Clarity in corporate reporting - December 2025 monthly newsletter

Impacted entities should consider early adoption as part of their first sustainability report

The International Sustainability Standards Board (ISSB) has published Amendments to Greenhouse Gas Emissions Disclosures, finalising targeted amendments to IFRS S2 Climate-related Disclosures. The Australian Accounting Standards Board (AASB) met on 15 December 2025 to finalise equivalent amendments to AASB S2 Climate-related Disclosures. Deloitte observers confirmed the making of the amendments and those amendments will be made available on the AASB's website indue course.

Summary of key changes from existing IFRS S2 requirements

• Financed emissions. Entities would only be required to measure and disclose Scope 3 Category 15 greenhouse gas emissions arising from financed emissions related to loans, project finance, bonds, equity investments and undrawn loan commitments (and so would exclude Category 15 emissions associated with derivatives, and facilitated emissions arising from commercial banking and insurance-associated activities)
• Industry classification of financed emissions. An entity participating in commercial banking or insurance activities would be allowed to use a single industry classification system other than the Global Industry Classification Standard (GICS) when classifying financed emissions (but would not be required to use the same industry classification for both commercial banking and insurance activities where the entity participates in both activities)
• Measuring greenhouse gas emissions. An entity would be permitted to use a method other than the Greenhouse Gas Protocol Corporate Standard to measure greenhouse gas emissions for all or part of an entity where required by a jurisdictional or exchange requirement (such as NGER reporters)
• Global warming potential values. An entity would be permitted to use global warming potential values other than those from the latest Intergovernmental Panel on Climate Change (IPCC) Assessment for relevant parts of an entity where required by a jurisdictional authority or exchange requirement.

Changes from the original proposals

In finalising the amendments, the ISSB responded to constituent feedback and staff analysis and amended the proposals in the exposure draft. The key changes include:

• Replacing the proposal to quantify derivatives and financial activities excluded from Scope 3 Category 15 emissions with a requirement to describe the excluded financial activities (including those involving derivatives).  In addition, entities would be required to explain what they consider to be a derivative
• Introducing a requirement to include a subtotal of financed emissions from loans and investments where emissions for other financial activities are included in Category 15
• Removing the industry classification ‘hierarchy’ which prioritised the GICS industry classification system, in favour of a more permissive approach, but introducing additional explanatory disclosure requirements.

Application of the amendments

The new requirements apply for annual reporting periods beginning on or after 1 January 2027, with early application permitted. 

The AASB decided at its November 2025 meeting to adopt the same effective date for the amendments to AASB S2 and the paper discussed at that meeting notes that many stakeholders expect the amendments to be available for the first mandatory sustainability reporting period ending 31 December 2025. Given the nature of the amendments, it is likely that many entities will adopt the amendments early when they first apply AASB S2.

Under section 336A(3) of the Corporations Act 2001, entities electing to apply the amendments early would be required to document the early adoption election in writing by the directors. This is usually actioned by a directors’ resolution to adopt the amendments early.

More information:

• Amendments to Greenhouse Gas Emissions Disclosures (Amendments to IFRS S2)
• iGAAP in Focus ISSB finalises amendments to IFRS S2 regarding specific greenhouse gas emissions disclosure requirements
• AASB Action Alert (November 2025).

Consider the impacts of the new examples on reporting

On 28 November 2025 the International Accounting Standards Board (IASB) published six examples to the guidance accompanying several IFRS Accounting Standards that illustrate how an entity applies the requirements in those Standards to report the effects of uncertainties in its financial statements.

The examples mostly focus on climate-related uncertainties, but the principles and requirements illustrated apply equally to other types of uncertainties.

There is no effective date nor transition requirements as the illustrative examples are not an integral part of IFRS Accounting Standards – instead, they provide additional insight into existing disclosure requirements. The IASB expects that implementation will be on a timely basis.

A full list of the examples is available in our iGAAP in Focus newsletter and is summarised below:

• Materiality judgements applying IAS 1 Presentation of Financial Statements/IFRS 18 Presentation and Disclosure in Financial Statements
• Disclosure of assumptions – specific requirements (IAS 36 Impairment of Assets)
• Disclosure of assumptions – general requirements (IAS 1/IAS 8 Basis of Preparation of Financial Statements)
• Disclosure about credit risk (IFRS 7 Financial Instruments: Disclosures)
  
• Disclosure about decommissioning and restoration provisions (IAS 37  Provisions, Contingent Liabilities and Contingent Assets)
• Disclosure of disaggregated information (IFRS 18).

More information:

• IASB press release
• IASB project page - Disclosures about Uncertainties in the Financial Statements
• iGAAP in Focus IASB publishes illustrative examples for disclosures of uncertainties in the financial statements using climate-related scenarios.
  

New sustainability reports given protection from civil action

On 27 November 2025, the Senate passed the Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Bill 2025 without amendment. The Bill includes measures to extend the modified liability provisions in the Corporations Act 2001 to include voluntary sustainability reports and reports prepared under ASIC Corporations Instruments.

Summary

• Voluntary sustainability reports and those prepared in accordance with an ASIC Instrument would be covered by the modified liability provisions of the Corporations Act 2001, protecting entities, directors and auditors from civil liability on certain matters
• Application of the modified liability provisions is not automatic as they will only apply where the directors include an additional directors’ declaration in the relevant sustainability report and the sustainability report fully complies with the requirements of the Corporations Act 2001 and AASB S2 Climate-related Disclosures.

Background and detail

The existing modified liability provisions in section 1707D of the Corporations Act 2001 apply to “protected statements” made in relation to sustainability reports for a limited time. For this purpose, protected statements include:

• For a three-year period from commencement of mandatory sustainability reporting – statements made in a sustainability report or auditor’s report on a sustainability report about scope 3 greenhouse gas emissions, scenario analysis and transition plans
• For a 12-month period from commencement – statements in relation to climate about the future.

The provisions mean that no legal action other than a criminal action, or action by ASIC, can be brought against a person in relation to those protected statements. ASIC Regulatory Guide RG 280 Sustainability reporting provides an example that an investor cannot bring a civil action alleging that a protected statement in a sustainability report is misleading or deceptive. 

The amendments included in the Bill will treat the following documents as being sustainability reports for the purposes of the modified liability provisions, i.e. they will have the same protection from legal action that applies to mandatory sustainability reports:

• Voluntary sustainability reports that otherwise meet the requirements of the Corporations Act 2001. In other words, the report must be prepared in accordance with the provisions of the Corporations Act 2001 (including having a directors’ declaration and being subject to assurance) and AASB S2 Climate-related Disclosures. In anticipation of these amendments, the Auditing and Assurance Standards Board (AUASB) released ED 02/25 Amendments to ASSA 5010 Timeline for Audits and Reviews of Information in Sustainability Reports under the Corporations Act 2001, setting out how the phase-in of assurance would apply to voluntarily prepared reports
• Sustainability reports prepared following an ASIC instrument, but only where the ASIC instrument provides that the modified liability provisions are to apply. Therefore, this might mean that ASIC needs to amend ASIC Corporations (Reporting by Stapled Entities) Instrument 2023/673 to allow the modified liability provisions to apply to sustainability reports prepared under the instrument.

Critically, in both cases, the legislation requires that the sustainability reports include an additional signed and dated declaration by the directors, effectively binding the directors to the same Corporations Act 2001 provisions that apply to mandatory sustainability reports before the modified liability provisions apply.

The Bill received Royal Assent on 4 December 2025 and commenced the following day. Accordingly, the modified liability provisions will apply to eligible sustainability reports for December 2025 year ends.

Outcomes from ASIC’s latest financial reporting and audit surveillance

ASIC has announced its enforcement priorities for 2026, adding a new priority around financial reporting misconduct, including failure to lodge financial reports. 

The inclusion of financial reporting misconduct as an enforcement priority follows ASIC surveillance activities, in response to the removal of the lodgement exemption for previously grandfathered companies in 2022. ASIC detected a high-level of lodgement non-compliance by these entities and included non-lodgement in its financial reporting and audit focus areas for FY 2025-26.  

Subsequently, ASIC announced an increased focus on the non-lodgement of financial reports by all large proprietary companies, and noted it will use its “full range of enforcement and compliance tools in response to non-lodgement”. Additionally, in its Corporate Plan 2025-26, ASIC announced it would act against entities, including large proprietary companies, that do not lodge financial reports.  

In the past 12-18 months, ASIC has also announced actions against a small foreign controlled proprietary company and a number of group companies for non-lodgement of financial reports.

These developments have led to non-lodgement being reflected in ASIC’s enforcement priorities. Entities should closely monitor financial reporting obligations and lodge outstanding financial reports as soon as possible. Similarly, ASIC has reminded auditors of their obligation to report non-compliance with financial reporting lodgement obligations by companies.

Subsequent to releasing its enforcement priorities, ASIC also announced the prosecution of directors of a company for non-lodgement of financial reports and auditors report for a five-year period and separately announced the issue of 12 infringement notices to large proprietary companies for failing to lodge their 2024 audited financial reports on time.

More broadly, ASIC will continue to undertake surveillance on financial reporting and act where necessary.

Other enforcement priorities relevant to corporate reporting include governance and directors’ duties failures and auditors’ misconduct.

With the imminent introduction of mandatory sustainability reporting, greenwashing has been removed from ASIC’s enforcement priorities after being included for several years, with ASIC intending a “proportionate and pragmatic” approach to supervision and enforcement as sustainability reporting is phased in.

In a speech on the enforcement priorities given at ASIC’s 2025 Annual Forum, ASIC Deputy Chair Sarah Court said "[W]hile greenwashing will not be an express enforcement priority for 2026, we remain alert to the risk of serious instances of misleading and deceptive conduct in this area". Accordingly, entities should remain cognisant of ASIC’s guidance on greenwashing.

Exposure Draft on dynamic risk management

The IASB published the Exposure Draft Risk Mitigation Accounting – Proposed amendments to IFRS 9 and IFRS 7 on 3 December 2025.

The exposure draft includes ‘core areas’ that are central to an accounting model that might enable investors to understand the effect of a company’s dynamic risk management (commonly referred to as macro hedge accounting). The proposed model aims to provide greater transparency into how interest rate risk management affects financial performance and future cash flow in a dynamic environment.

The comment period closes on 31 July 2026. The 240-day consultation period also includes fieldwork, enabling financial institutions and other interested parties to test the model using their own data and provide practical feedback to the IASB.

More information:

• IASB media release
• Exposure Draft Risk Mitigation Accounting – Proposed amendments to IFRS 9 and IFRS 7
• iGAAP in Focus IASB proposes new requirements on risk mitigation accounting

Call for increase to financial reporting and sustainability reporting thresholds

In November 2025 the Australian Institute of Company Directors (AICD) released a report titled $160bn and Counting: The Cost of Commonwealth Regulatory Complexity calling for targeted regulatory reform with the aim to reduce compliance costs.

In relation to corporate reporting requirements, the AICD recommends increasing the reporting threshold for large proprietary companies and Group 3 climate reporting entities.

The AICD report follows ASIC’s suggestion that the Federal Government consider adjusting the large proprietary company thresholds to $100 million revenue and $50 million assets (from the current $50 million revenue and $25 million assets). To date, the Government has not announced any changes in the thresholds.

PCAF updates greenhouse gas emission guidance for financial institutions and insurers

The Partnership for Carbon Accounting Financials (PCAF) has released updates to the Financed Emissions (Part A) and Insurance-Associated Emissions (Part C) sections of its Global Greenhouse Gas Accounting and Reporting Standards for the Financial Industry.

The updates expand emissions tracking by introducing new methodologies for a wider range of financial products, including securitisations and sub-sovereign debt. It also adds methods for insurance-associated emissions and provides supplemental guidance on reporting avoided and forward-looking emissions.