Climate reporting legislation ‘ambiguous and inconsistent’, warns IPA
The IPA has urged the government to tighten the wording used in its proposed climate-related disclosure requirements to ensure compliance with the reforms.
The Institute of Public Accountants has welcomed the proposed framework for climate-related financial disclosures but has raised concerns about the wording in the draft legislation.
“IPA supports the overall proposals in the Exposure Draft. Our support is on the basis that the proposals are pragmatic and align with current reporting frameworks domestically and internationally, thereby assisting in understanding the proposed requirements and their implementation,” the accounting body said in a recent submission.
“However, IPA has concerns with the wording of the draft legislation in the Exposure Draft, in that the wording is at times inconsistent and ambiguous.”
The IPA said the wording needs to be tightened to ensure compliance with the legislation.
The submission noted, for example, that one section of the reforms refers to ‘sustainability standards’ whilst another section refers to ‘international sustainability standards’.
While the sustainability reporting standards issued by AASB (ASRS) are intended to align with those issued by the ISSB (currently IFRS S1 and S2), the Australian equivalent is likely to contain modifications for the Australian context that differ from those of the ISSB, the submission said.
“Given this difference, it is important to distinguish between the two sets of sustainability reporting standards,” the submission said.
“This similarly applies to the Australian Accounting Standards (AAS) issued by the AASB and those issued by the IASB (IFRS Accounting Standards).”
The submission also noted that section 296A(6)(a) requires directors’ declaration to make “an explicit and unreserved statement of compliance with international sustainability reporting standards”.
“We recommend the removal of the word “international,” as its retention may pose challenges for compliance by an entity,” it said.
Concerns about timelines
The IPA said it is also concerned about the delays in finalising the requirements, with consultation on the exposure draft ending 9 February and the application date for the reforms commencing 1 July.
The IPA also noted that the AASB is seeking comments on the first two sustainability standards in ED SR1 Australian Sustainability Reporting Standards – Disclosure of Climate-related Financial Information by 1 March 2024.
“ED SR1 contains sustainability reporting requirements for which some entities must apply commencing 1 July 2024,” it said.
“The IPA acknowledges the AASB’s standard-setting timeline is not within the remit of Treasury. However, IPA is of the view that where possible, legislators and standard-setters should align the timeframes and requirements in a timelier manner, especially where it involves the introduction of a new reporting framework that requires significant investments by all stakeholders.”
The IPA said this would allow the wide-ranging stakeholders including preparers, auditors, users, regulators and the accounting profession in general, sufficient time to understand and apply the requirements.
“Additionally, the delays in finalising the requirements and the short time frame between the issue of the requirements and their application create unnecessary uncertainties for all stakeholders.”
