Document ID: chunk:federal_register_of_legislation:F2025L00107:front:0:p154
Version: federal_register_of_legislation:F2025L00107
Segment Type: other
Provision Reference: 
Character Range: 481859–484928

attention that indicate the sustainability information may be materially misstated, paragraph 148L requires the practitioner to perform additional procedures.

     1.

 2.       In considering the magnitude of a possible misstatement, the practitioner may consider the qualitative and quantitative aspects of the possible misstatement (i.e., misstatements in a disclosure may be judged to be material due to size, nature or circumstances). The qualitative and quantitative factors in paragraphs A300 and A301, respectively, may be helpful in this regard.

 3.       The practitioner's consideration of the magnitude of a potential misstatement in a qualitative disclosure may depend on the importance of that disclosure to the intended users. For example, intended users may place more importance on the entity's efforts to reduce carbon emissions than its efforts to enhance community engagement. Therefore, intended users may have a lower tolerance for a misstatement of disclosures about efforts to reduce carbon emissions than disclosures about efforts to enhance community engagement.
Example:

The practitioner may identify and assess a risk of misstatement in an entity's disclosure that its efforts to reduce carbon emissions includes enhancing its carbon capture and storage capacities and describe its plans to acquire the technology to do so.  This may be based on the practitioner's understanding of:

     * The pressures that the entity faces to reduce carbon emissions to meet regulatory targets; and

     * The fact that acquiring the technology to capture and store carbon likely would be cost prohibitive to the entity.

Whether the practitioner considers the misstatement material, if it were to occur, depends on the importance that intended users place on the disclosure, and the magnitude of misstatement that would influence the decisions of intended users, which may be influenced by factors including:

     * Current or past trends in carbon emissions for the entity and the industry;

     * Whether the plan to reduce carbon emissions is important to meeting legal or regulatory emissions targets;

     * Whether the plan to enhance carbon capture and storage capacities is the primary approach, or part of a multi-pronged approach, to reducing carbon emissions; and

     * Whether customers, employees, or investors in the industry place importance on carbon emissions.

 1.       The sustainability reporting framework may require disclosure of a large number of individual metrics for different sustainability matters. In these circumstances:

           * The practitioner may treat a group of metrics as a disclosure for purposes of identifying and assessing the risks of material misstatement (i.e., the practitioner need not identify and assess the risk of material misstatement for each individual metric.) This may be the case, for example, if intended users are more likely to focus on the group of metrics rather than individual metrics.

           * Depending on the facts and circumstances, the practitioner may determine