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FSA Credential Level I study materials
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FSA Credential Level I practice questions

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Question 1IFRS Sustainability Disclosure Standards (ISSB Standards)

Under IFRS S1, what is the primary objective of general requirements for disclosure of sustainability-related financial information?

  1. To prescribe a uniform chart of sustainability accounts for statutory filing
  2. To certify entities that meet minimum sustainability performance thresholds
  3. To enable primary users of general purpose financial reports to assess enterprise value and make resource allocation decisions Correct answer.
  4. To replace financial statements prepared under IFRS Accounting Standards

Explanation

IFRS S1 requires an entity to disclose sustainability-related financial information that is useful to primary users in assessing enterprise value and deciding how to allocate resources. It is a disclosure standard, not a performance benchmark or accounting replacement.

Question 2IFRS Sustainability Disclosure Standards (ISSB Standards)

Which body issues the IFRS Sustainability Disclosure Standards, including IFRS S1 and IFRS S2?

  1. The International Accounting Standards Board
  2. The International Sustainability Standards Board Correct answer.
  3. The Global Reporting Initiative
  4. The Financial Stability Board

Explanation

The International Sustainability Standards Board (ISSB) was established to develop IFRS Sustainability Disclosure Standards. The IASB issues IFRS Accounting Standards, while GRI and the FSB are separate organisations with different roles.

Question 3IFRS Sustainability Disclosure Standards (ISSB Standards)

IFRS S2 requires disclosure of greenhouse gas emissions. Which set of emissions does it specify as the minimum to be disclosed?

  1. Scope 1 and Scope 2 emissions only, with Scope 3 optional
  2. Scope 1, Scope 2 and Scope 3 greenhouse gas emissions Correct answer.
  3. Scope 2 and Scope 3 emissions only
  4. Only Scope 1 emissions from owned or controlled sources

Explanation

IFRS S2 requires an entity to disclose its absolute gross Scope 1, Scope 2 and Scope 3 greenhouse gas emissions, each expressed in metric tonnes of CO2 equivalent. Scope 3 is required, subject to the relief provisions in the standard.

Question 4IFRS Sustainability Disclosure Standards (ISSB Standards)

Under IFRS S1, which qualitative characteristics must sustainability-related financial information possess?

  1. Comparability and verifiability only
  2. Materiality and timeliness only
  3. Conservatism and prudence
  4. Relevance and faithful representation Correct answer.

Explanation

IFRS S1 states that sustainability-related financial information must be relevant and faithfully represent what it purports to represent. Comparability, verifiability, timeliness and understandability enhance those two fundamental characteristics.

Question 5IFRS Sustainability Disclosure Standards (ISSB Standards)

IFRS S1 requires sustainability-related financial disclosures to be reported as part of which publication?

  1. The directors' remuneration report exclusively
  2. The statutory tax return
  3. A stand-alone marketing brochure
  4. The entity's general purpose financial reports Correct answer.

Explanation

IFRS S1 requires disclosures to be included as part of an entity's general purpose financial reports, alongside the financial statements. This ensures the information is subject to the same governance and assurance environment.

Question 6IFRS Sustainability Disclosure Standards (ISSB Standards)

Which concept does IFRS S1 use to define the boundary of the sustainability-related risks and opportunities about which an entity reports?

  1. The value chain Correct answer.
  2. The tax consolidation group
  3. The geographic footprint
  4. The legal entity perimeter

Explanation

IFRS S1 requires an entity to consider its value chain, including upstream and downstream activities, when identifying risks and opportunities. The value chain concept extends reporting beyond the reporting entity's own operations.

Question 7IFRS Sustainability Disclosure Standards (ISSB Standards)

IFRS S2 is the ISSB standard that deals specifically with which topic?

  1. Water and marine resources disclosures
  2. Biodiversity-related disclosures
  3. Climate-related disclosures Correct answer.
  4. Labour practices disclosures

Explanation

IFRS S2 sets out climate-related disclosure requirements and is designed to be applied together with IFRS S1. Topics such as biodiversity and water are not addressed by IFRS S2.

Question 8IFRS Sustainability Disclosure Standards (ISSB Standards)

In IFRS S1, the term 'enterprise value' refers to which of the following?

  1. The value of an entity's tangible fixed assets only
  2. The book value of an entity's net assets
  3. The total value of an entity's equity and debt, reflecting its ability to generate future cash flows Correct answer.
  4. The market capitalisation of an entity at the reporting date

Explanation

IFRS S1 describes enterprise value as the value of the entity's equity and debt, reflecting the ability to generate future cash flows over the short, medium and long term. It is not limited to market capitalisation or net asset book value.

Question 9IFRS Sustainability Disclosure Standards (ISSB Standards)

An entity applying IFRS S1 identifies a sustainability-related risk but concludes it is not material. What does IFRS S1 require the entity to do?

  1. Disclose every identified risk regardless of materiality
  2. Omit the specific disclosure but still disclose information about the material risks and opportunities it has identified Correct answer.
  3. Obtain regulatory approval before omitting the disclosure
  4. Disclose the immaterial risk only in the prior year comparatives

Explanation

IFRS S1 applies a materiality judgement; an entity need not disclose immaterial information. However, it must still disclose information that enables users to understand the material sustainability-related risks and opportunities.

Question 10IFRS Sustainability Disclosure Standards (ISSB Standards)

Under IFRS S1, when an entity cannot identify a sustainability-related risk or opportunity using the IFRS Sustainability Disclosure Standards, what should it do?

  1. Apply the most relevant guidance from other standard-setting bodies, such as SASB Standards or GRI, to identify the risk or opportunity Correct answer.
  2. Report only the financial statement impact
  3. Delay reporting until the next annual cycle
  4. Omit the topic entirely until an IFRS standard is issued

Explanation

IFRS S1 permits an entity to refer to other sources, such as SASB Standards, GRI Standards and CDSB guidance, where IFRS Sustainability Disclosure Standards do not provide sufficient guidance. The aim is to maintain completeness of disclosure.

Question 11IFRS Sustainability Disclosure Standards (ISSB Standards)

IFRS S1 requires an entity to disclose its sustainability-related risks and opportunities over which time horizons?

  1. Short, medium and long term, as defined by the entity Correct answer.
  2. The current financial year only
  3. The useful life of the entity's longest-lived asset
  4. A fixed five-year horizon prescribed by the standard

Explanation

IFRS S1 requires disclosures across the short, medium and long term, with the entity defining what each horizon means for it. The standard does not prescribe fixed periods.

Question 12IFRS Sustainability Disclosure Standards (ISSB Standards)

An entity discloses a climate-related target under IFRS S2. Which of the following is required alongside the target?

  1. Only the target figure in absolute terms
  2. The market price of the entity's shares at the reporting date
  3. The name of the external auditor who reviewed the target
  4. The period over which the target applies, the base period and the methodology used to set the target Correct answer.

Explanation

IFRS S2 requires an entity to describe the target, including the period it covers, the base period, the methodology used and whether it is absolute or intensity-based. This enables users to assess the credibility and comparability of the target.

Question 13IFRS Sustainability Disclosure Standards (ISSB Standards)

Which approach does IFRS S2 require for scenario analysis of climate-related risks?

  1. Scenario analysis is required only for financial institutions
  2. Scenario analysis is encouraged but not required
  3. The entity must use a scenario analysis approach commensurate with its circumstances, including at least one scenario aligned with the latest international agreement on climate change Correct answer.
  4. The entity must use exactly two scenarios prescribed by the standard

Explanation

IFRS S2 requires an entity to use climate-related scenario analysis to assess resilience, using an approach commensurate with its circumstances. It must include at least one scenario consistent with the latest international agreement on climate change.

Question 14IFRS Sustainability Disclosure Standards (ISSB Standards)

Under IFRS S1, how should an entity treat sustainability-related financial disclosures when the information is subject to significant estimation uncertainty?

  1. Withhold the information until the uncertainty is resolved
  2. Disclose only the point estimate without qualification
  3. Report the information only to the board of directors
  4. Disclose the information together with a description of the sources and nature of the uncertainty Correct answer.

Explanation

IFRS S1 requires an entity to disclose information about estimation uncertainty, including the sources and nature of the uncertainty. This allows users to understand the reliability and limitations of the reported information.

Question 15IFRS Sustainability Disclosure Standards (ISSB Standards)

IFRS S2 requires disclosure of climate-related physical risks. Which of the following best describes physical risks?

  1. Risks arising from changes in interest rates
  2. Risks arising from the effects of climate change, such as extreme weather events and chronic shifts in climate patterns Correct answer.
  3. Risks arising from the transition to a lower-carbon economy
  4. Risks arising from reputational damage caused by marketing campaigns

Explanation

IFRS S2 distinguishes physical risks, which stem from the effects of climate change, from transition risks, which arise from the shift to a lower-carbon economy. Physical risks include acute hazards and chronic climate shifts.

Question 16IFRS Sustainability Disclosure Standards (ISSB Standards)

An entity prepares its first IFRS S1 report. What does IFRS S1 require regarding comparative information?

  1. Provide no comparatives in the first year of application
  2. Provide comparatives only for greenhouse gas emissions
  3. Provide comparatives only for narrative disclosures
  4. Disclose comparative information for the prior period for all amounts disclosed in the current period Correct answer.

Explanation

IFRS S1 requires comparative information for the preceding period for all amounts disclosed in the current period. This supports trend analysis and comparability for users.

Question 17IFRS Sustainability Disclosure Standards (ISSB Standards)

Under IFRS S1, which governance disclosures are required?

  1. The governance body responsible for oversight of sustainability-related risks and opportunities and how responsibilities are reflected in terms of reference Correct answer.
  2. The names of all employees involved in sustainability data collection
  3. The number of board meetings held in the year
  4. The remuneration of the chief financial officer

Explanation

IFRS S1 requires disclosure of the governance body or individual responsible for oversight and how that responsibility is reflected in mandates, roles and terms of reference. It also covers how the body is informed and how it considers trade-offs.

Question 18IFRS Sustainability Disclosure Standards (ISSB Standards)

How does IFRS S2 address financed emissions for financial institutions?

  1. It exempts financial institutions from all emissions disclosures
  2. It requires disclosure of financed emissions, which form part of Scope 3 emissions, using the GHG Protocol Corporate Value Chain Standard or equivalent Correct answer.
  3. It requires financed emissions to be measured using a prescribed internal model
  4. It requires financed emissions to be reported only in the notes to the financial statements

Explanation

IFRS S2 requires disclosure of financed emissions as part of Scope 3 for entities with financial activities, applying the GHG Protocol Corporate Value Chain (Scope 3) Standard or an equivalent methodology.

Question 19IFRS Sustainability Disclosure Standards (ISSB Standards)

An entity applies IFRS S1 and determines that a particular sustainability-related risk is material. Which of the following best describes the required core content areas?

  1. Assets, liabilities, equity and cash flow
  2. Revenue, expenses, profit and loss
  3. Scope 1, Scope 2, Scope 3 and offsets
  4. Governance, strategy, risk management, and metrics and targets Correct answer.

Explanation

IFRS S1 and IFRS S2 are structured around four core content areas: governance, strategy, risk management, and metrics and targets. These areas organise the disclosures about material sustainability-related risks and opportunities.

Question 20IFRS Sustainability Disclosure Standards (ISSB Standards)

How does IFRS S1 treat the connection between sustainability-related financial disclosures and the entity's financial statements?

  1. It prohibits any reference to financial statement line items
  2. It requires the sustainability disclosures to be audited by the same auditor as the financial statements
  3. It requires disclosure of how sustainability-related risks and opportunities affect the entity's financial position, financial performance and cash flows, and of connections between disclosures Correct answer.
  4. It requires sustainability disclosures to be presented as a separate set of financial statements

Explanation

IFRS S1 emphasises connectivity, requiring an entity to explain how sustainability-related risks and opportunities affect its financial position, financial performance and cash flows, and to identify connections between disclosures.

Question 21IFRS Sustainability Disclosure Standards (ISSB Standards)

An entity applying IFRS S2 has operations in a jurisdiction where a local sustainability standard conflicts with IFRS S2. How should the entity proceed?

  1. It must always apply IFRS S2 in full and ignore local law
  2. It may apply the local standard without any disclosure
  3. It must cease reporting under IFRS S2 entirely
  4. It may apply the local standard only if doing so does not prevent it from meeting the objective of IFRS S2, and it must disclose the use of the relief Correct answer.

Explanation

IFRS S1 and S2 include relief provisions allowing an entity to use a local standard in place of a specific requirement where that is necessary to avoid conflict with local law, provided the objective is still met and the relief is disclosed.

Question 22IFRS Sustainability Disclosure Standards (ISSB Standards)

Which of the following best explains how IFRS S1 defines 'material' for sustainability-related financial information?

  1. Information is material if it relates to climate change
  2. Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that primary users make on the basis of the general purpose financial reports Correct answer.
  3. Information is material if it is requested by a regulator
  4. Information is material if it exceeds a quantitative threshold set by the standard

Explanation

IFRS S1 adopts a definition of materiality aligned with IFRS Accounting Standards, focused on information that could reasonably be expected to influence primary users' decisions. It is not a fixed quantitative threshold.

Question 23IFRS Sustainability Disclosure Standards (ISSB Standards)

An entity discloses an industry-based metric under IFRS S2. Which source does the standard identify as providing industry-based guidance for identifying metrics?

  1. The IFRS for SMEs Standard
  2. The SASB Standards, adapted for international application Correct answer.
  3. The Basel Committee capital framework
  4. The OECD Guidelines for Multinational Enterprises

Explanation

IFRS S2 identifies the SASB Standards as a source of industry-based metrics, adapted for international application. The standard requires industry-based disclosures where relevant to the entity's activities.

Question 24IFRS Sustainability Disclosure Standards (ISSB Standards)

Under IFRS S1, which of the following best describes the requirement for an entity to disclose how it identifies, assesses and manages sustainability-related risks?

  1. It must disclose the full internal risk register verbatim
  2. It must disclose only risks that have crystallised during the reporting period
  3. It must describe its processes, including how it prioritises risks and how the processes are integrated into its overall risk management Correct answer.
  4. It must disclose only the names of the risk committee members

Explanation

The risk management content area requires a description of the processes used to identify, assess, prioritise and monitor sustainability-related risks, and how those processes are integrated into the entity's overall risk management.

Question 25IFRS Sustainability Disclosure Standards (ISSB Standards)

An entity applying IFRS S2 reports a Scope 2 emissions figure. Which methodological choice must it disclose?

  1. Whether the figure was reviewed by an external auditor
  2. Whether the figure is calculated using the location-based or market-based method Correct answer.
  3. Whether the figure includes only subsidiaries
  4. Whether the figure is expressed in tonnes or kilograms

Explanation

IFRS S2 requires disclosure of Scope 2 emissions and the method used, distinguishing location-based from market-based approaches. This is necessary for comparability across entities.

Question 26IFRS Sustainability Disclosure Standards (ISSB Standards)

IFRS S1 and IFRS S2 are issued by which body?

  1. The Financial Stability Board
  2. The Global Reporting Initiative
  3. The International Accounting Standards Board
  4. The International Sustainability Standards Board Correct answer.

Explanation

The ISSB, a sister board to the IASB under the IFRS Foundation, issued IFRS S1 and IFRS S2 in June 2023. The IASB sets IFRS Accounting Standards, not the sustainability standards.

Question 27IFRS Sustainability Disclosure Standards (ISSB Standards)

IFRS S1 and IFRS S2 were issued in which year?

  1. 2022
  2. 2024
  3. 2021
  4. 2023 Correct answer.

Explanation

Both standards were issued in June 2023, with IFRS S1 effective for periods beginning on or after 1 January 2024. Earlier years relate to exposure drafts and consultation.

Question 28IFRS Sustainability Disclosure Standards (ISSB Standards)

IFRS S1 sets out which overarching structure that IFRS S2 also follows?

  1. The triple bottom line of people, planet, and profit
  2. The five capitals model of integrated reporting
  3. The four content areas of governance, strategy, risk management, and metrics and targets Correct answer.
  4. The double materiality framework of the EU CSRD

Explanation

Both standards are built on the TCFD-aligned architecture of governance, strategy, risk management, and metrics and targets. This core content structure is required by IFRS S1 and applied by IFRS S2 to climate matters.

Question 29IFRS Sustainability Disclosure Standards (ISSB Standards)

An entity applying IFRS S1 must disclose sustainability-related risks and opportunities that could affect which of the following?

  1. The entity's contribution to global emissions
  2. The wellbeing of all stakeholders
  3. The entity's compliance with local permits
  4. The entity's enterprise value Correct answer.

Explanation

IFRS S1 focuses on sustainability-related risks and opportunities that could reasonably be expected to affect the entity's prospects, expressed through enterprise value. It does not adopt a broad stakeholder or impact-only objective.

Question 30IFRS Sustainability Disclosure Standards (ISSB Standards)

Under IFRS S1, sustainability-related financial information should be reported at the same time and covering the same period as which report?

  1. The entity's internal management accounts
  2. The entity's CSR marketing brochure
  3. The entity's general purpose financial statements Correct answer.
  4. The entity's tax return

Explanation

IFRS S1 requires sustainability-related financial disclosures to be part of the entity's general purpose financial reporting, published concurrently with the financial statements and covering the same reporting period. This connected reporting is a core principle.

Question 31IFRS Sustainability Disclosure Standards (ISSB Standards)

IFRS S2 requires an entity to disclose its absolute gross greenhouse gas emissions for which scopes?

  1. Scope 1 only
  2. Scope 1 and Scope 2 only
  3. Scope 1, Scope 2, and Scope 3 Correct answer.
  4. Scope 2 and Scope 3 only

Explanation

IFRS S2 requires disclosure of absolute gross Scope 1, Scope 2, and Scope 3 emissions, with Scope 3 required regardless of materiality threshold framing. The GHG Protocol is the referenced methodology.

Question 32IFRS Sustainability Disclosure Standards (ISSB Standards)

In IFRS S2, which type of risk refers to the potential negative effects of climate change itself, such as extreme weather or rising sea levels?

  1. Liability risk
  2. Physical risk Correct answer.
  3. Reputational risk
  4. Transition risk

Explanation

Physical risks arise from the climate itself, including acute hazards like storms and chronic shifts like temperature change. Transition risks instead stem from the move to a lower-carbon economy.

Question 33IFRS Sustainability Disclosure Standards (ISSB Standards)

Where does IFRS S1 direct an entity to look for guidance on identifying sustainability-related risks and opportunities when IFRS standards do not address a specific matter?

  1. Only the entity's own internal policies
  2. Only the GRI Standards
  3. Only national government legislation
  4. The SASB Standards and other sources, subject to a hierarchy Correct answer.

Explanation

IFRS S1 establishes a source hierarchy, referencing the SASB Standards and other investor-focused frameworks where IFRS Sustainability Disclosure Standards are silent, applied in a defined order. This supports comparability across entities.

Question 34IFRS Sustainability Disclosure Standards (ISSB Standards)

Under IFRS S1, an entity is required to disclose information about which time horizons?

  1. Only the current annual reporting period
  2. Only a fixed ten-year horizon
  3. Short, medium, and long term, as defined by the entity Correct answer.
  4. Only the long term beyond twenty years

Explanation

IFRS S1 requires disclosure across short, medium, and long-term horizons, with the entity defining what each horizon means for it. This allows users to understand how risks and opportunities may unfold over time.

Question 35IFRS Sustainability Disclosure Standards (ISSB Standards)

An entity applying IFRS S2 uses an internal carbon price in its strategy. What does IFRS S2 require regarding this?

  1. Disclose only that a carbon price exists without any figure
  2. Avoid disclosing carbon price because it is commercially sensitive
  3. Report the carbon price only to regulators, not in the financial report
  4. Disclose whether and how the entity uses a carbon price, including the price per metric tonne Correct answer.

Explanation

IFRS S2 requires disclosure of whether and how the entity uses a carbon price and, if so, the price per metric tonne of CO2e and the rationale. This gives users insight into how climate risk is factored into planning and investment.

Question 36IFRS Sustainability Disclosure Standards (ISSB Standards)

Under IFRS S2, an entity's climate resilience assessment must be disclosed. Which approach does the standard require for this assessment?

  1. A single deterministic forecast with no scenarios
  2. An actuarial valuation prepared by an external auditor
  3. A qualitative and, where appropriate, quantitative scenario analysis, including at least one climate-related scenario Correct answer.
  4. A historical back-testing exercise only

Explanation

IFRS S2 requires scenario analysis to assess climate resilience, using at least one scenario and applying qualitative and, where relevant, quantitative analysis. The entity also discloses the scenarios used and key assumptions.

Question 37IFRS Sustainability Disclosure Standards (ISSB Standards)

An entity applying IFRS S2 reports gross Scope 3 emissions. Which of the following best describes a required disclosure about Scope 3 under the standard?

  1. The names of the individual suppliers emitting the most
  2. The exact emission factor for every purchased item
  3. The categories included and the basis for determining which categories are included Correct answer.
  4. Only the total figure with no supporting detail

Explanation

IFRS S2 requires disclosure of the Scope 3 categories included and the basis for selecting them, alongside the gross emissions figure. This enables users to understand the completeness and comparability of the reported number.

Question 38IFRS Sustainability Disclosure Standards (ISSB Standards)

Under IFRS S1, an entity's governance disclosures must address which of the following?

  1. The list of all suppliers in the value chain
  2. The entity's marketing strategy for sustainability products
  3. The names and remuneration of all employees
  4. The governance body or bodies responsible for oversight of sustainability-related risks and opportunities Correct answer.

Explanation

IFRS S1 governance disclosures cover the governance body responsible for oversight, how responsibilities are reflected in mandates and policies, and how the body is informed. This mirrors the TCFD governance pillar.

Question 39IFRS Sustainability Disclosure Standards (ISSB Standards)

An entity applying IFRS S2 discloses a climate-related target. Which of the following must accompany the target disclosure?

  1. The full list of competitors' targets for comparison
  2. The names of the executives who approved the target
  3. The period over which the target applies and the base period from which progress is measured Correct answer.
  4. The exact budget allocated to achieving the target

Explanation

IFRS S2 requires disclosure of the target's scope, the period over which it applies, the base period, and whether it is absolute or intensity-based. It also requires disclosure of progress against the target.

Question 40IFRS Sustainability Disclosure Standards (ISSB Standards)

How does IFRS S2 treat an entity's financed emissions, such as those associated with loans and investments?

  1. They must be reported as Scope 1 emissions
  2. They must be disclosed only if the entity is a manufacturer
  3. They are excluded entirely from the standards
  4. They are included within Scope 3 and disclosed in accordance with the GHG Protocol, using the financial institution's own approach Correct answer.

Explanation

Financed emissions are part of Scope 3 category 15 under the GHG Protocol and are disclosed under IFRS S2's Scope 3 requirements. Financial institutions apply the standard to their lending and investment portfolios.

Question 41IFRS Sustainability Disclosure Standards (ISSB Standards)

Under IFRS S1, if an entity cannot identify a sustainability-related risk or opportunity using the IFRS Sustainability Disclosure Standards and other sources, what is the required outcome?

  1. The entity reports a zero value for all metrics
  2. The entity discloses that it could not identify any such risks or opportunities, and the information it used Correct answer.
  3. The entity must engage an external auditor to create a figure
  4. The entity omits the disclosure entirely without explanation

Explanation

IFRS S1 requires the entity to state that it could not identify any sustainability-related risks or opportunities, along with the information it used in its assessment. This preserves transparency about the absence of findings.

Question 42IFRS Sustainability Disclosure Standards (ISSB Standards)

Which of the following best describes how IFRS S1 addresses the connection between sustainability-related financial disclosures and the financial statements?

  1. Financial statements must be audited but sustainability disclosures need no assurance
  2. The two reports must be entirely separate with no cross-reference
  3. Sustainability disclosures must replace the financial statements
  4. Disclosures should be connected, with consistency between assumptions and data used where relevant Correct answer.

Explanation

IFRS S1 requires connected reporting, so assumptions and data used in sustainability disclosures should be consistent with those in the financial statements where relevant. This helps users assess the combined effect on enterprise value.

Question 43IFRS Sustainability Disclosure Standards (ISSB Standards)

An entity applying IFRS S2 is located in a jurisdiction whose local sustainability standard conflicts with IFRS S2. What does IFRS S2 permit?

  1. The entity must ignore local law and apply IFRS S2 verbatim
  2. The entity may disclose the required information under the local standard if that information is equivalent, with disclosure of the differences Correct answer.
  3. The entity may choose any standard it prefers without explanation
  4. The entity must stop reporting sustainability information

Explanation

IFRS S2 allows an entity to use information prepared under a local standard where that information is equivalent, provided the entity discloses the differences from IFRS S2. This supports jurisdictional interoperability while preserving transparency.

Question 44IFRS Sustainability Disclosure Standards (ISSB Standards)

Under IFRS S1, which of the following best describes the requirement to disclose how the entity identifies, assesses, and manages sustainability-related risks?

  1. The entity discloses only the financial impact of each risk
  2. The entity discloses only the names of the risk committee members
  3. The entity describes its processes, including how it prioritises risks and how they are integrated into its overall risk management Correct answer.
  4. The entity discloses only a list of risks with no process description

Explanation

IFRS S1's risk management pillar requires a description of the processes used to identify, assess, prioritise, and monitor sustainability-related risks, and how these are integrated with the entity's overall risk management. This provides insight into the robustness of the entity's approach.

Question 45IFRS Sustainability Disclosure Standards (ISSB Standards)

An entity applying IFRS S1 reports a sustainability-related metric that is subject to significant measurement uncertainty. What does IFRS S1 require?

  1. Reporting the metric without any mention of uncertainty
  2. Suppression of the metric until the uncertainty is resolved
  3. Replacing the metric with a qualitative statement only
  4. Disclosure of the sources of uncertainty and the judgements made in preparing the metric Correct answer.

Explanation

IFRS S1 requires disclosure of the sources and nature of measurement uncertainty and the judgements made, so users can evaluate the reliability of the reported information. The metric is still reported, accompanied by this context.

Question 46IFRS Sustainability Disclosure Standards (ISSB Standards)

IFRS S2 requires disclosure of the entity's gross Scope 2 emissions. Which methodological choice must the entity disclose?

  1. Whether it uses the location-based or market-based method Correct answer.
  2. The exact electricity meter readings for each facility
  3. The names of its electricity suppliers
  4. The price paid per kilowatt-hour

Explanation

IFRS S2 requires the entity to disclose whether Scope 2 emissions are measured using the location-based or market-based method, since the two can produce materially different figures. This allows comparability across entities.

Question 47IFRS Sustainability Disclosure Standards (ISSB Standards)

Under IFRS S1, an entity is preparing its first year of reporting. Which relief does IFRS S1 provide regarding comparative information?

  1. In the first year, the entity need not present comparative information, but must disclose that fact Correct answer.
  2. The entity must obtain third-party assurance on comparatives
  3. The entity must present comparatives only for governance disclosures
  4. The entity must restate five years of prior sustainability data

Explanation

IFRS S1 provides transition relief allowing an entity in its first reporting year to omit comparative information, provided it discloses that it has done so. This eases the initial adoption burden.

Question 48IFRS Sustainability Disclosure Standards (ISSB Standards)

An entity applying IFRS S2 discloses industry-based metrics. Which source does IFRS S2 identify as providing the industry-based guidance?

  1. The GRI Sector Standards
  2. The UN Sustainable Development Goals
  3. The SASB Standards, as adapted for climate-related disclosure Correct answer.
  4. The ISO 14064 certification scheme

Explanation

IFRS S2 requires industry-based metrics and identifies the SASB Standards as the source, adapted to the climate context. This supports comparability within industries.

Question 49IFRS Sustainability Disclosure Standards (ISSB Standards)

Which of the following best explains how IFRS S1 defines material sustainability-related financial information?

  1. Information is material if omitting, misstating, or obscuring it could reasonably be expected to influence decisions that primary users make on the basis of the general purpose financial reports Correct answer.
  2. Information is material if it concerns any environmental or social topic, regardless of effect on users
  3. Information is material only if it exceeds a fixed quantitative threshold set by the standard
  4. Information is material if it is requested by any stakeholder group

Explanation

IFRS S1 defines materiality in terms of information that could reasonably be expected to influence primary users' decisions, consistent with the IASB's materiality concept. It is not a fixed threshold or a broad stakeholder-request test.

Question 50IFRS Sustainability Disclosure Standards (ISSB Standards)

An entity applying IFRS S2 has a climate-related target validated by the Science Based Targets initiative. How does IFRS S2 treat this external validation?

  1. External validation is prohibited from disclosure
  2. External validation replaces the need to report progress
  3. The entity discloses whether the target is validated by a third party and identifies the validator Correct answer.
  4. Validation must be performed by the entity's auditor only

Explanation

IFRS S2 requires disclosure of whether a climate-related target has been validated by a third party and, if so, which one. This helps users assess the credibility of the target without substituting for progress reporting.