A
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Accounting measurement
A concept that measures something in monetary terms; allows for comparability and a consistent understanding; reflected in financial statements.
D
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Disclosing (Disclosure)
The process of converting internal information into an external output (or the output itself). Corporate disclosure is the act of providing relevant information to stakeholders; the structure, frequency and format are typically defined by a regulatory body (such as a securities regulator) and apply to all aspects of the general-purpose financial statements.
F
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Financial statements / General purpose financial statements
Financial statements released to a broad group of users. They are intended for a wide range of primary uses, such as credit analysis and stock valuations. These statements include the income statement, balance sheet, statement of cash flows, statement of shareholders’ equity, and any accompanying disclosures. If the financial statements have been audited, then they should also include the audit report. Financial statements are typically a regulatory disclosure obligation for publicly listed companies.
M
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Management Discussion & Analysis (MD&A)
Often referred to as the front half of the annual report, where management explains performance through qualitative narrative and quantitative measures that help users understand details and context not otherwise available through the reporting standards.
It includes industry context, the company’s strategy and mission, its major risks, and uncertainties*, and other elements relevant to explaining current performance and how future performance may differ from past performance. While separate from financial statements, the MD&A is typically a regulatory disclosure obligation for publicly listed companies.
* Risks and uncertainties may be separate from the MD&A section, such as in the Form 10-K.
R
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Reporting
The process of measuring performance according to a prescribed set of reporting standards; a required information structure defined by and compliant with a particular set of financial accounting and reporting standards, such IAS1 or ASC 205 and 505, SEC Regulation S-X, Article 3; applies to all aspects of financial statements; may or may not be shared externally.
S
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Sustainability measurement
A concept that measures things in units, such as number of people, metric tons, etc.. While these are not reflected in financial statements, they can be reflected in other statements, such as sustainability statements. When disclosed, they should be in the MD&A, risk section, sustainability report, or elsewhere in the annual report.
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Sustainability statements
A dedicated section of the regulatory annual disclosures presenting information about sustainability matters. In the EU, the information must be prepared in compliance with the requirements of the CSRD and its ESRS.
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Sustainability-related financial disclosures
A particular form of general purpose financial reports that provides information about the reporting entity’s sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s:
- cash flows,
- access to finance, or
- cost of capital over the short, medium or long term.
This could include information about the entity’s governance, strategy and risk management in relation to those risks and opportunities, and related metrics and targets. (See IFRS 1)
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Sustainability-related financial information
Information about the sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s:
- cash flows,
- access to finance, or
- cost of capital over the short, medium, or long term.
(See IFRS 1)
Connecting sustainability and finance
Accountants must take the lead on joining the dots between sustainability and finance information, performance and disclosures to ensure organisations are able to make the transformative changes needed. Read our guidance unravelling the mystery in the connection between sustainability and finance.
