Sustainability-related risks and opportunities — Accounting glossary

IFRS S1 focuses on sustainability-related risks and opportunities that could reasonably be expected to affect an entity’s cash flows, access to finance or cost of capital over short, medium or long horizons. Dependencies and impacts on resources and relationships can give rise to those risks and opportunities. Identify the risks and opportunities first, then determine what information about them is material to primary users. The assessment should be grounded in the entity’s actual business model and circumstances, not a generic list.

Worked example

A manufacturer relies on a water-intensive process in a drought-prone region. Reduced water access could disrupt output and future cash flows. Management assesses the risk, its time horizons, response and the information material to investors and lenders.

Common mistake

Assuming that an impact on the environment automatically determines the IFRS S1 disclosure conclusion without assessing a reasonably expected effect on the entity’s prospects and material information.

Where it appears in your exams

Qualification	Exam	Relationship	Period
ACCA	FR	Supporting	September 2026–June 2027
ACCA	SBR	Direct	September 2026–June 2027