6 Key Takeaways from the AASB’s Guidance on Disclosing Anticipated Financial Effects

As the first group of companies obligated to report under the Australian Sustainability Reporting Standards prepares their disclosures, there have been many questions about what it means to disclose the anticipated financial effects. The Australian Accounting Standards Board (AASB) has released guidance to help entities understand the requirements.

The guidance published at the end of October provides practical direction for aligning with AASB S2 and enhancing transparency in climate-related financial disclosures. It’s important to note that this document doesn’t change the requirements or interpretation of the standard, but it does add clarity.

Here are our six key takeaways for reporters, each with a brief explanation to help bring the guidance to life as you prepare your disclosures:

1. Consider your circumstances and the relative significance of your risks and opportunities

What the guidance says:

The AASB has two ‘proportionality mechanisms’ available, which both mean that the organisation should consider the significance of the risk and/or opportunity in determining the level of effort required for preparing disclosures.

The first mechanism relates to using the information you have available without “undue cost and effort” to attain (more on this in the takeaway below), whilst the other relates to using an approach corresponding to your current level of skill, your capability, and resources at hand.

The greater the usefulness of information about a climate-related risk or opportunity is to primary users, the greater the effort expected of an entity in obtaining that information. If your initial screening/assessment shows a particular risk or opportunity is material, then it’s expected that you’ll spend more time analysing that one.

2. “Undue cost and effort” isn’t a general reason against disclosing quantitative information

What the guidance says:

While AASB’s proportionality mechanisms mentioned in the takeaway above recognise that there is difficulty accessing or producing certain information, these do not exempt an entity from disclosing the anticipated financial impacts of climate-related risks and opportunities. You are expected to use information that is already available, whether internal or publicly accessible, to meet disclosure requirements without incurring undue cost or effort. This could look like a less exhaustive scan of data, referencing publicly available information, or leveraging existing internal data. Considerations of existing information you can leverage are noted in the third takeaway below.

3. You likely have more information available than you think

What the guidance says:

Organisations are expected to already have some information, both externally, such as public databases and industry reports, and internally, such as reports or statistics used in risk management and strategy. Information may also sit within your finance teams, who have already been preparing financial statements of this nature. The guidance specifically calls out that the information in ASRS S2 disclosures are connected to financial statements and not a duplication of them.

4. You’re required to disclose a combination of both quantitative and qualitative information, and it’s the most useful internally and externally

What the guidance says:

Providing a combination of both quantitative and qualitative information on your anticipated financial impact is required and decision-useful, both internally for management and externally for investors and stakeholders. Quantitative information illustrates how risks and opportunities may affect financial statements and can be presented as a single amount or a range. Qualitative information then provides essential context to understand the quantitative figure.

*Accuracy in the context of sustainability disclosure does not mean certainty and precision, but that the information is free from material error, descriptions are clearly explained, estimations and assumptions are identified, and disclosures are based on reasonable assumptions.

5. Quantitative information is required, but you have a few limited reasons to omit some information

What the guidance says:

There is a general expectation to provide quantitative information, however, entities do not need to provide numerical values if:

• The financial effects are not separately identifiable (e.g., climate is bundled into broader strategic decisions) or;
• The measurement uncertainty is too high, making the numbers potentially misleading and/or not useful as determined by the entity.

If an entity has chosen to use either of these reasons, then supporting explanations must be disclosed instead of quantification. There are only two circumstances in which an entity will be relieved of disclosing financial information, these are legal exemption and commercial sensitivity (opportunities only).

6. Your disclosures are expected to improve over time.

What the guidance says:

Over time, the reasonable and supportable information available to an entity without undue cost or effort, along with the skills, capabilities, and resources, is expected to evolve. As a result, disclosures in these areas will be anticipated to improve. This guidance supports a process of learning and iteration, enabling entities to strengthen their disclosures over time. For example, as an entity’s capabilities grow, so too will its assessment of what constitutes “undue” cost or effort.

Final thoughts

The AASB’s guidance is a valuable resource for organisations navigating the evolving landscape of climate-related financial disclosures. By embedding these principles into your reporting processes, you can enhance transparency, build stakeholder trust, and better prepare for regulatory requirements.

How can SLR support you?

We understand that for many organisations, even the initial stages of ASRS disclosures and qualitative climate-related analysis can feel like a gargantuan effort. From assessing your disclosure readiness to quantifying your climate impacts and developing decarbonisation and transition plans, we tailor our approach to meet you where you are. Contact Emma Elbaum, Elizabeth Lu, or Henry Partridge to discuss how we can make your climate reporting journey easier.