Aligning group sustainability and financial reporting periods

There is no explicit requirement in AASB S2 Climate-related Disclosures mandating that the climate-related financial disclosures of a parent and its subsidiaries should cover the same reporting period and the same reporting dates (year-ends) as the consolidated sustainability report.

However, the general requirements outlined in Appendix D to AASB S2, which help to ensure that the climate-related financial disclosures presented are useful to primary users when they make decisions about providing resources to the entity, provide some guidance:

• Reporting entity: Climate-related financial disclosures shall be for the same reporting entity as the related financial statements. A consolidated sustainability report should, therefore, incorporate the climate-related financial disclosures for the same group entities as the consolidated financial statements (i.e. the group as a whole).
• Connected information: Users should be able to understand the connections between the climate-related financial disclosures and information contained in the related financial statements.
• Timing of reporting: Climate-related financial disclosures must be reported at the same time as the related financial statements and cover the same reporting period as the related financial statements.

So, while Appendix D generally requires the same reporting period for the climate-related financial disclosures and the financial report, it does not specifically address whether the parent and all of its subsidiaries should have the same reporting date, and cover the same reporting period for climate-related financial disclosures.

Appendix D also does not explicitly require or permit whether, and to what extent, the value chain information of a subsidiary should cover the same reporting period as the parent.

Must a parent and its subsidiaries align reporting periods and dates for financial reporting?

Generally, yes, they should. A parent entity preparing financial statements under Chapter 2M of the Corporations Act 2001 must prepare consolidated financial statements as required by AASB 10 Consolidated Financial Statements.

AASB 10 (and IFRS 10 if applying IFRS^® Accounting Standards) requires that the parent and all its subsidiaries must have the same reporting date (year-end). If they don’t (for example, where a newly acquired subsidiary has not yet synchronised its reporting date with that of its parent), the subsidiary must prepare additional information as of the parent entity’s reporting date so that the parent can consolidate the financial information of the subsidiary.

If this is impracticable, the parent will consolidate the most recent financial statements of the subsidiary adjusted for the effects of significant transactions or events that occur between the date of those financial statements and the date of the consolidated financial statements. The difference between the subsidiary’s reporting date and that of the consolidated financial statements cannot be more than three months.

Must reporting dates and reporting periods align for climate-related financial disclosures?

Yes. Even though Appendix D does not specifically address whether the parent and all of its subsidiaries should have the same reporting date, and cover the same reporting period for climate-related financial disclosures, it does not override the requirements of Australian Accounting Standards. This means that the climate-related financial disclosures need to be prepared for a reporting period and at reporting dates, consistent with the requirements for consolidation under AASB 10.

Therefore, Appendix D requires that the parent and its subsidiaries use the same reporting period and reporting dates, unless the relevant accounting standards permit the parent entity to have a different reporting date from one or more of its subsidiaries. This approach is consistent with and promotes connectivity between sustainability-related financial information and the related financial statements.

Need help? 

Australian parent entities need to ensure that their financial and sustainability reports are connected by using the same reporting period and reporting dates for all group entities. If you are reporting under a different financial reporting framework and are unsure whether the relevant accounting standards permit differing reporting periods and dates for group entities, our sustainability reporting experts are always available to assist. Contact us for help.