Reporting entities applying AASB S2 Climate-related Disclosures must disclose their Scope 1, Scope 2 and Scope 3 greenhouse gas (GHG) emissions, and measure them in accordance with the Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (2004) (GHG Protocol). If the entity is required, in whole or in part, by a jurisdictional authority or an exchange on which the entity is listed to use a different method to measure its emissions, it may use that method instead of the GHG Protocol.

The GHG Protocol requires entities to account for and report on all GHG emission sources and activities within the chosen inventory boundary, which includes setting the organisational boundary (i.e., which entities to include) and the operational boundary (i.e. which emission sources).

AASB S2 emissions data must cover the same reporting entity as the financial statements

With climate reporting now mandatory in Australia, AASB S2 requires the following regarding the climate-related financial disclosures:

  • They must be for the same reporting entity as the related financial statements, unless otherwise permitted by law
  • They must cover the same reporting period as the related financial statements
  • They must be consistent with the corresponding data and assumptions used in preparing the related financial statements.

Applying the above to emissions data of acquired subsidiaries in a group’s consolidated climate-related financial disclosures, it would appear that these should be included from the date that these subsidiaries are first included in the group’s consolidated financial statements. This is because climate-related financial disclosures must cover the same entities as those included in the consolidated financial statements, and the data and assumptions used must be consistent with those used for preparing the related financial statements.

Historically, entities that have voluntarily reported emissions data applying the GHG Protocol have followed a number of different approaches for subsidiaries acquired during a reporting period. For example, one approach is to only include the acquired subsidiary’s emissions in the first full year of consolidation, rather than from the date the group obtains control.

Are these entities, applying AASB S2, permitted to continue applying the methodology used in previous years for voluntary reporting when determining the point at which emissions data for subsidiaries acquired during a reporting period are included in the group’s emissions data?

Answer

An entity is not always permitted to apply the methodology previously followed.

Emissions data is required to be included from the point at which an acquired subsidiary is required to be included in an entity’s consolidated financial statements in accordance with AASB 10 Consolidated Financial Statements.

An entity can, therefore, continue to apply the previous methodology if it results in emissions data for acquired subsidiaries being included from the acquisition date (the date on which its results and financial position are included in the group’s consolidated financial statements). If the previous methodology results in emissions data being included from a different date, it cannot be used when applying AASB S2.

Example

Entity A is the parent of Subsidiary B (together referred to as the Group).

Subsidiary B was acquired on 1 June 2026.

Entity A will be reporting its mandatory climate-related financial disclosures for the year ended 30 June 2026 in accordance with the requirements of AASB S2.

Entity A prepares its consolidated financial statements in accordance with the requirements of Australian Accounting Standards. Based on the requirements of AASB 10, Entity A is required to consolidate Subsidiary B from the date of acquisition on 1 June 2026.

GHG Protocol

Entity A previously produced voluntary climate-related financial disclosures and determined its inventory boundary for reporting its GHG emission disclosures in accordance with the GHG Protocol.

The GHG Protocol requires an entity to:

‘Account for and report on all GHG emission sources and activities within the chosen inventory boundary. Disclose and justify any specific exclusions.’

Based on its interpretation of the requirements of the GHG Protocol, Entity A determined its inventory boundary to only include the emissions data for acquired operations, such as subsidiaries from their first full year of consolidation. Therefore, in accordance with that methodology, no emissions data for Subsidiary B would have been included in Entity A’s 30 June 2026 consolidated climate-related financial disclosures, but emissions data would have been included from 1 July 2026.

Although this approach was not consistent with Entity A’s consolidation requirements in accordance with AASB 10 for its financial statements, this approach was considered by Entity A to meet the principles of the GHG Protocol and was explained in Entity A’s voluntary climate-related financial disclosures, setting out its methodology for determining its reporting boundary and calculating emissions.

AASB S2

AASB S2, Appendix D, paragraph 23 requires the following:

‘Data and assumptions used in preparing the climate-related financial disclosures shall be consistent—to the extent possible considering the requirements of Australian Accounting Standards—with the corresponding data and assumptions used in preparing the related financial statements.’

Therefore, the point from which emissions and other data for an acquired subsidiary are included in preparing Entity A’s climate-related financial disclosures must be consistent with the point from which the subsidiary’s financial information is included in Entity A’s consolidated financial statements.

This means that the emissions data for Subsidiary B is required to be included in Entity A’s mandatory group climate-related financial disclosures from the date of consolidation of Subsidiary B in Entity A’s consolidated financial statements, i.e. 1 June 2026.