Compensation

Metrics in use for ESG Reporting- 1 Best and complete read

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Metrics in use for ESG Reporting

Here is a list of Metrics in use for ESG Reporting that companies can use to start communicating on the ESG issues. The metrics have been divided into four categories:

Each category contains recommended disclosure metrics (both qualitative and quantitative) that have been marked either as minimum disclosures (relevant to all companies) or additional disclosures (that might not be relevant to all companies).

The selection of recommended disclosure metrics has been informed by relevant regulatory initiatives i.e. the CSRD and the ESRS as well as the Warsaw Stock Exchange corporate governance code. Moreover, to address increasing investors’ data needs, they have been also aligned with the mandatory PAI indicators for corporate investments required by the SFDR (see mapping in the Appendix – Relevance of the Guidelines to investors). References have been added below each section to other frameworks and resources that companies may also consider (Appendix – Alignment with EU regulations and other frameworks).

It should be emphasized that the Guidelines do not provide an exhaustive list of indicators and topics. Rather they aim to offer less advanced companies a minimum set of carefully selected disclosure metrics that will help them to prepare for the upcoming requirements stemming from the CSRD and the ESRS and better respond to investors’ ESG data needs. Companies in scope of the CSRD should use the ESRS to prepare their disclosures on material sustainability topics.

Metrics in use for ESG Reporting – General information

General information metrics provide essential context to understand the company business activities and value creation model, it’s material ESG impacts, risks and opportunities, and how it is managing them.

General information

What should be disclosed:

I

M 1

Business model
  • Short description of the company business model and value chain.
  • Whether the company is active in the following sectors: fossil fuel (coal, oil and gas), controversial weapons along with related revenues.

Companies may consider including the following characteristics when describing their business model: economic activities; products and services offered; markets of operation, company size (in terms of workforce, business locations, revenue, etc.)

I

M 2

Sustainability integration
  • Whether and how sustainability matters are integrated in the company strategy and business model.
  • Resilience of the company strategy and business model(s) to material sustainability risks.
  • Policies and actions adopted to manage material sustainability matters.
  • Targets related to management of sustainability matters.

I

M 3

Sustainability governance
  • Governance bodies roles and responsibilities with regard to sustainability matters (e.g. in relation to risk management, target setting, sustainability disclosure).
  • Whether governance bodies are informed about sustainability matters, and how they are addressed by administrative and/or management bodies.
  • Whether incentive schemes are offered to members of governance bodies that are linked to sustainability matters.

I

M 4

Material impacts, Risk and Opportunities
  • The processes used to identify material impacts, risks and opportunities.
  • Sustainability due diligence process.
  • Outcome of the materiality assessment (identified material impacts, risks and opportunities).
  • How material impacts, risks and opportunities interact with the company strategy and business model.

I

M 5

Stakeholder engagement
  • Description of the company main stakeholders, and how the company engages with them.
  • How the interests and views of stakeholders are taken into account by the undertaking’s strategy and business model.

Metrics in use for ESG Reporting- Environmental disclosures

Environmental metrics cover issues that arise from or impact the natural environment.

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Example accounting policies

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Example accounting policies

Get the requirements for properly disclosing the accounting policies to provide the users of your financial statements with useful financial data, in the common language prescribed in the world’s most widely used standards for financial reporting, the IFRS Standards. First there is a section providing guidance on what the requirements are, followed by a comprehensive example, easy to tailor to the specific needs of your company.Example accounting policies

Example accounting policies guidance

Whether to disclose an accounting policy

1. In deciding whether a particular accounting policy should be disclosed, management considers whether disclosure would assist users in understanding how transactions, other events and conditions are reflected in the reported financial performance and financial position. Disclosure of particular accounting policies is especially useful to users where those policies are selected from alternatives allowed in IFRS. [IAS 1.119]

2. Some IFRSs specifically require disclosure of particular accounting policies, including choices made by management between different policies they allow. For example, IAS 16 Property, Plant and Equipment requires disclosure of the measurement bases used for classes of property, plant and equipment and IFRS 3 Business Combinations requires disclosure of the measurement basis used for non-controlling interest acquired during the period.

3. In this guidance, policies are disclosed that are specific to the entity and relevant for an understanding of individual line items in the financial statements, together with the notes for those line items. Other, more general policies are disclosed in the note 25 in the example below. Where permitted by local requirements, entities could consider moving these non-entity-specific policies into an Appendix.

Change in accounting policy – new and revised accounting standards

4. Where an entity has changed any of its accounting policies, either as a result of a new or revised accounting standard or voluntarily, it must explain the change in its notes. Additional disclosures are required where a policy is changed retrospectively, see note 26 for further information. [IAS 8.28]

5. New or revised accounting standards and interpretations only need to be disclosed if they resulted in a change in accounting policy which had an impact in the current year or could impact on future periods. There is no need to disclose pronouncements that did not have any impact on the entity’s accounting policies and amounts recognised in the financial statements. [IAS 8.28]

6. For the purpose of this edition, it is assumed that RePort Co. PLC did not have to make any changes to its accounting policies, as it is not affected by the interest rate benchmark reforms, and the other amendments summarised in Appendix D are only clarifications that did not require any changes. However, this assumption will not necessarily apply to all entities. Where there has been a change in policy, this will need to be explained, see note 26 for further information.

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Employee benefits accounting policies

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Employee benefits accounting policies

This is a separated part of the example accounting policies, it is separated because of the size of this note and the specific nature of employee benefits.

Example accounting policies – Introduction

Get the requirements for properly disclosing the accounting policies to provide the users of your financial statements with useful financial data, in the common language prescribed in the world’s most widely used standards for financial reporting, the IFRS Standards. Here is a section providing guidance on what the requirements are, below a comprehensive example is provided, easy to tailor to the specific needs of your company.

Employee benefits Guidance

Presentation and measurement of annual leave obligations

RePort Plc has presented its obligation for accrued annual leave within current employee benefit obligations. However, it may be equally appropriate to present these amounts either as provisions (if the timing and/or amount of the future payments is uncertain, such that they satisfy the definition of ‘provision’ in IAS 37) or as other payables.

For measurement purposes, we have assumed that RePort Plc has both annual leave obligations that are classified as Employee benefits accounting policiesshort-term benefits and those that are classified as other long-term benefits under the principles in IAS 19. The appropriate treatment will depend on the individual facts and circumstances and the employment regulations in the respective countries.(IAS19(8),(BC16)-(BC21))

To be classified and measured as short-term benefits, the obligations must be expected to be settled wholly within 12 months after the end of the annual reporting period in which the employee has rendered the related services. The IASB has clarified that this must be assessed for the annual leave obligation as a whole and not on an employee-by-employee basis.

Share-based payments – expense recognition and grant date

Share-based payment expenses should be recognised over the period during which the employees provide the relevant services. This period may commence prior to the grant date. In this situation, the entity estimates the grant date fair value of the equity instruments for the purposes of recognising the services received during the period between service commencement date and grant date.(IFRS2(IG4))

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Accounting for mergers – Best 2 Read

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Accounting for mergers

Mergers and acquisitions (business combinations) can have a fundamental impact on the acquirer’s operations, resources and strategies. For most entities such transactions are infrequent, and each is unique. IFRS 3 ‘Business Combinations’ contains the requirements for accounting for mergers, which are challenging in practice.

This narrative provides a high-level overview of IFRS 3 and explains the key steps in accounting for business combinations in accordance with this Standard. It also highlights some practical application issues dealing with:

  • how to avoid unintended accounting consequences when bringing two businesses together, and
  • deal terms and what effect they can have on accounting for business combinations.

The acquisition method in accounting for mergers

IFRS 3 establishes the accounting and reporting requirements (known as ‘the acquisition method’) for the acquirer in a business combination. The key steps in applying the acquisition method are summarised below:

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Option valuation models

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Option valuation models

Option valuation models use mathematical techniques to identify a range of possible future share prices at the exercise date. From these possible future share prices, the pay-off of an option can be calculated. These intrinsic values at exercise are then probability-weighted and discounted to their present value to estimate the fair value of the option at the grant date.

This narrative is part of the IFRS 2 series, look here.

Model selection

There are three main models used to value options:

  • closed-form models: e.g. the BSM model;
  • lattice models; and
  • simulation models: e.g. Monte Carlo models.

These models generally result in very similar values if the same assumptions are used. However, certain models may be more restrictive than others – e.g. in terms of the different pay-offs that can be considered or assumptions that can be incorporated.

For example, a BSM model incorporates early exercise behaviour by using an expected term assumption that is shorter than the contractual life, whereas a lattice model or Monte Carlo model can incorporate more complex early exercise behaviour.

Simple model explanation

The approach followed in, for example, a lattice model illustrates the principles used in an option valuation model in a simplified manner.

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Determination of grant date in IFRS 2

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Determination of grant date

The determination of grant date is important because this is the date on which the fair value of equity instruments granted is measured. Usually, grant date is also the date on which recognition of the employee cost begins. However, this is not always the case (Service commencement date and grant date in Determination of the vesting period).

‘Grant date’ is the date at which the entity and the employee agree to a share-based payment arrangement, and requires that the entity and the employee have a shared understanding of the terms and conditions of the arrangement. (IFRS 2.A)

In order for the employer and the employee to ‘agree’ to a share-based payment transaction, there needs to be both an offer and an acceptance of that offer. (IFRS 2.IG2)

Approval and communication by the employer

If the agreement is subject to an approval process, then the grant date cannot be before the date on which that approval is obtained. If a grant is made subject to approval – e.g. by a board of directors – then the grant date is normally when that approval is obtained.

The arrangement also needs to be communicated to the employees to achieve grant date.

In a broad-based unilateral grant of a share-based payment, there is often a period of time between board approval and communication of the terms of the award to individual employees. In some entities, the terms and conditions of the awards are communicated to each employee by their direct supervisor. Because of the varying schedules of employees and employers, it is possible that different employees may be informed of their awards on different dates.

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Disclosure non-financial assets and liabilities example

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Disclosure non-financial assets and liabilities example

The guidance for this disclosure example is provided here.

8 Non-financial assets and liabilities

This note provides information about the group’s non-financial assets and liabilities, including:

  • specific information about each type of non-financial asset and non-financial liability
    • property, plant and equipment (note 8(a))
    • leases (note 8(b))
    • investment properties (note 8(c))
    • intangible assets (note 8(d))
    • deferred tax balances (note 8(e))
    • inventories (note 8(f))
    • other assets, including assets classified as held for sale (note 8(g))
    • employee benefit obligations (note 8(h))
    • provisions (note 8(i))
  • accounting policies
  • information about determining the fair value of the assets and liabilities, including judgements and estimation uncertainty involved (note 8(j)).

8(a) Property, plant and equipment

Amounts in CU’000

Freehold land

Buildings

Furniture, fittings and equipment

Machinery and vehicles

Assets under construction

Total

At 1 January 2019

Cost or fair value

11,350

28,050

27,510

70,860

–

137,770

Accumulated depreciation

–

–

-7,600

-37,025

–

-44,625

Net carrying amount

11,350

28,050

19,910

33,835

–

93,145

Movements in 2019

Exchange differences

–

–

-43

-150

–

-193

Revaluation surplus

2,700

3,140

–

–

–

5,840

Additions

2,874

1,490

2,940

4,198

3,100

14,602

Assets classified as held for sale and other disposals

-424

–

-525

-2,215

–

3,164

Depreciation charge

–

-1,540

-2,030

-4,580

–

8,150

Closing net carrying amount

16,500

31,140

20,252

31,088

3,100

102,080

At 31 December 2019

Cost or fair value

16,500

31,140

29,882

72,693

3,100

153,315

Accumulated depreciation

–

–

-9,630

-41,605

–

-51,235

Net carrying amount

16,500

31,140

20,252

31,088

3,100

102,080

Movements in 2020

Exchange differences

–

–

-230

-570

–

-800

Revaluation surplus

3,320

3,923

–

–

–

7,243

Acquisition of subsidiary

800

3,400

1,890

5,720

–

11,810

Additions

2,500

2,682

5,313

11,972

3,450

25,917

Assets classified as held for sale and other disposals

-550

–

-5,985

-1,680

–

-8,215

Transfers

–

–

950

2,150

-3,100

–

Depreciation charge

–

-1,750

-2,340

-4,380

–

-8,470

Impairment loss (ii)

–

-465

-30

-180

–

-675

Closing net carrying amount

22,570

38,930

19,820

44,120

3,450

128,890

At 31 December 2020

Cost or fair value

22,570

38,930

31,790

90,285

3,450

187,025

Accumulated depreciation

–

–

-11,970

-46,165

–

-58,135

Net carrying amount

22,570

38,930

19,820

44,120

3,450

128,890
(i) Non-current assets pledged as security

Refer to note 24 for information on non-current assets pledged as security by the group.

(ii) Impairment loss and compensation

The impairment loss relates to assets that were damaged by a fire – refer to note 4(b) for details. The whole amount was recognised as administrative expense in profit or loss, as there was no amount included in the asset revaluation surplus relating to the relevant assets. [IAS 36.130(a)]

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Revenue definition

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Revenue definition

Revenue is defined in IFRS 15 as: ‘Income arising in the course of an entity’s ordinary activities‘.

IFRS 15 establishes a single and comprehensive framework which sets out how much revenue is to be recognised, and when. The core principle is that a vendor should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the vendor expects to be entitled in exchange for those goods or services.

The application of the core principle in IFRS 15 is carried out in five steps:

revenue definition

The five-step model is applied to individual contracts. However, as a practical expedient, IFRS 15 permits an entity to apply the model to a portfolio of contracts (or performance obligations) with similar characteristics if the entity reasonably expects that the effects would not differ materially from applying it to individual contracts.

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IAS 33 EPS Impact of share-based payments

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EPS Impact of share-based payments

Because share-based payments are common and they impact EPS, it is important to understand how IFRS 2 interacts with IAS 33. Accordingly, this narrative starts with an alternative IFRS 2 perspective and discusses the EPS implications of each type of arrangement under IFRS 2.

This narrative builds on the basic principles introduced in EPS or earnings per share, and sets out the specific basic and diluted EPS implications of the following types of instrument(s).

For details on the specific EPS implications of particular types of instrument, this chapter may need to be read in conjunction with the chapter on those specific instruments. For example, for a number of the instruments described in other chapters, the treasury share method is used in calculating diluted EPS. The general principles underlying the treasury share method are explained in detail in here, and the additional implications of applying the treasury share method to share-based payment instruments are further explained in 1.3 below.

Simply put, share-based payments are generally transactions in which an entity acquires goods or services (including employee services) in exchange for its (or another group entity’s) equity instruments or a liability that is based on the price or value of its (or another group entity’s) equity instruments. There are three main factors to be considered in assessing how a share-based payment will affect EPS.

IFRS 2 Conditions

Analysis

Settlement alternatives that drive the classification as equity- or cash-settled share-based payments under IFRS 2

They determine whether and how EPS is affected – e.g. if a share-based payment is a POS.

See 1 below

Vesting conditions

They impact how a share-based payment is dealt with in EPS – e.g. as an option or as a contingently issuable share.

See 2 below

Form of the instrument

It determines which other considerations might be necessary to understand the EPS implications – e.g. dividend entitlements for non-vested shares or exercise prices for options.

See 2 below

1. IFRS 2 Settlement alternatives

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