Connectivity―what is it and what does it deliver?

The ISSB was created to operate alongside the IASB to provide information for investment decisions. Having two standard-setting boards within the IFRS Foundation offers stakeholders the benefits of connectivity, resulting in holistic and coherent general purpose financial reports. Investors are the primary audience for general purpose financial reports, including sustainability-related financial disclosures and financial statements, which complement each other.
Connectivity in products and processes is important to achieve coherence in reporting. Connectivity in products includes Standards and digital taxonomies that facilitate digital reporting, and it is important that the language in IFRS Accounting Standards and IFRS Sustainability Disclosure Standards is consistent. Examples of tangible connectivity in products include using concepts and terms in IASB Standards that are used in the ISSB’s Standards, requiring sustainability-related financial disclosures to be provided with financial statements, and explaining how climate-related risks and opportunities are reflected in financial statements.
This project to explore stakeholder concerns about the reporting of climate-related risks in financial statements will investigate the causes of these concerns, such as unclear or insufficient requirements in IASB standards and lack of compliance by companies. The outcomes of the project will depend on the causes of the concerns and could include minor amendments to IASB standards or new application guidance. However, the project will not develop an IASB standard on climate-related risks, change the definitions of assets and liabilities, or develop accounting requirements for pollutant pricing mechanisms. The project will complement the work of the ISSB and may consider questions such as covering sustainability-related opportunities and risks beyond those related to climate and how scenario analyses provided when applying ISSB standards could inform the measurement of assets and liabilities in financial statements.
Connectivity in processes involves establishing practices to facilitate knowledge sharing and coordination between the IASB and ISSB, including updating each other on activities and working on projects relevant to each other. Achieving connectivity in products and processes can be done without joint board discussions, although there will be instances where it will be appropriate for the boards to consider technical issues together.
The ISSB’s forthcoming consultation on agenda priorities will ask stakeholders for feedback on its work plan priorities, including whether to undertake a project to move beyond simply connecting information to closer integration in reporting. Depending on feedback, this project could be a joint project between the two boards and build on the IASB’s Exposure Draft Management Commentary and/or the Integrated Reporting Framework. The IFRS Foundation aims to deliver better information for better decisions and looks forward to engaging with stakeholders.