Materiality in sustainability reporting

Multiple-choice questions. In order to be awarded CPD units you must answer the following five random questions correctly. If you fail the test, please reread the article before attempting the questions again.

What was the original use of the concept of 'materiality'?

To judge how errors in financial statements affect investor decisions

To assess sustainability disclosures

To measure depreciation of tangible and intangible assets

None of the other answers

Why can materiality be challenging for accountants to determine?

Investors scrutinise this figure more than any other

Companies don’t provide enough financial data

Related accounting principles change frequently

Accountants are not investors and must use judgment about what matters to them

Why is applying materiality to sustainability reporting considered difficult?

Sustainability issues are irrelevant to business performance

Investors often don’t know how sustainability issues affect their decisions

There are no existing reporting frameworks

Sustainability data is not easy to quantify

What is the purpose of determining materiality in sustainability reporting?

To satisfy environmental regulators

To decide what topics and information go into the disclosures

To prevent entities from using boilerplate disclosures

To replace financial statements

Which sustainability standards focus on financial materiality?

IFRS 13

CSRD

ISSB S1 and S2

All of the other answers

What does 'impact materiality' under the CSRD refer to?

The valuation of a company's assets

The financial risks threatening going concern

The positive or negative effects a company has on society and the environment

The quality of financial statement disclosures

Which of the following statements is true? Statement 1, financial materiality always overrides impact materiality, or Statement 2, impacts can rapidly turn into financial risks or opportunities

Both statements

Statement 1

Statement 2

Neither statement

What is one key principle mentioned for assessing materiality?

Focus on what keeps the board up at night and the strategic implications

Disclose all available information regardless of relevance

Focus on short-term profits

Avoid considering external factors

What mistake do companies often make when assessing materiality?

Confusing the materiality of an issue with the materiality of the information about it

Ignoring investors' opinions

Reporting only on financial outcomes

Overestimating the cost of disclosures

What key question should companies ask when assessing materiality?

If this information were known or unknown, how would it change someone's view of the company?

How robust is our sustainability data?

What are the risks of making boilerplate disclosures?

What do our competitors disclose?

1 Unit