Disclosure focus
The practical focus is on the organisation’s overall exposure and management approach across its operations, assets, and activities that matter to the reporting boundary. That means looking beyond headline facilities to the parts of the business that could materially affect climate risk, resilience, and oversight, so the report reflects the full covered entity rather than a narrow operational snapshot.
This LRA educational guidance supports disclosure preparation. For the exact requirements, always refer to the official CARB source.
Prepare
What to collect before drafting
Tick each field as the evidence lands. Owners are the teams that usually hold the source files.
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Annual turnover
FinanceCapture the entity’s annual turnover or gross receipts for the reporting period, using the same basis used in the finance records.
Evidence Audited accounts, management accounts, or tax filings that show the annual revenue figure and period covered.
Watch for Does not reconcile to the general ledger or statutory accounts, so the revenue basis used for the threshold test is wrong.
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California trading presence
LegalCapture whether the entity carries on business activities in California, using the organisation’s own operating footprint and legal presence assessment.
Evidence Entity registration records, state filings, sales or operating records, and legal entity mapping showing California activity.
Watch for Definition mismatch: the California activity test is applied to the wrong entity or to a group view instead of the reporting entity.
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Exemption position
LegalCapture the entity’s current exemption position for this filing, including which exemption applies or that none applies.
Evidence Legal memo, internal eligibility assessment, and supporting correspondence or filings that document the exemption decision.
Watch for A stale exemption decision is used, so the reported status no longer matches the current legal position.
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Insurance carve-out
LegalCapture whether the entity falls within the insurance carve-out for this requirement, based on its actual regulated status.
Evidence Regulatory authorisation records, entity classification documents, and legal review of the insurance status.
Watch for The insurance exclusion is applied to a non-insurance affiliate, or missed for an insurance entity in the structure.
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Entity legal type
LegalCapture the entity’s legal form as recorded in corporate records, using the exact legal type that applies to the reporting entity.
Evidence Certificate of incorporation, registry extract, constitutional documents, or equivalent corporate registry evidence.
Watch for Definition mismatch: the legal form is taken from a trading description or local shorthand rather than the registered entity type.
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Parent-level reporting
FinanceCapture whether the disclosure will be prepared at parent level, and confirm the parent entity that will hold the consolidated report.
Evidence Group structure chart, consolidation policy, and reporting instructions showing the parent entity and consolidation basis.
Watch for Scope error: the response is marked as parent-level when the filing is actually prepared at subsidiary level, or vice versa.
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Revenue threshold test
FinanceCapture whether annual revenue is above the $500 million threshold, using the same revenue figure and period as the financial records.
Evidence Finance pack, audited statements, or revenue schedule showing the amount tested against the threshold.
Watch for Period error: the threshold is tested against a different year or a non-comparable revenue measure, so the yes/no answer is wrong.
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US domicile status
LegalCapture whether the reporting entity is based in the United States, using the entity’s registered and operational base for the assessment.
Evidence Registered office records, tax residency documents, and legal entity information showing the entity’s base location.
Watch for Definition mismatch: the U.S. base is assessed from the parent or operating footprint instead of the reporting entity’s own status.
Before you start
- First, are we actually in scope because we do business in California and fit the business form being assessed?
- Which revenue figure will we use for the check, and is it the right annual amount for the period we are testing?
- Can we trace that revenue figure back to a source we can evidence, rather than relying on an estimate or unsupported number?
- Are we treating the group at parent level, or only the individual entity, for this assessment?
- Do any exclusion or exemption conditions apply to us, including the insurance carve-out?
- Are we a U.S.-based entity, and does the revenue threshold test show more than $500 million?
How to prepare it
Request the data
Request the entity and revenue evidence
Translate the disclosure into an internal business question — then adapt it to your organisation's own language.
Do we sit within the scope test for this California reporting obligation, based on our entity type, California activity, revenue level, and any exclusion or consolidation position?
Use your organisation’s own terms first, then map them to the reporting fields. For example, ask for the group structure, legal entity type, turnover or gross receipts, California trading footprint, any insurance-related exclusion position, and whether the figure is held at parent or local level.
Weak request
Please confirm whether we are covered and send the SB 261 applicability evidence.
Why it fails: This uses framework language that may not match how the business tracks the information, and it does not specify the exact evidence needed to test the scope position. It also leaves out the source, basis, period, and ownership details needed to trace the answer back to records.
Better request
Please send the evidence pack for [entity] and [period] covering: the revenue or gross receipts figure used for the scope review, the California business activity check, the legal form, any insurance-related exclusion position, and whether the figure is held at parent or entity level. Include the source system or file, the basis used, and the name of the person who can confirm the position.
Formal email template
Subject: Request for scope evidence – California reporting review Dear [name], We are preparing the internal scope assessment for the California reporting review and need your help with the underlying evidence. Please provide, for [entity name] and [reporting period]: - the revenue or gross receipts figure used for the scope check, with the source and basis - confirmation of whether the entity has business activity in California - the entity’s legal form - whether any insurance-related exclusion position applies - whether the figure is held on a parent-consolidated basis or at entity level - any note on whether the revenue level is above the internal threshold used for this review - the source system or file reference for each item, where available Please return the information in the attached table, with any supporting documents or links. If any item is not available, please note the reason and the best available substitute. This is a possible LRA training template only. Please adapt it to your organisation’s own terms and check the official source before sign-off. Kind regards, [preparer name] [team] [contact details]
Short Teams / Slack version
Hi [name] — could you send the evidence for the California scope check for [entity] and [period]? We need the revenue/gross receipts basis, California activity confirmation, legal form, any insurance exclusion position, and whether the figure is parent-level or entity-level. Please include the source file/system and any supporting note. This is a possible LRA training template only — please adapt it to your organisation’s own terms and check the official source before sign-off.
Industry examples
Retail
Context. A group sells through stores, online channels, and a California distribution footprint.
Adapted request. Please provide the scope evidence for [entity] and [period]: revenue or gross receipts used for the review, confirmation of California trading activity, legal form, any insurance exclusion position, and whether the figure is taken from the group pack or the local ledger. Include the source file and owner.
Example response. Entity: [name]; Period: FY2025; Revenue basis: group turnover from the finance pack; California activity: Yes, online sales and a warehouse; Legal form: corporation; Insurance exclusion: No; Reporting basis: parent-level consolidated; Threshold assessment: Yes, above internal threshold; Source: FY2025 group pack; Owner: [name], Finance Manager.
Financial services
Context. A regulated group has multiple legal entities and needs a clear view of which entity is being assessed.
Adapted request. Please share the entity-level evidence for [entity] and [period]: gross receipts or revenue used in the scope review, legal form, California business presence, whether the entity is treated as an insurance business for this check, and whether the assessment is based on the parent view or the standalone entity. Please attach the supporting register or accounts extract.
Example response. Entity: [name]; Period: FY2025; Revenue basis: statutory accounts extract; California activity: Yes, client servicing and sales support; Legal form: LLC; Insurance exclusion: Yes, treated as insurance entity for this check; Reporting basis: standalone entity; Threshold assessment: No, below internal threshold; Source: statutory accounts pack; Owner: [name], Legal Counsel.
Draft your disclosure
Notes that turn data into a disclosure
LRA training templates — adapt them to your organisation, and check the official source before sign-off.
Method note
State the basis used to decide whether the entity is in scope, including how revenue was measured, how California activity and U.S. location were assessed, whether the report was prepared at parent level, and how any exemption or insurer exclusion was applied.
Context note
Explain that the figures are being used to determine whether the business falls within the reporting population, rather than to describe performance, and note which recorded facts support the final applicability conclusion.
Fluctuation statement
If the applicability result changes from one period to the next, point to the specific driver, such as a revenue movement across the threshold, a change in business presence, a different consolidation basis, or a revised exemption assessment.
Content index entry
SB261-APPLICABILITY Covered entity applicability — [location / page] / [notes]Download Centre
Preparation tools & forms
Download preparation tools for SB261-APPLICABILITY with free verified email access for 24 hours. Source-report links remain public.
Check
For each claim, check the evidence
We used the prior year’s revenue figure from the approved finance records, converted and presented in US dollars.
Risk Assurer may ask whether the amount came from the right period, whether the currency conversion was applied consistently, and whether the figure matches the underlying accounts.
Evidence to check ['Prior-year management accounts or audited financial statements', 'Working paper showing the source ledger and any currency conversion', 'Finance sign-off or reconciliation to the reported amount']
We checked the business footprint before concluding that the entity has California activity.
Risk Assurer may probe whether the conclusion is supported by a documented review rather than a general assumption about trading presence.
Evidence to check ['Internal assessment memo on California activity', 'Entity structure and operating-location records', 'Tax, legal, or compliance review notes supporting the conclusion']
We recorded the coverage position after testing the relevant conditions and documenting the outcome.
Risk Assurer may question whether the status was determined from a complete and current assessment, and whether the basis for the conclusion is retained.
Evidence to check ['Applicability assessment worksheet', 'Decision log showing the criteria reviewed and the final status', 'Approval from the responsible finance or legal reviewer']
We checked whether the insurance-related carve-out applied before finalising the disclosure.
Risk Assurer may ask whether the exclusion was considered at the right entity level and whether the conclusion is backed by evidence.
Evidence to check ['Legal or compliance memo on the insurance carve-out', 'Entity classification documents', 'Review sign-off showing who confirmed the position']
We confirmed the entity’s legal form from corporate records and used that in the assessment.
Risk Assurer may probe whether the legal form was taken from authoritative records and whether it was current at the reporting date.
Evidence to check ['Certificate of incorporation or equivalent registry extract', 'Group legal entity register', 'Working paper linking the legal form to the reported conclusion']
Where the parent prepared a group-level report, we kept evidence that the separate-report relief was based on that consolidated report.
Risk Assurer may ask whether the parent-level basis is real, complete, and available for inspection, and whether the reporting entity is actually covered by it.
Evidence to check ['Copy of the consolidated climate-related risk report', 'Group reporting pack showing the parent-level basis', 'Cross-reference between the entity and the parent report']
Evidence pack to prepare
Common reporting gaps
- Figures are stated without the supporting narrative, or narrative without figures.
- Scope is inconsistent between the text and the numbers.
- The reporting boundary is left undefined.
- Material changes since the previous period are not disclosed.
- Estimates and measured values are not distinguished.
- Source records for the figures are not identified.
Where drafts go wrong
Mistakes to avoid and where judgement is needed
The left column is what preparers get wrong while collecting; the right column is where you will have to make and explain a judgement.
Mistakes to avoid
- Wrong owner askedTeams often ask the sustainability lead for legal form, revenue, or US presence when those facts sit with finance, tax, legal entity management, or the parent-company reporting team.
- Framework language used too earlyPeople ask for answers in disclosure terms instead of the organisation’s own records, which makes source teams translate rather than simply confirm the underlying fact.
- Scope not fixedThe data pull starts before everyone agrees which legal entity, group perimeter, or reporting population is in scope, so the figures and status checks do not line up.
- Wrong period basisCollectors mix a current snapshot with a prior-year revenue basis or another timing point, so the applicability check is built on mismatched dates.
- Counting bases mixedOne team uses standalone entity figures while another uses group-level numbers, which can make the revenue test and the entity status check point to different populations.
- Source labels lostOriginal file names, system tags, or ledger labels are stripped away, so later reviewers cannot trace where each revenue or entity-status value came from.
- Separate populations mergedInsurance-related entities, parent-level reporting units, and operating subsidiaries are blended into one file even though they should be checked separately.
- Evidence trail incompleteThe pack contains the answer but not the supporting extract, date stamp, or reviewer sign-off, so no one can show how the applicability call was reached.
Judgement needed
- Group boundary after a buy-in or saleSet the reporting perimeter using the business structure in place for the reporting period, and explain any material change caused by an acquisition, disposal or similar transaction.
- Which revenue figure to use when records differChoose one clearly defined revenue basis, apply it consistently, and disclose the source and timing if internal and external figures do not match exactly.
- Cross-border legal form and local labelsMap overseas legal forms to your own entity description in a way that is consistent and explain any judgement where local naming does not align neatly with the California test.
- Operations that sit close to the California lineDecide whether the organisation is in scope based on how it actually trades or operates in California, and state the practical basis used where the position is not clear-cut.
- Parent-level reporting versus entity-by-entity reviewIf the group can be assessed at parent level, use that approach consistently; if not, explain why a different boundary was used and how the conclusion was reached.
- Insurance-related exclusion where activities are mixedWhere the organisation has both insurance and non-insurance activities, explain how you separated them and how you decided whether the exclusion applies to the relevant part of the business.
- Estimated figures where measured data are not availableUse estimates only where direct figures are not yet available, describe the method and assumptions, and flag any areas where the result could change once better data arrive.
- Rounding and threshold proximityState the exact or rounded figure used for the threshold test, and disclose any rounding approach where the result sits close to the cut-off.
- Privacy limits on sharing supporting detailIf data protection rules prevent full disclosure of underlying records, provide the highest level of aggregation that still supports the conclusion and explain the limitation.
Examples
How it reads on the page
Synthetic, written by LRA — not from a company report, not text from any standard.
We would say our group is a UK-incorporated parent filing on a consolidated basis, with our California activity captured through a U.S. subsidiary. Our latest annual turnover is $620 million, so the revenue threshold is met; we do business in California (Y), we are not using an insurance-company carve-out (N), and we are not claiming any other exemption (N).
- Legal form: corporation
- Parent-level reporting: Y
- U.S.-based entity: Y
This example shows how a reporter can describe the applicability check in plain language while still covering the key status points. It is synthetic and internally consistent.
We are a non-U.S. limited liability company that reports at the parent level, and our California sales activity means we do business in the state (Y). Our annual receipts are $480 million, so we do not clear the revenue threshold (N); we also do not rely on an insurance-only exclusion (N) and we are not otherwise exempt (N).
- Legal form: limited liability company
- Parent-level reporting: Y
- U.S.-based entity: N
This example shows a different fact pattern where the revenue threshold is not met, while the other applicability indicators are still stated clearly. It is synthetic and internally consistent.
Quality ladder
- Basic
We reported revenue of $620 million.
- Better
We reported $620 million of annual revenue, confirmed that we do business in California, and noted that our legal form is a corporation.
- Best
We reported $620 million of annual revenue for the year ended 31 December 2025, confirmed that we do business in California and are a U.S.-based corporation, and noted that the figure is above the $500 million threshold because our sales grew across our core markets.
Check your understanding
Scenarios to work through
A group has a US-incorporated parent with several operating subsidiaries. The parent prepares a single set of group accounts, and one subsidiary sells into California through local distributors.
A company is organised as a limited liability company and had annual gross receipts of 520 million currency units in the latest year. It has no staff or office in California, but it ships products there through third parties.
A financial services group has a regulated insurance subsidiary with 610 million currency units of annual revenue. The rest of the group is a non-insurance trading business, and the insurance arm is the only part with California customers.
A multinational has a US parent and a non-US holding company above it. The non-US parent owns the US operating company, which has 505 million currency units of annual revenue and sells into California.
Real reports
How 3 companies report it
Examples of full and partial reporting practice. These are evidence-led reviews, not exact disclosure templates to copy.
Sands China Ltd.
Ingersoll Rand Inc.
CSX Corporation
| Field | Sands China Ltd. | Ingersoll Rand Inc. | CSX Corporation |
|---|---|---|---|
| Annual turnover | Not found | Not found | Not found |
| California trading presence | Not found | Not found | Not found |
| Exemption position | Not found | Partial | Not found |
| Insurance carve-out | Not found | Not found | Not found |
| Entity legal type | Not found | Not found | Not found |
| Parent-level reporting | Not found | Not found | Not found |
| Revenue threshold test | Not found | Not found | Not found |
| US domicile status | Not found | Not found | Not found |
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Peer comparison uses examples on this card, not prevalence in the report corpus.
Advice, not assurance
Framework references
Relevant California requirements and related disclosures
California
SB261-APPLICABILITY
within California SB 261: Climate-Related Financial Risk Act
Related & explore
More in California SB 261 →Browse full catalogue →Search all disclosures →
FAQ
Questions this page answers
Start with the plain-language explainer and the datapoints to prepare, then use the step-by-step preparation section to organise the information you already hold. The page is designed to help you turn those inputs into a draft and an evidence pack, rather than to act as an official source.
The page says to prepare annual turnover, California trading presence, exemption position, insurance carve-out, entity legal type, parent-level reporting, revenue threshold test, and US domicile status. Use those items as your collection checklist so you can build the disclosure from a complete set of inputs.
Use the step-by-step 'how to prepare' section to decide which entity or group is in scope and to line up the datapoints that support that decision. The page also flags parent-level reporting and exemption position, which are useful anchors when you document your approach.
The page is set up for a sustainability or ESG manager, HR or data owner, or an assurance reviewer to use together, so ownership should sit with the person coordinating those inputs. In practice, assign each datapoint and each assurance claim to a named owner so the evidence pack can be completed on time.
The page includes an evidence pack with five items and a separate set of six assurance claims to verify. Use those together so each claim is backed by a clear claim, risk and evidence trail before you finalise the draft.
The page has a section on common reporting gaps and mistakes, which is there to help you spot weak points before review. Use it as a pre-submission check so you can correct missing data, unclear scope or unsupported statements early.
The Download Centre includes a Prep & Assurance workbook in .xlsx format, which is intended to help you organise the preparation and assurance steps. Use it alongside the page’s datapoints, assurance claims and evidence pack so your draft and support files stay aligned.
The Download Centre also provides a printable Library Card in PDF format, which is useful as a quick reference while you are collecting data or checking the draft. It can help you keep the key preparation points and assurance items in view without reopening the full page.
Yes — the page includes synthetic illustrative example disclosures, including a quantitative table, to show how the information can be presented. Treat them as examples only and adapt the structure to your own data, making sure any figures you use are internally consistent.
The page says ESRS E1 (Climate Change) is the closest correspondence, so some of the same underlying data may be reusable. Do not assume the disclosures are identical; use the page to see where your existing climate data can support the California disclosure.
More questions this page can help with