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TAC Public Meeting December 2025 Paper 7: Revising comparatives
Executive summary
| Date | 09 December 2025 |
| Paper reference | 2025-TAC-057 |
| Project | Technical assessment of IFRS S1 and IFRS S2 |
| Topic | Revising comparatives due to changes in estimates |
Objective of the paper
In light of new information received via the UK Government's consultation on UK Sustainability Reporting Standards (UK SRS), the TAC is asked to reconsider its endorsement recommendations in relation to the requirement in IFRS S1 paragraph B50 to revise comparatives due to changes in estimates, especially relating to financed emissions.
This paper presents the feedback received during the consultation, and further considerations for the TAC.
Decisions for the TAC
The TAC is asked to consider whether to amend its endorsement recommendations to the Secretary of State relating to revising comparatives due to changes in estimates.
If the TAC agrees to amend the endorsement recommendations, then the TAC is asked to select and agree upon new recommendations.
Appendices
- Appendix 1 Summary of the TAC's endorsement recommendations (December 2024)
- Appendix 2 – Extract from IFRS S1 General Requirements for Disclosure of Sustainability-related Information
Context
1 When preparing its endorsement recommendations for the Secretary of State for Business and Trade, the TAC discussed and made recommendations relating to the challenges associated with revising comparatives due to changes in estimates, as required under paragraph B50 of IFRS S1 General Requirements for Disclosure of Sustainability-related Information (presented in full in Appendix 2).
2 Since the publication of these endorsement recommendations (on 18 December 2024), further concerns have been raised about this requirement. In responses to the UK Government's consultation on UK SRS, which closed on 17 September 2025, stakeholders reiterated concerns about the cost and burden that companies will likely face when applying this requirement. Additionally, feedback was received about the specific challenge for financial institutions that disclose financed emissions data.
3 In light of the information received via the consultation, the TAC is asked to reconsider its endorsement recommendations, especially in relation to revisions of estimates associated with financed emissions.
4 As a reminder, the TAC is required to provide a technical assessment as to whether endorsing IFRS Sustainability Disclosure Standards would be conducive to the long-term public good in the UK. The TAC is required to assess whether:
- use of the IFRS Sustainability Disclosure Standard is likely to result in an improvement in the international comparability of sustainability-related reporting in the UK.
- use of the IFRS Sustainability Disclosure Standard is likely to support companies in making disclosures that are understandable, relevant, reliable and comparable.
- use of the IFRS Sustainability Disclosure Standard is likely to improve the quality of corporate reporting within the UK in the long-term.
- companies are likely to be able to provide the disclosures required by the IFRS Sustainability Disclosure Standard within the timeframes that a company normally reports without undue cost or effort.
5 The TAC may consider whether:
- use of the IFRS Sustainability Disclosure Standard is likely to be conducive to the UK's economic growth and international competitiveness, taking into account the costs and benefits of compliance.
- the IFRS Sustainability Disclosure Standard is likely to be coherent with, and suitable for inclusion in, UK domestic legislation and regulation.
6 According to its Terms of Reference, the TAC can only propose amendments to an IFRS Sustainability Disclosure Standard if:
- changes are considered necessary for the effective application of the IFRS Sustainability Disclosure Standard within a UK context.
- a failure to amend a IFRS Sustainability Disclosure Standard would be of detriment to the long-term public good in the UK, taking into consideration the matters in Section A, paragraphs 9.
- changes are desirable, to build upon the material provided within the global baseline provided by an IFRS Sustainability Disclosure Standard. 1
Analysis
Revising comparatives due to changes in estimates
7 IFRS S1 paragraphs B50–B54 require an entity to revise comparative amounts for the prior period(s), if the entity identifies new information in relation to an estimate that provides evidence of circumstances that existed in that period, unless impracticable or the metric is forward-looking. Entities are required to disclose the revised comparative amount, including the difference between the amount disclosed in the preceding period and the revised comparative amount, and explain why the amount has been revised.
8 This approach differs from that taken in accounting standards (IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and UK GAAP), which do not require comparative amounts to be revised when there are changes in accounting estimates. According to the requirements in the accounting standards, changes in estimates are recognised in the current and future periods affected by the change and, therefore, the comparative information remains as originally disclosed. Instead, the change in estimate is reflected in the profit or loss of the reporting period that the change occurs and with a resultant change in equity for that period too.
9 However, in sustainability-related financial disclosures, there is no equivalent concept to equity or reserves and, therefore, changes in estimates cannot be made in such a way. For example, a revision to a Scope 3 GHG emissions estimate impacts only the estimate itself, and there are no cumulative Scope 3 GHG emissions to revise. Therefore, providing revised comparatives that reflect updated estimates offers insight for primary users to understand reliable and decision-useful trends.
10 When finalising IFRS S2 Climate-related Disclosures in 2023, after considering mixed stakeholder views on this issue, the International Sustainability Standards Board (ISSB) decided that entities would provide more decision-useful information by revising comparatives to reflect changes in prior-period estimates. However, recognising the complexity of making such revisions, the ISSB introduced proportionality mechanisms in IFRS S1 paragraph 51 that allow entities not to revise estimates if doing so is impracticable, or if the metric is forward-looking. Additionally, it should be noted that materiality considerations based on both qualitative and quantitative factors apply as they do for all other disclosure requirements.
Previous TAC discussions and decisions
11 The TAC has discussed this issue in several meetings. It has also extensively discussed the challenges generally relating to estimating data, especially in relation to collecting data from the value chain. The following is a summary of the TAC's discussions and decisions that are relevant to the issue relating to revising comparatives.
11.1 Data quality continues to develop, particularly data from third parties (e.g. customers and suppliers), and there will be a natural evolution in data quality.
11.2 The TAC wrote to the ISSB in January 2025 requesting that it considers developing further guidance on the requirements to revise comparatives. This guidance could include information about how entities treat changes in data quality and how to determine whether these changes represent changes in estimates rather than errors.
11.3 If an entity is required to revise disclosures this would incur significant costs, including the potential need to obtain additional assurance.
11.4 It is challenging but important for companies to provide an explanation for changes in estimation, as it is likely to provide information about whether changes are due to a change in information availability, a change in fact, a change in scope, a change in methodology or a change in the business.
11.5 The requirements to revise or restate data collected from different reporting periods (especially from the value chain) will be challenging, as this requirement might introduce significant costs for limited benefit to primary users, especially as this information might not be used for the reporting entity's strategic decision-making and might not be important for users. The collection of data from different reporting periods could be another factor for entities to consider alongside what information might be considered material when revising comparatives.
11.6 There are particular challenges around the revision of comparative amounts for Scope 3 emissions due to changes in estimates. Scope 3 emissions reporting is subject to significant use of estimates, as nearly all data is reliant on information received from entities in the value chain. IFRS S1 requires entities to revise comparative amounts unless this would be impracticable, or the amounts are not material. It can be difficult to know when revisions have become material when considering small changes across a large number of data points from entities in the value chain, which might not be material in isolation and individually, but are material when aggregated.
11.7 Regular revisions of Scope 3 emissions data and other sustainability-related data could impact metrics and targets, including those linked to executive remuneration. This is especially the case as data from the value chain is subject to time lags which might lead to continuous need for restatement or revision of estimates previously reported.
ISSB's Transition Implementation Group's view
12 As part of its ongoing efforts to support the implementation of IFRS S1 and IFRS S2, the ISSB's Transition Implementation Group (TIG) considered a question on whether entities are required to revise estimates when older data from value chain entities is used, without adjustment, to estimate current period Scope 3 Category 15 GHG emissions. The question focused on whether IFRS S1 paragraph B50 applies, particularly given that revising such data may not reflect investee/borrower decarbonisation progress when the same revised data is used as the basis for the current-year estimate.
13 As the example referenced a single loan instrument with no movements between the two illustrated years and involved an investee and issuer sharing the same year-end, the TIG members acknowledged that the example was an extreme case and overly simplistic compared to what would likely be encountered in practice.
14 A summary of the TIG’s meeting minutes reinforced the following:
14.1 Requirement to revise the estimates: TIG members agreed that entities are required to apply IFRS S1 paragraph B50 when revising preceding period estimates, even when current-period estimates are derived from prior-period data sourced from value chain entities. Although the fact pattern presented related specifically to financed emissions, the TIG members confirmed that the principles apply more broadly to all value chain data, not only to Scope 3 Category 15 GHG emissions.
14.2 Materiality considerations: The TIG agreed that revisions to previously reported amounts should be made only where the differences are material, assessed using both qualitative and quantitative factors. Members observed that an entity must evaluate whether information about the difference between the preceding period estimate and the revised disclosure is material and therefore requires revision. Revisions would not need to be made when the effect is immaterial.
14.3 Understandability and complementary disclosures: The TIG noted that revising estimates alone may not always provide users with sufficient insight into performance and trends. Accordingly, entities should consider providing complementary disclosures where relevant, such as:
- explanations of significant measurement uncertainties in accordance with IFRS S1 paragraphs 77–78; and
- indications of circumstances in which future revisions may be expected, for example where updated value chain data will become available at a later date.
14.4 TIG members also noted that, in general, decarbonisation trend should not be looked at in isolation (i.e. as only between current and prior year) but for several years that have been updated with revised information.
14.5 Measurement framework under IFRS S2: The TIG reaffirmed that entities must apply the Scope 3 measurement framework set out in IFRS S2 paragraphs B38–B57, even when estimating current year using prior year data. This includes ensuring:
- faithful representation of Scope 3 GHG emissions measurements; and
- use of all reasonable and supportable information available at the reporting date, without undue cost or effort.
14.6 TIG members also discussed that IFRS S1 requirements on measurement uncertainty, completeness, neutrality, and clarity also apply.
15 The TIG discussion is helpful context for the TAC to decide whether to amend its endorsement recommendations. However, it should be noted that the example the TIG discussed was overly simplistic and some of the decisions may not apply. For example, as noted in paragraph 14.4 of this paper the views of the TIG do not take into account that IFRS S1 only requires comparative information for the prior period and therefore decarbonisation trends will depend on just two years data. If both of these years are based on the same underlying emissions data, then the trend will not reflect decarbonisation. Additionally, in relation to paragraph 14.2 of this paper, the TAC has already agreed that the materiality assessment is a simple example involving a limited number of data points. However, it can be difficult to know when revisions are material when considering small changes across a large number of data points from entities in the value chain, which might not be material in isolation and individually, but are material when aggregated.
Stakeholder feedback from DBT consultation
16 In June 2025, the UK Government issued a consultation to seek views on the exposure drafts of UK SRS S1 and UK SRS S2. This consultation included the endorsement recommendations of the TAC.
17 Question 3 of the consultation asked about the impact of revising comparative data for financed emissions calculations and what additional guidance might be useful.
18 Some stakeholders provided views more broadly related to revising comparatives (not specifically in relation to financed emissions). These comments included that:
- it is essential for companies to revise comparative data to improve accuracy, to reflect improvements in data integrity, to ensure the data is decision-useful and to depict a true story of the company's performance.
- sustainability data is inherently complex and subject to estimation uncertainty. Primary users of this information generally understand these limitations.
- this requirement will impose administrative burden and divert resources away from actioning decarbonisation strategies.
- more guidance, including worked examples, is needed from the ISSB to clarify when revisions are material.
- the revised information may offer limited benefit and could detract efforts towards improving data quality.
- updating prior-year numbers continuously can make year-on-year comparisons less straightforward.
- a better approach could be to require clearer explanation and documentation of the methodology which will allow users to understand the driver behind year-on-year changes.
- from an assurance perspective, continuous revisions introduce heightened audit trail complexity and will demand rigorous retrospective verification processes.
19 Specifically relating to financed emissions, stakeholders' (including investors) views included that:
- financed emissions calculations and disclosures are nascent and it is expected that more accurate models for estimates will be developed.
- revising comparative data, where feasible, enhances consistency and comparability of financed emissions disclosures, but is challenging.
- the inherent time lag between financial balance sheet data and the most recent counterparty emissions data will never be solved and is therefore a permanent feature of financed emissions reporting.
- to comply with IFRS S1 paragraph B50, financed emissions calculations will always need to be updated to reflect actual data once available and therefore revisions to comparatives will always be required.
- it is likely that the same emissions data is being used to calculate both current and prior-year emissions data, which undermines the comparability and usefulness of disclosures for users. This also means that the differences between the current year and the revised comparatives would only reflect changes in portfolio composition or fair value movements and may obscure actual year-on-year emissions changes, making it difficult for users to interpret progress or trends.
- revising comparatives every year may be confusing for users and mislead them, especially if the changes are not fully explained.
- this requirement is a significant additional reporting and assurance burden with limited benefit to users, which is not proportionate or cost effective.
- given that the ISSB cannot amend this any time soon, it is suggested that a relief in UK SRS S1 paragraph B50 for Scope 3 emissions would be useful, as long as the relief also emphasises the disclosure of estimation uncertainty.
20 Feedback relating to revising comparatives due to changes in estimates has not substantially changed since the TAC collected views in 2024. However, the conviction of the views is notably stronger with emphasis on the challenges for Scope 3 and financed emissions.
21 Additionally, the TAC's initial discussion and decisions on this issue emphasised the importance of materiality judgements, with an expectation that companies need only revise comparatives if the resulting information is material. However, as indicated by the stakeholder feedback, it is confirmed that financed emissions data will always need to be revised when actual data is available to replace estimates. This is a concern that was not previously discussed by the TAC, and therefore it is appropriate for the TAC to reconsider their advice based on this new information.
22 Notably, investors acknowledged the inherent challenges associated with calculating financed emissions and they were concerned that continuous revisions of data would obscure trends and therefore not be decision useful.
Specific concerns related to financed emissions
23 Noting the concerns raised by stakeholders relating to financed emissions and revising comparatives, the following paragraphs provide an analysis of the challenges.
23.1 It is well documented that financed emissions data is calculated using a large volume of data which is heavily reliant on estimates, especially when counterparty emissions data is not available for the current reporting period. It is also noted that there is an inherent and unavoidable lag in financed emissions data that will never be resolved. Financial institutions that disclose financed emissions are making best efforts to provide reliable information based on information that is available at the reporting date, which is in the spirit of the requirement in IFRS S1.
23.2 Given the volume of data that goes into calculating financed emissions, and the reliance on estimates and modelled data, it can be suggested that revising financed emissions comparatives will likely require significant cost and effort which may not result in better quality information for users.
23.3 It is also acknowledged that the most recent emissions data available from counterparties may have a lag of more than one year. As actual data is disclosed by the counterparties throughout the calendar year, it may result in financial institutions revising the same disclosure multiple times. IFRS S1 paragraph 70 only requires comparative information from the preceding period (only one year of comparative information), but some companies already provide more comparative data to effectively demonstrate trends. There is a risk that the requirement in IFRS S1 paragraph B50 could result in financial institutions no longer providing year on year data beyond the preceding period, which would reduce the ability of users to observe longer term trends.
23.4 Fundamentally, the objective of disclosing financed emissions information is to enable users of general-purpose financial reports to understand an entity's performance in relation to its climate-related risks and opportunities. Therefore, it can be argued that it is the trend observed through the comparatives that is most useful for users as it demonstrates how the companies are managing their risk exposure. As noted by investors in the UK SRS consultation, there is a concern that continuously revising comparatives will obscure these trends. Additionally, because the current year estimated data and revised comparative data is based on the same underlying emissions data, both investors and preparers raised concerns that the difference between the two years would be a reflection of portfolio composition or fair value movements rather than a reflection of risk exposure or changes in emissions.
23.5 It was noted by some stakeholders that the challenges observed for financed emissions are also relevant for a number of other categories in the calculation of Scope 3 emissions.
Current practice of revising financed emissions comparatives
24 The Secretariat noted that, although financial institutions in the UK and other jurisdictions may be required to report financed emissions as part of their climate reporting, there is currently no mandate to revise estimates as required under IFRS S1. Any revisions to estimates made at present are voluntary. Given this voluntary and evolving nature of reporting in such a complex area, it is difficult to identify a clear trend of revisions to estimates in current reporting practices.
25 The PCAF methodology does not explicitly address revisions arising from changes in estimates. However, it does mention restatements for improvements in data quality, changes in methodology and structural changes such as disposals or acquisitions.
26 A review of sustainability reports from UK and some overseas financial institutions reveals isolated practices. While some entities restate figures due to methodological changes or errors, it is unclear from current disclosures whether, and how, changes in estimates are contributing to these restatements.
27 The Secretariat noted that some financial institutions disclose policies for restating financed emissions either within their sustainability reports or their financed emissions methodology papers. However, this primarily addresses errors and methodological changes and does not explicitly cover revisions due to changes in estimates.
Materiality
28 As noted in paragraph 11.5 of this paper, the TAC has already discussed and agreed that revising comparatives for Scope 3 emissions due to changes in estimates would lead to significant costs for companies. The TAC also agreed that the resulting disclosure would likely have limited decision-useful insight.
29 If the TAC's assessment is correct, and the decision-usefulness of the revised comparative information for Scope 3 (in particular financed emissions) data is limited, then when materiality is applied there may be no need to revise comparatives, as they may not meet the definition for material information on a qualitative basis.
30 As highlighted by stakeholders during the UK SRS consultation, when financed emissions data is calculated using prior year data as a proxy and later replaced with actual data, the change could be material based on qualitative or quantitative considerations, or a combination of both. However, materiality remains entity-specific and requires judgement informed by facts and circumstances.
31 As noted in the TIG discussion detailed above, materiality applies to all disclosure requirements in IFRS S1 and IFRS S2. The TAC has highlighted in previous discussions that it can be difficult to know when revisions are material when considering small changes across a large number of data points from entities in the value chain, which might not be material in isolation and individually, but are material when collated. Companies would need to go through the exercise of collecting and collating revised data from across the value chain to be able to access whether the change is material.
Changes to ESRS 1
32 In its meeting on the 25 November 2025, the European Financial Reporting Advisory Group's (EFRAG's) Sustainability Reporting Board (SRB) discussed and agreed changes to certain European Sustainability Reporting Standards (ESRS). In particular, (draft) ESRS 1 General Requirements now include a relief from paragraph 85(b) which requires entities to restate comparatives if new information is identified that provides evidence of circumstances that existed in the preceding period (unless impractical to do so).
33 The new relief AR 37 states:
The undertaking is not required to restate the comparative figure for new information received, if the estimation methodology for the relevant metric relies systematically at the reporting date on an input of the previous period.
34 This new relief resolves the concerns of stakeholders by recognising that some metrics are reliant on estimates based on prior period data, and to revise this data every year would be burdensome. This new relief does not specify or limit its use to financed emissions disclosure, which also recognises that other metrics beyond financed emissions may benefit from its use.
Summary of analysis
35 Aside from the specific challenges for financed emission disclosures, the stakeholder feedback from the UK SRS consultation did not surface any new arguments against the requirement to revise comparatives due to other changes in estimates beyond financed emissions.
36 In relation to financed emissions, the need to continuously revise comparatives due to the reliance on estimates and prior period emissions data presents a challenge for financial institutions and may not provide decision-useful information for users. This challenge may not be unique to financed emissions, but it is the most prominent metric that is currently required by the existing standards. The changes approved by the EFRAG SRB recognise these challenges and have provided a relief that goes beyond financed emissions.
37 A summary of the endorsement criteria is outline in the table below, including an assessment of whether the requirements in IFRS S1 paragraph B50 meets the endorsement criteria based on the analysis in this paper.
| Endorsement criteria | In relation to the disclosures of financed emissions, would the implementation of IFRS S1 and IFRS S2 meet the endorsement criteria? |
|---|---|
| The use of the IFRS Sustainability Disclosure Standard is likely to result in an improvement in the international comparability of sustainability-related reporting in the UK. | Partially. Maintaining the global baseline will improve international comparability of disclosures as there will be some consistency over the way comparatives are revised. However, the changes that have been agreed by EFRAG SRB on ESRS 1 could lead to changes in practice with those applying draft UK SRS, and therefore impact international comparability. |
| The use of the IFRS Sustainability Disclosure Standard is likely to support companies in making disclosures that are understandable, relevant, reliable and comparable. | Partially. The TAC has agreed that revising comparatives due to changes in estimates can provide useful information, especially as sustainability information is heavily reliant on estimation. However, stakeholders have suggested that continuous revisions to metrics, especially ones that have high measurement uncertainty, could result in disclosures that are not understandable, reliable or comparable. |
| The use of the IFRS Sustainability Disclosure Standard is likely to improve the quality of corporate reporting within the UK in the long-term. | Partially. There are conflicting views on whether the requirements in IFRS S1 would lead to better quality reporting that serves the needs of users. |
| Companies are likely to be able to provide the disclosures required by the IFRS Sustainability Disclosure Standard within the timeframes that a company normally reports without undue cost or effort. | Partially. Although there is likely to be significant cost and effort required, especially for financed emissions disclosures, this requirement would not prevent companies from disclosing within the timeframes that it normally reports. |
| Additional criteria | |
|---|---|
| Whether use of the IFRS Sustainability Disclosure Standard is likely to be conducive to the UK's economic growth and international competitiveness, taking into account the costs and benefits of compliance. | Partially. As noted by stakeholders, the costs of compliance are likely to outweigh the benefit, especially in relation to financed emissions disclosure. |
| Whether the IFRS Sustainability Disclosure Standard is likely to be coherent with, and suitable for inclusion in, UK domestic legislation and regulation. | Yes. There is no current UK domestic legislation or regulation that would be affected by these requirements. |
Endorsement recommendations
Previous recommendations
Endorsement recommendation
The TAC recommends that the requirements in IFRS S1 relating to judgements, measurement uncertainty, errors and revising comparative amounts due to changes in estimates are maintained without amendment.
Additional recommendations and observations
38 The TAC recommends that the ISSB develops guidance on the requirements to revise comparatives that would support the application of the standards. This guidance could include information about how entities treat changes in data quality and how to determine whether these changes represent changes in estimates rather than errors. Ideally such guidance would be developed as practice evolves.
39 The TAC recommends that the PIC [Policy and Implementation Committee] considers, as an implementation matter, alongside other requirements in the Companies Act 2006, the Streamlined Energy and Carbon Reporting (SECR) requirement that the comparative information shall be ‘as disclosed in last year's report' because this might not meet the requirements for the disclosure of comparative information in IFRS S1.
40 The TAC recommends that market practice relating to judgements, measurement uncertainty, errors and revising comparative amounts due to changes in estimate is an area for continued monitoring to provide feedback to the ISSB during its post-implementation review of IFRS S1.
41 The full endorsement recommendations regarding revising comparatives are included in Appendix 1.
Options for the TAC to consider
42 Based on the new information received during the UK Government's consultation on UK SRS and the analysis provided in this paper, the TAC is asked whether to amend its endorsement recommendations for the Secretary of State.
43 If the TAC agrees that an amendment to its recommendations is necessary, the TAC might consider the following options.
43.1 Replicate the approach used by EFRAG and recommend a relief that states that an entity is not required to revise comparatives when new information is available, if the estimation methodology used for the relevant metric relies systematically at the reporting date on data from previous periods.
- This approach will resolve stakeholder concerns and will remove the requirement to revise comparatives due to changes in estimates when these estimates are reliant on prior period data.
- Rather than providing a relief just for financed emissions or Scope 3, this relief can be applied to other metrics that are heavily reliant on prior period data for estimation.
- This approach would diverge from the ISSB baseline but will align with the approach taken by EFRAG.
- The TAC could go further and suggest that if an entity uses this relief, they should disclose this as part of their methodology or policy for restatement.
43.2 Provide a relief from IFRS S1 paragraph B50 but just for financed emissions.
- The most prominent concerns that were raised by stakeholders in the UK SRS consultation related to financed emissions and therefore it can be argued that any proposed amendments to the standard should focus on these specific concerns.
43.3 Provide a relief from IFRS S1 paragraph B50 but for all Scope 3 emissions.
- Recognising that the challenges highlighted for financed emissions are also applicable to wider Scope 3 emissions data, the TAC could recommend a relief that covers all Scope 3 data.
- Widening the relief at this point would prevent the need for any future amendments if it were later agreed that all Scope 3 disclosure would benefit from a similar relief.
44 The TAC is reminded that they are able to propose an amendment to a IFRS Sustainability Disclosure Standard if:
- changes are considered necessary for the effective application of the IFRS Sustainability Disclosure Standard within a UK context.
- there is a failure to amend a IFRS Sustainability Disclosure Standard would be of detriment to the long-term public good in the UK, taking into consideration the matters in Section A, paragraphs 9 (TAC).
- changes are desirable, to build upon the material provided within the global baseline provided by a IFRS Sustainability Disclosure Standard. 2
Questions for the TAC
- Does the TAC agree to amend its recommendations to the Secretary of State in relation to the requirement in IFRS S1.B50 to revise comparatives due to changes in estimates?
- If the answer to question (i) is 'yes', which of the options (if any) does the TAC want to recommend to the Secretary of State?
Appendix 1 – Summary of the TAC's endorsement recommendations (December 2024)
Judgements, uncertainties and errors, including revising comparatives
Endorsement recommendation
The TAC recommends that the requirements in IFRS S1 relating to judgements, measurement uncertainty, errors and revising comparative amounts due to changes in estimates are maintained without amendment.
Additional recommendations and observations
137 The TAC recommends that the ISSB develops guidance on the requirements to revise comparatives that would support the application of the standards. This guidance could include information about how entities treat changes in data quality and how to determine whether these changes represent changes in estimates rather than errors. Ideally such guidance would be developed as practice evolves.
138 The TAC recommends that the PIC considers, as an implementation matter, alongside other requirements in the Companies Act 2006, the Streamlined Energy and Carbon Reporting (SECR) requirement that the comparative information shall be ‘as disclosed in last year's report' because this might not meet the requirements for the disclosure of comparative information in IFRS S1.
139 The TAC recommends that market practice relating to judgements, measurement uncertainty, errors and revising comparative amounts due to changes in estimate is an area for continued monitoring to provide feedback to the ISSB during its post-implementation review of IFRS S1.
Technical assessment and deliberations
140 IFRS S1 sets out requirements for the disclosure and application of judgements and the use of assumptions and estimates in the preparation of an entity's sustainability-related disclosures. IFRS S1 also sets out the requirements for how entities should address errors and changes in estimates in the disclosure of comparative information. The relevant references are IFRS S1 paragraphs 74–76 on judgements, paragraphs 77–82 on measurement uncertainty, paragraphs 83-86 and B55–B59 on errors and paragraphs B49–59 on comparative information.
141 The TAC recommends that the requirements in IFRS S1 relating to judgements, measurement uncertainty, errors and revising comparative amounts due to changes in estimate are maintained without amendment. By maintaining the requirements, the UK Sustainability Reporting Standards are likely to support entities in making disclosures that are understandable, reliable and comparable, and therefore, improve the quality of corporate reporting in the UK. The TAC welcomes the use of these concepts from IFRS Accounting Standards as providing a consistent framework.
142 The TAC notes that data quality continues to develop, particularly data from third parties (e.g. customers and suppliers), and that there will be a natural evolution in data quality. Noting these challenges, the TAC recommends that the ISSB develops further guidance on the requirements to revise comparatives that would support the application of the standards. This guidance could include information about how entities treat changes in data quality and how to determine whether these changes represent changes in estimates rather than errors. This guidance could also include the differences between changes in estimates and errors, and the difference between restatements and revisions, and how this might affect an entity's assessment of what information is considered material. The TAC notes that if an entity is required to restate disclosures this would incur significant costs, including the potential need for obtaining additional assurance. The TAC highlights that providing an explanation for changes in estimation is challenging but important as it is likely to provide information about whether changes are due to a change in information availability, a change in fact, a change in scope, a change in methodology or a change in the business. This is particularly relevant for reporting entities that are utilising the proportionality mechanisms and during initial years of implementation of IFRS Sustainability Disclosure Standards. The TAC also expressed concerns around the requirements to revise or restate data collected from different reporting periods (especially from the value chain) as this information might introduce significant costs for limited decision-useful insight, especially as this information might not be used for strategic decision-making and might not be important for users. This collection of data from different reporting periods could be another factor for entities to consider alongside what information might be considered material when restating comparatives.
143 The TAC highlights one example, which relates to Scope 3 emissions reporting, where there are particular challenges around the revision of comparative amounts due to changes in estimates. Scope 3 emissions reporting is subject to significant use of estimates as nearly all data is reliant on information received from entities in the value chain. IFRS S1 requires entities to revise comparative amounts unless this would be impracticable or the amounts are not material. It can be difficult to know when revisions have become material when considering small changes across a large number of entities in the value chain, which might not be material in isolation and individually, but are material when collated. Regular revisions of Scope 3 emissions data and other sustainability-related data could impact metrics and targets, including those linked to executive remuneration, especially as data from the value chain is subject to time lags which might lead to continuous need for restatement or revision of the comparatives. While in June 2024 the ISSB's Transition Implementation Group on IFRS S1 and IFRS S2 (TIG) discussed a simple scenario consisting of a change in previously reported estimated greenhouse gas emissions in the value chain for a single issuer and a single loan, further guidance from the ISSB could clarify when entities should undertake revisions and how they should explain their decisions regarding revisions in more complex scenarios. Ideally, such guidance would be developed as practice evolves.
144 The TAC recommends that the PIC considers, as an implementation matter, alongside other requirements in the Companies Act 2006, the SECR requirement that the comparative information shall be 'as disclosed in last year's report' because this might not meet the requirements for the disclosure of comparative information in IFRS S1.
145 Finally, the TAC recommends that market practice relating to judgements, measurement uncertainty, errors and revising comparative amounts due to changes in estimate is an area for continued monitoring to provide feedback to the ISSB during its post-implementation review of IFRS S1. This would facilitate an understanding of how the requirements are being applied by entities and whether further and more granular requirements or guidance are necessary
Appendix 2 – Extract from IFRS S1 General requirements for Disclosure of Sustainability-related information
The requirements in IFRS S1 that relate to the disclosure of comparatives, including the requirements for entities to revise comparative information due to changes in estimates are set out below.
IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information
[...]
Comparative information
70 Unless another IFRS Sustainability Disclosure Standard permits or requires otherwise, an entity shall disclose comparative information in respect of the preceding period for all amounts disclosed in the reporting period. If such information would be useful for an understanding of the sustainability-related financial disclosures for the reporting period, the entity shall also disclose comparative information for narrative and descriptive sustainability-related financial information (see paragraphs B49–B59).
71 Amounts reported in sustainability-related financial disclosures might relate, for example, to metrics and targets or to current and anticipated financial effects of sustainability-related risks and opportunities.
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Metrics
B50 In some cases, the amount disclosed for a metric is an estimate. Except as specified in paragraph B51, if an entity identifies new information in relation to the estimated amount disclosed in the preceding period and the new information provides evidence of circumstances that existed in that period, the entity shall:
- disclose a revised comparative amount that reflects that new information;
- disclose the difference between the amount disclosed in the preceding period and the revised comparative amount; and
- explain the reasons for revising the comparative amount.
B51 In applying the requirement in paragraph B50, an entity need not disclose a revised comparative amount:
- if it is impracticable to do so (see paragraph B54).
- if the metric is forward-looking. Forward-looking metrics relate to possible future transactions, events and other conditions. The entity is permitted to revise a comparative amount for a forward-looking metric if doing so does not involve the use of hindsight.
B52 If an entity redefines or replaces a metric in the reporting period, the entity shall:
- disclose a revised comparative amount, unless it is impracticable to do so;
- explain the changes; and
- explain the reasons for those changes, including why the redefined or replacement metric provides more useful information.
B53 If an entity introduces a new metric in the reporting period, it shall disclose a comparative amount for that metric unless it is impracticable to do so.
B54 Sometimes, it is impracticable to revise a comparative amount to achieve comparability with the reporting period. For example, data might not have been collected in the preceding period in a way that allows retrospective application of a new definition of a metric, and it might be impracticable to recreate the data. If it is impracticable to revise a comparative amount for the preceding period, an entity shall disclose that fact.