First-Time Application of IFRS S1 and IFRS S2

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The first year establishes the reporting entity, control environment, terminology, metric definitions, comparative basis and public claims that later periods will inherit. A relief can reduce immediate burden, but it can also create a year-two data cliff, weaken comparability or require a more complex basis-of-preparation note. The technically easiest first-year option is therefore not always the best implementation choice.

The Standards’ effective date and the entity’s date of initial application are separate concepts. IFRS S1 and IFRS S2 are effective for annual periods beginning on or after 1 January 2024, but local law, regulation, listing rules or voluntary adoption determine when a particular entity first applies them. The local instrument may incorporate the issued reliefs, modify them, add different phase-ins or require earlier publication and assurance.

For the transition provisions, the date of initial application is the beginning of the annual reporting period in which the entity first applies the Standard. This date anchors the comparative reliefs, climate-first relief and IFRS S2 greenhouse gas reliefs. The entity should record the financial year, local legal basis, reporting entity, standards edition and whether application is mandatory, voluntary or early.

Figure 1. Each first-time relief has a narrow year-one effect and a distinct year-two consequence.

IFRS S1 E3 and IFRS S2 C3 relieve the entity from providing comparative information in the first annual reporting period. This is a permission, not a prohibition. A mature reporter may choose to provide selected comparative information, but it should only do so when definitions, boundaries, methods and controls make the comparison useful and consistent.

In the first year, IFRS S1 E4 permits the sustainability-related financial disclosures to be reported after the related financial statements. The exact deadline depends on whether the entity is required to provide a second-quarter or half-year interim report, provides one voluntarily, or provides no such interim report. The latter two routes are limited to nine months after year end.

Later publication can create breathing space for first-time data and governance, but it weakens simultaneous connectivity and can leave investors with financial statements before the related sustainability information. Before electing the relief, the entity should consider local filing requirements, market expectations, assurance timing, board calendars, digital filing and whether the information can still be updated for conditions existing at year end.

IFRS S1 E5 permits the entity to disclose only climate-related risks and opportunities in the first annual reporting period and consequently apply IFRS S1 only insofar as it relates to climate information. IFRS S2 supplies the climate-specific requirements. The entity discloses that it used the relief.

The relief narrows the subject matter; it does not remove IFRS S1’s applicable general architecture. Materiality, fair presentation, reporting entity, connected information, timing, cross-references, judgements, measurement uncertainty, errors and compliance discipline continue to apply to the climate disclosures. Official ISSB educational material confirms that a first-year compliance statement can be made when all applicable S1 and S2 requirements are met and use of the relief is disclosed.

IFRS S2 normally requires greenhouse gas emissions to be measured using the GHG Protocol Corporate Standard unless a jurisdictional authority or exchange requires another method. IFRS S2 C4(a) permits a first-time reporter to continue the different method it used in the annual period immediately before initial application. The relief protects continuity while the entity transitions, but it should not be confused with a permanent alternative-method permission.

IFRS S2 C4(b) permits omission of Scope 3 emissions in the first annual period, including the additional financed-emissions information for asset management, commercial banking and insurance activities. The relief is optional. An entity with sufficiently mature Scope 3 data may disclose it in year one, gaining an earlier baseline and avoiding a year-two current-period build from scratch.

Figure 2. The first application decision should be assessed across the preparation year, initial year and second reporting cycle.

A transition register should contain a separate local overlay rather than editing the issued IFRS paragraph out of recognition. This keeps the global baseline visible and shows the exact local difference.