Rounding in sustainability reports

The Australian Securities and Investments Commission (ASIC) recently reissued its rounding legislative instrument because the superseded instrument, ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, has expired. Group 1 and Group 2 entities are gearing up for their first mandatory sustainability reports, and many are asking if they are permitted to apply rounding of dollar amounts in the sustainability report, in a similar way to the financial report and directors’ report.

What information does AASB S2 Climate-related Disclosures require?

AASB S2 requires entities to disclose information about climate-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, its access to finance or cost of capital over the short, medium or long term.

While much of this information is narrative (such as regarding governance and risk management), there are quantitative disclosures required about the current and anticipated effects of climate-related risks and opportunities on the entity’s financial performance, financial position and cash flows (in dollars), greenhouse gas emissions and climate targets (in CO₂-equivalents (CO₂e)), and scenario analysis.

So, can these dollar amounts in sustainability reports be rounded?

Strict view – No rounding allowed in the sustainability report

The new legislative instrument, ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2026/183 (LI 2026/183), makes no specific allowance for rounding in the sustainability report, with an ‘eligible report’ including only the financial report, directors’ report (annual and half-year) and a profit and loss statement and balance sheet required by section 989B for Australian financial services licensees. Therefore, technically, rounding is not allowed in the sustainability report.

Alternative view – Rounding allowed in the sustainability report

Despite the strict reading of LI 2026/183, there is an alternative view that rounding of amounts in the sustainability report is permitted, or even required, by the following qualitative characteristics in the Application Guidance contained in Appendix D to AASB S2:

• Relevance: Relevant climate-related financial information has confirmatory value. That is, it provides users with feedback on previous evaluations (including in the financial report). Applying inconsistent rounding conventions between the financial report and the sustainability report may render sustainability information irrelevant.
• Understandability: Information should be coherent. That is, it should be presented in a way that allows users to relate information about its climate-related risks and opportunities to information in the entity’s financial statements. A different (or no) rounding approach in the sustainability report may prevent users from understanding the interrelatedness with the financial report.
• Connected information: If an entity is eligible, for example, to round amounts in its financial statements to the nearest thousand dollars ($’000), it should round connected information in the sustainability report in a similar way.

Conclusion

Although technically, LI 2026/183 does not permit rounding in the sustainability report, from a practical perspective, the alternative view is preferable. This is because it ensures consistent presentation of dollar amounts across the financial report, the directors’ report and the sustainability report, resulting in improved understandability and interconnectivity of information across all three reports.

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