HKFRS S1 - General Requirements for Sustainability Disclosure (Condensed)
| Section Name | Key Concept | Brief Description |
|---|---|---|
| Objective and Scope | Purpose and boundary of HKFRS S1 | Requires disclosure of sustainability-related risks and opportunities that could reasonably be expected to affect an entity's prospects (cash flows, access to finance, cost of capital). |
| Conceptual Foundations | Qualitative characteristics, fair presentation, materiality, reporting entity, connected information | Sets the principles for preparing and presenting sustainability-related financial disclosures, including relevance, faithful representation, and materiality. |
| Core Content | Governance, Strategy, Risk Management, Metrics and Targets | Specifies the four pillars of disclosure: how the entity oversees, manages, and measures sustainability-related risks and opportunities. |
| General Requirements | Sources of guidance, location, timing, comparative information, statement of compliance | Provides practical rules for preparing disclosures, including where to find guidance and when to report. |
| Judgements, Uncertainties and Errors | Disclosure of key judgements, measurement uncertainty, and correction of errors | Requires transparency about the most significant assumptions, uncertainties, and prior period corrections. |
Objective and Scope
Objective (Paragraphs 1-4)
The objective of HKFRS S1 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.
Scope (Paragraphs 5-9)
| Requirement | Details |
|---|---|
| Application | An entity shall apply this Standard in preparing and reporting sustainability-related financial disclosures in accordance with HKFRS Sustainability Disclosure Standards. |
| Exclusions | Sustainability-related risks and opportunities that could NOT reasonably be expected to affect an entity's prospects are outside the scope. |
| Financial Statements | May apply HKFRS Sustainability Disclosure Standards irrespective of whether related financial statements are prepared under HKFRS Accounting Standards or other GAAP. |
Conceptual Foundations
Qualitative Characteristics (Paragraph 10)
Fundamental Qualitative Characteristics:
- Relevance - Information must be capable of making a difference in decisions.
- Faithful Representation - Information must be complete, neutral and accurate.
Enhancing Qualitative Characteristics:
- Comparability
- Verifiability
- Timeliness
- Understandability
Fair Presentation (Paragraphs 11-16)
A complete set of sustainability-related financial disclosures shall present fairly all sustainability-related risks and opportunities that could reasonably be expected to affect an entity's prospects.
Materiality (Paragraphs 17-19)
Connected Information (Paragraphs 21-24)
An entity shall identify the financial statements to which sustainability-related financial disclosures relate. Data and assumptions shall be consistent with corresponding data and assumptions used in preparing related financial statements (to the extent possible).
Core Content - Governance and Strategy
Governance (Paragraphs 26-27)
Objective: Enable users to understand the governance processes, controls and procedures an entity uses to monitor, manage and oversee sustainability-related risks and opportunities.
Disclosure Requirements:
- Governance Body Oversight: Identify the governance body(s) responsible, how responsibilities are reflected in terms of reference, how the body determines appropriate skills, how often it is informed, and how it oversees targets and remuneration.
- Management's Role: Whether role is delegated, how oversight is exercised, and how controls and procedures are integrated with other internal functions.
Strategy (Paragraphs 28-42)
Objective: Enable users to understand an entity's strategy for managing sustainability-related risks and opportunities.
Five Key Areas of Disclosure:
- Sustainability-related risks and opportunities (describe, specify time horizons).
- Business model and value chain (current and anticipated effects).
- Strategy and decision-making (how entity has responded and plans to respond).
- Financial position, financial performance and cash flows (current and anticipated effects).
- Resilience (capacity to adjust to uncertainties).
Core Content - Risk Management, Metrics and Targets
Risk Management (Paragraphs 43-44)
Objective: Enable users to understand processes to identify, assess, prioritise and monitor sustainability-related risks and opportunities, and assess the entity's overall risk profile.
Disclosure Requirements:
- Inputs and parameters used.
- Whether and how scenario analysis is used.
- How nature, likelihood and magnitude of effects are assessed.
- How risks are prioritised relative to other types of risk.
- How processes have changed compared with previous period.
Metrics and Targets (Paragraphs 45-53)
Objective: Enable users to understand an entity's performance in relation to sustainability-related risks and opportunities, including progress towards targets.
Required Metrics (Paragraph 46):
- Metrics required by applicable HKFRS Sustainability Disclosure Standard.
- Metrics the entity uses to measure and monitor that risk or opportunity.
Industry-based Metrics (Paragraph 48): Metrics shall include those associated with particular business models, activities or other common features that characterise participation in an industry.
Targets (Paragraph 51): For each target, disclose the metric used, specific target, period, base period, milestones, performance, and any revisions.
General Requirements
Sources of Guidance (Paragraphs 54-59)
| Priority | Source |
|---|---|
| Required | HKFRS Sustainability Disclosure Standards |
| Required to refer to | SASB Standards (disclosure topics) |
| May refer to | CDSB Framework Application Guidance, other standard-setting bodies, same industry/geographical region entities |
Location of Disclosures (Paragraphs 60-63)
Required as part of general purpose financial reports. Must be clearly identifiable and not obscured. May be included by cross-reference to another report (subject to conditions).
Timing of Reporting (Paragraphs 64-69)
Comparative Information (Paragraphs 70-71)
Unless another Standard permits otherwise, an entity shall disclose comparative information in respect of the preceding period for all amounts disclosed in the reporting period.
Statement of Compliance (Paragraphs 72-73)
Judgements, Uncertainties and Errors
Judgements (Paragraphs 74-76)
An entity shall disclose information to enable users to understand the judgements that have the most significant effect on the information included in its sustainability-related financial disclosures.
Examples of Judgements:
- Identifying sustainability-related risks and opportunities.
- Determining which sources of guidance to apply.
- Identifying material information.
- Assessing whether an event or change in circumstances is significant.
Measurement Uncertainty (Paragraphs 77-82)
An entity shall disclose information to enable users to understand the most significant uncertainties affecting the amounts reported.
Requirements:
- Identify amounts subject to high level of measurement uncertainty.
- Disclose sources of measurement uncertainty.
- Disclose assumptions, approximations and judgements made.
Errors (Paragraphs 83-86)
Distinction: Corrections of errors are distinguished from changes in estimates.
Appendices (A-E)
Appendices
Appendix A - Defined Terms
| Term | Definition |
|---|---|
| Business model | An entity's system of transforming inputs through its activities into outputs and outcomes that aims to fulfil strategic purposes and create value. |
| Material information | Information is material if omitting, misstating or obscuring it could reasonably be expected to influence primary users' decisions. |
| Primary users | Existing and potential investors, lenders and other creditors. |
| Scenario analysis | A process for identifying and assessing a potential range of outcomes of future events under conditions of uncertainty. |
| Value chain | The full range of interactions, resources and relationships related to a reporting entity's business model and the external environment. |
Appendix B - Application Guidance
Key Areas:
- Sustainability-related risks and opportunities (B1-B12): Use all reasonable and supportable information available without undue cost or effort. Reassess scope on occurrence of significant event or change in circumstances.
- Materiality (B13-B37): Entity-specific assessment. Consider both quantitative and qualitative factors. Reassess at each reporting date.
- Connected information (B39-B44): Explain connections between disclosures. Avoid unnecessary duplication.
Appendix C - Sources of Guidance
In the absence of a specifically applicable HKFRS Sustainability Disclosure Standard, an entity may refer to:
- Global Reporting Initiative (GRI) Standards
- European Sustainability Reporting Standards (ESRS)
Appendix E - Effective Date and Transition
Transition Reliefs:
- Comparative information: Not required in first year of application.
- Climate-only focus: May disclose only climate-related risks and opportunities in first year.
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