Questions & Answers
Shall the (consolidated) sustainability statement of a parent company include all its subsidiaries even if some of them:
(a) are located outside of the EU; and/or
(b) if some are not consolidated for financial statements purposes?
- Non-EU subsidiaries
- non-consolidated subsidiaries
Background
The following question was received: ‘Does the (consolidated) sustainability statement of a parent company have to include all its subsidiaries even if some of them are located outside of the EU and/or if some are not (financially/legally) consolidated?’ and changed it to the above question for clarity.
ESRS 1 paragraph 62 states: ‘The sustainability statement shall be for the same reporting undertaking as the financial statements. For example, if the reporting undertaking is a parent company required to prepare consolidated financial statements, the sustainability statement will be for the group.’
ESRS 1 paragraph 90 states: ‘Data and assumptions used in preparing the sustainability statement shall be consistent to the extent possible with the corresponding financial data and assumptions used in the undertaking’s financial statements.’
ESRS 1 paragraph 102 states: ‘When the undertaking is reporting at a consolidated level, it shall perform its assessment of material impacts, risks and opportunities for the entire consolidated group regardless of its group legal structure.’
The scope of consolidation of financial statements for undertakings organised as a group is determined by either IFRS or national accounting laws, considering the requirements of the Accounting Directive (Directive 2013/34/EU, specifically Article 21). Exemptions from the consolidation of subsidiaries in the financial statements are provided under Article 23 (9) and (10) of the Accounting Directive.
In addition to these provisions in practise subsidiaries sometimes may not be included in the financial consolidation, based on materiality considerations, even though the legal obligation to consolidate them exists.
Answer
The starting point of the sustainability statement is the perimeter used for financial reporting.
The consolidated sustainability statement of a parent company must include all its subsidiaries in line with the scope of consolidation in financial reporting, even if some of them are located outside of the EU.
The undertaking performs its assessment of material impacts, risks and opportunities based on the business model for the entire consolidated group. Subsidiaries that are immaterial for financial statements and therefore are excluded from the consolidated perimeter when preparing financial statements on an exceptional basis for practical considerations, or in line with national accounting law, may still be material from a double materiality point of view. When this happens, they shall be included in the reporting boundaries of the consolidated sustainability statement, despite them being deemed immaterial for the consolidated financial statements.
Relations
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The sustainability statement shall be for the same reporting undertaking as the financial statements. For example, if the reporting undertaking is a parent company required to prepare consolidated financial statements, the sustainability statement will be for the group. This requirement does not apply where the reporting undertaking is not required to draw-up financial statements or where the reporting undertaking is preparing consolidated sustainability reporting pursuant to Article 48i of Directive 2013/34/EU. | |
The sustainability statement shall be for the same reporting undertaking as the financial statements. For example, if the reporting undertaking is a parent company required to prepare consolidated financial statements, the sustainability statement will be for the group. This requirement does not apply where the reporting undertaking is not required to draw-up financial statements or where the reporting undertaking is preparing consolidated sustainability reporting pursuant to Article 48i of Directive 2013/34/EU. | |
The sustainability statement shall be for the same reporting undertaking as the financial statements. For example, if the reporting undertaking is a parent company required to prepare consolidated financial statements, the sustainability statement will be for the group. This requirement does not apply where the reporting undertaking is not required to draw-up financial statements or where the reporting undertaking is preparing consolidated sustainability reporting pursuant to Article 48i of Directive 2013/34/EU. |