New IAASB guidance clarifies the application of materiality under ISSA 5000

In Australia, mandatory sustainability reports prepared in compliance with AASB S2 Climate-related Disclosures is subject to assurance under ASSA 5000 (which is based on ISSA 5000). In this article, we explore the concept of ‘materiality’ for the purposes of assurance under ASSA 5000, noting that this is different to the concept of ‘materiality’ applied by preparers when reporting under AASB S2.

The International Auditing and Assurance Standards Board (IAASB) has released a new staff publication, Frequently Asked Questions: The Application of Materiality under ISSA 5000 (FAQ), providing additional implementation guidance on how assurance practitioners apply materiality in sustainability assurance engagements. While Australian entities apply ASSA 5000, many of the concepts discussed in the FAQ are relevant to organisations preparing sustainability reports and assurance engagements in Australia, particularly in understanding how assurance practitioners approach materiality.

As sustainability reporting and assurance requirements evolve globally, materiality remains one of the most important - and often misunderstood - concepts for both preparers and assurance practitioners. The new guidance helps clarify key areas of judgement, including the relationship between an organisation’s materiality process and the assurance practitioner's application of materiality, the role of intended users, and the practical implications of double materiality.

Why materiality remains in the spotlight

With ISSA 5000 coming into effect for reporting periods beginning on or after 15 December 2026, organisations are turning their attention to assurance readiness. The IAASB's new guidance provides useful insight into how assurance practitioners apply materiality and highlights several areas that reporting teams may wish to revisit before assurance requirements take effect.

While many organisations already have established processes for identifying and assessing material sustainability matters, the guidance reinforces that assurance materiality serves a different purpose. Understanding that distinction can help organisations better prepare for future assurance engagements.

Three key takeaways

1. Materiality is a user-driven concept

The publication reiterates that materiality is fundamentally linked to the information needs of intended users and what could reasonably influence their decisions. Different reporting frameworks may define materiality differently because they are designed to meet the needs of different user groups. For example, IFRS® Sustainability Disclosure Standards focus on information relevant to investors and capital providers, while other frameworks may place greater emphasis on broader stakeholder impacts.

For organisations, this reinforces the importance of clearly understanding who the intended users of sustainability information are and ensuring that reporting processes are aligned to those information needs.

A note on double materiality

The FAQ also discusses double materiality concepts relevant to some overseas reporting regimes, such as the European Sustainability Reporting Standards (ESRS). These concepts are not included in Australia's sustainability reporting and assurance framework. 

2. There is no single materiality threshold for sustainability information

One of the more significant practical observations in the FAQ is that sustainability assurance often involves considering multiple materiality thresholds and judgements. Unlike a financial statement audit, sustainability reports typically include a wide range of qualitative and quantitative disclosures covering various topics, metrics, and stakeholder interests. As a result, practitioners may apply different materiality considerations across different disclosures or groupings of disclosures.

This reflects the complexity of sustainability reporting and highlights why organisations should avoid treating materiality as a single, uniform threshold across all sustainability topics.

3. Qualitative disclosures matter as much as quantitative metrics

Many organisations naturally focus on emissions data, workforce statistics and other measurable indicators. However, the guidance emphasises that qualitative disclosures, such as governance arrangements, policies, action plans, and strategic commitments, require separate materiality considerations. ISSA 5000 adopts a different approach for qualitative and quantitative disclosures, requiring practitioners to consider materiality for qualitative disclosures and determine materiality for quantitative disclosures.

This serves as a useful reminder that reporting quality is not solely about getting the numbers right. Narrative disclosures, governance statements, and descriptions of sustainability strategies can also significantly influence user decision-making.

Further information

Materiality sits at the centre of effective sustainability reporting and assurance. As reporting requirements mature, organisations that understand how assurance practitioners assess materiality will be better placed to support robust disclosures and respond to increasing stakeholder scrutiny. The IAASB FAQ is a worthwhile read for anyone involved in sustainability reporting, governance or assurance readiness.

Readers can access the full publication on the IAASB website.

BDO insight

One area we continue to see organisations grapple with is the distinction between materiality for reporting purposes and materiality in an assurance context. Reporting frameworks help determine what information should be included and disclosed in a sustainability report. Assurance practitioners, apply materiality for a different purpose, assessing whether sustainability information is free from material misstatement. Understanding that distinction early can help avoid surprises.

An assurance practitioner may identify omitted information, inaccurate disclosures or deficiencies in qualitative disclosures that could reasonably influence users' decisions, even where management considers its reporting materiality assessment complete.

It is recommended that preparers of sustainability reports:

• Review whether your materiality assessment process is sufficiently documented to support assurance
• Clearly identify intended users of sustainability information and the decisions they are expected to make
• Evaluate whether governance, strategy and risk management disclosures receive the same level of rigour as quantitative metrics
• Consider whether documentation supports the rationale for excluding information that may be material from an assurance perspective.

How BDO can help

Materiality decisions sit at the heart of credible sustainability reporting. If you're reviewing your reporting approach, preparing for assurance or assessing the implications of ASSA 5000, our sustainability reporting specialists and sustainability assurance team can help you identify gaps, strengthen reporting processes and prepare for future assurance requirements.

Services will be provided subject to applicable independence, ethical and professional standards requirements.