ESRS Standard
ESRS Standard
23. The objective of this DR is to enable an understanding of the interactions between the undertaking's material impacts, risks and opportunities and its strategy and business model, as well as of the related financial effects.
24. The undertaking shall disclose a high-level description of how material impacts originate from its strategy and business model, the effects of risks and opportunities on its business model and value chain, and how it has addressed, and plans to address, those impacts, risks and opportunities in its strategy and decision-making.
25. The undertaking shall disclose qualitative and quantitative information about how material risks and opportunities have affected its financial position, financial performance and cash flows for the reporting period (current financial effects).
26. The undertaking shall disclose qualitative and quantitative information about the material risks and opportunities identified in paragraph 25 for which there is a significant risk of a material adjustment within the next annual reporting period to the carrying amounts of assets and liabilities reported in the related financial statements.
27. The undertaking shall disclose qualitative and quantitative information on how it expects its financial position, financial performance, and cash flows to change over the short, medium and long term, given its strategy to manage material risks and opportunities (anticipated financial effects).
28. The undertaking need not provide quantitative information about the current financial effects or anticipated financial effects if it determines that:
(a) the effects are not separately identifiable; or
(b) the level of measurement uncertainty involved in estimating those effects is so high that the resulting quantitative information would not be useful (see ESRS 1 General Requirements, paragraphs 89 and 90).
29. The undertaking need not provide quantitative information about the anticipated financial effects of material risks or opportunities if it does not have the skills, capabilities or resources to provide that quantitative information.
30. In preparing disclosures about its anticipated financial effects, the undertaking shall use all reasonable and supportable information available to it at the reporting date without undue cost or effort (see ESRS 1 General Requirements, paragraphs 94, 95 and 96).
31. If the undertaking determines that it need not provide quantitative information about the current financial effects or anticipated financial effects of a risk or opportunity for any of the reasons specified in paragraphs 28 and 29, it shall:
(a) explain why it has not provided quantitative information;
(b) provide qualitative information about those financial effects, including identifying line items, totals and subtotals within the related financial statements that are likely to be affected, or have been affected, by that risk or opportunity; and
(c) provide quantitative information about the combined financial effects of that risk or opportunity with other risks or opportunities and other factors, unless the undertaking determines that quantitative information about the combined financial effects would not be useful.
32. When providing quantitative information, the undertaking may present single amounts or ranges.
33. The undertaking shall disclose qualitative information about the resilience of its strategy and business model regarding its capacity to manage its material risks as disclosed in accordance with paragraph 24. This information shall include how the analysis was conducted and the time horizons considered.
Application Requirements (AR)
Application Requirements (AR)
AR 15 for para. 24
The undertaking may consider the linkages that exist between paragraph 24 and IRO-2, paragraph 37(a) to present the content in a way that avoids duplications and facilitates an understanding of the information reported in accordance with these paragraphs. Paragraph 24 focuses on reporting the interaction of the undertaking’s material impacts, risks and opportunities with its strategy and business model. IRO-2, paragraph 37(a) focuses on a description of those impacts, risks and opportunities and how they are likely to affect people and the environment.
AR 16 for paras. 25 and 26
If the information is included in the financial statements, it may be incorporated by reference (see ESRS 1 General Requirements, Chapter 9.3).
AR 17 for para. 27
In preparing the disclosure on anticipated financial effects, the undertaking shall consider how it expects its financial position, financial performance and cash flows to change over the short, medium and long term, given its strategy to manage risks and opportunities, taking into consideration:
(a) its announced investment and disposal plans (e.g. capital expenditure, major acquisitions and divestments, joint ventures, business transformation, innovation, new business areas and asset retirements), including plans to which the undertaking is not contractually committed; and
(b) its planned sources of funding to implement its strategy.
(c) Reporting on anticipated financial effects is likely to involve the use of estimates. If estimates of anticipated financial effects disclosed in a prior reporting period later prove to be inaccurate as additional information becomes known, the undertaking shall revise its estimates in its next appropriate sustainability statement. The possible need to revise an estimate does not therefore necessarily imply that there has been a reporting error, as explained in ESRS 1 General Requirements, AR 46.
(d) The provisions on the omission of certain information in ESRS 1, Chapter 7.7, including the omission of information that could be seriously prejudicial to the commercial position of the undertaking, also apply when reporting on anticipated financial effects.
AR 18 for paras. 25 and 27
Quantitative information may consist of non-monetary information such as volumes, number of products, or number of employees.
AR 19 for paras. 25 and 27
In presenting information reported in accordance with paragraphs 25 and 27 about current financial effects and anticipated financial effects, the undertaking may consider the linkage with the information reported in accordance with GDR-A, paragraphs 46(b)(c) about financial resources allocated to the key actions.
AR 20 for paras. 25 and 27
The DR related to current financial effects and anticipated financial effects are designed to produce information that complements information provided in the financial statements. See Chapter 9 of ESRS 1 General Requirements for the requirements on how to support the understandability of connections between risks and opportunities and the information reported in the financial statements.
AR 21 for paras. 28 and 29
If the undertaking cannot provide quantitative information in accordance with paragraphs 28 and 29, it is expected to provide qualitative information that is decision useful according to paragraph 23 of ESRS 1 General Requirements. In such instance, paragraph 24 of ESRS 1 General Requirements also applies.
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