impairment of goodwill in the confectionery cash-generating unit driven by the anticipated sugar levy Recognised in the financial statements under IAS 36; the driver is disclosed under IFRS S1 This is connectivity in practice: the same risk produces a recognised accounting consequence and a sustainability disclosure, and the assumptions underpinning both should be consistent

Why this matters for interpretation

Section 7.4 of this guide covers non-financial performance indicators and their role in interpreting an entity's position. IFRS S1 disclosures are the structured, comparable source of exactly that information. A candidate answering a Section C interpretation requirement can legitimately point to a sustainability disclosure — a reformulation target missed, or an unmitigated supply concentration — as evidence that a favourable current ratio trend may not be sustainable.

7. Common Exam Traps

Warning

Trap 1: Confusing the ISSB with the IASB or the Trustees. The Trustees appoint members and oversee governance. The IASB issues IFRS Accounting Standards. The ISSB issues IFRS Sustainability Disclosure Standards. None of the three can do another's job.

Warning

Trap 2: Applying a double materiality lens. IFRS S1 uses financial materiality — the effect of sustainability matters on the entity. Frameworks such as the European Sustainability Reporting Standards apply double materiality , which additionally captures the entity's effect on people and the environment. Writing that IFRS S1 requires disclosure of the entity's environmental impact regardless of financial effect is wrong.

Warning

Trap 3: Treating the disclosures as a separate report. IFRS S1 requires publication at the same time as, and for the same entity and period as, the financial statements . A standalone sustainability report published in the following quarter does not comply.

Tip

Learn the four pillars as a sequence. Governance (who watches), strategy (what it means for the business), risk management (how it is identified and handled), metrics and targets (how we are doing). Almost every descriptive question on IFRS S1 can be answered by working through that order.