Document ID: chunk:federal_register_of_legislation:F2025L00107:front:0:p176
Version: federal_register_of_legislation:F2025L00107
Segment Type: other
Provision Reference: 
Character Range: 547170–550436

that they all overstate or understate the sustainability matter.

External factors

 1.                 The misstated sustainability information relates to non-compliance with a law or regulation, particularly when the consequence for non-compliance is severe.

 2.                  The misstated sustainability information relates to sustainability matters that has implications for a large number of the entity's stakeholders. However, there may be situations when the sustainability matter has implications for only a small number of stakeholders but may, nonetheless, have material implications. For example, a small community affected by radioactive contamination of its water supply from effluent from an entity's operations may result in a lawsuit that could have a material impact on the entity and its other stakeholders.

Nature of the sustainability information

 1.                 The misstatements may indicate doubts as to the feasibility of management's plans. For example, an entity may disclose its policies or commitments to mitigate sustainability-related risks in accordance with the applicable criteria, but evidence obtained may indicate these policies or commitments are unrealistic, rely on unproven technologies, or require financing that the entity is unlikely to be able to obtain.

 2.                 The misstatement relates to a particular disclosure that is commonly used to compare the entity to its peers.

 3.                  The misstatement relates to a target or threshold, and the error significantly impacts whether the target or threshold is met (e.g., the magnitude of the error may be small but may have significant consequences for meeting the target).

 4.                  The misstated information is reporting a significant change in a previously reported position, or a trend that has reversed.

Presentation

 1.                 The misstatement that has arisen from the presentation of the sustainability information being misleading because the wording that has been used lacks clarity such that it could be interpreted in widely different ways. Accordingly, intended users might make different decisions depending on their interpretation.

Management's behaviour

 1.                  The misstatement has arisen as a result of fraud by management to mislead intended users.

 2.              Management is reluctant to correct the misstatement for reasons other than they consider it immaterial.

 3.                 Management is reporting aggressive targets or estimates, or is defensive in providing explanations.

 1.       Misstatements in qualitative information are as important as misstatements in quantitative information. If the misstatements in qualitative information are not corrected by management, the practitioner may accumulate them by listing them, or marking up or highlighting them in a copy of the sustainability information. When it is not possible to add the misstatements together to determine their effect in the aggregate, the practitioner may consider whether there are any commonalities among the misstatements, such as whether the misstatements reflect a more favourable outcome that is collectively material, or indicate management bias.

 2.       Other factors that may help the