Sustainability reporting and audit relief decisions register

We made an in-principle decision to refuse relief from the requirement to prepare sustainability reports for four entities within an Australian corporate group for the financial year ended 31 December 2025. Each of the four entities are a large proprietary company that currently lodge individual Ch 2M financial reports and meet the sustainability reporting requirements in their own right. Relief was sought on the basis that one of the four entities will prepare a sustainability report that includes the other three entities. The applicants submit that emissions within their value chain are better represented through a combined sustainability report at this proposed level.

However, none of these entities control the other three entities. Relief was required because these entities do not (and do not propose to) prepare consolidated financial reports under AASB 10 Consolidated Financial Statements.

We were not satisfied that compliance with the relevant sustainability requirements would impose unreasonable burdens because:

• allowing the companies to prepare a consolidated sustainability report for a group of entities that does not prepare corresponding consolidated financial reports is inconsistent with the connected information requirements in AASB S2 Climate-related Disclosures
• the companies’ proposal to artificially consolidate without control does not meet the requirements for preparing consolidated financial reports under AASB 10 and relief would be inconsistent with s292A(2).

We made an in-principle decision to refuse relief to five separate applicants from the requirement to prepare a sustainability report for the financial year ended 31 December 2025. The applicants are foreign-owned large proprietary companies that are required to prepare and lodge financial reports under Ch 2M.

They sought relief on the basis that they lodge their foreign parent-level sustainability reports in compliance with the Task Force for Climate-related Financial Disclosures (TCFD) recommendations.

Generally, the applicants submitted the resources, cost and effort required for Australian-level reporting is out of proportion to the value to the primary users of the information in the sustainability report.

The applicants argued that users would be more interested in global consolidated sustainability reports than Australian-level sustainability reports, as climate-related risks, opportunities, strategies and targets are managed at the global-level.

We were not satisfied that compliance with the relevant sustainability requirements would impose unreasonable burdens because:

• relief would reduce the consistency and comparability of climate-related financial disclosures because the TCFD recommendations, are not equivalent to AASB S2 Climate-related Disclosures
• relief is inconsistent with the connected information requirements in AASB S2 Climate-related Disclosures because users of the Australian subsidiaries’ financial reports will not be able to understand connections between the subsidiaries’ financial reports and disclosures provided by the foreign parent-level sustainability report
• the ongoing compliance costs of preparing and lodging sustainability reports at the Australian subsidiary level are considered costs ordinarily incurred in complying with the legislation and doing business using a corporate structure in Australia, and
• the fact that the reporting entity is privately owned or has limited known external users does not mean reporting is inappropriate in the circumstances.

We made an in-principle decision to refuse relief to three entities from the requirement to prepare sustainability reports for the financial year ended 31 December 2025. The entities are large proprietary companies and lodge individual Ch 2M financial reports. Relief was sought on the basis that their parent, an Australian partnership, prepare a consolidated sustainability report for the Australian corporate group.

The partnership comprises three Australian incorporated entities and three foreign incorporated entities with equal interests, and as such, control is not vested in any single corporate partner.

The parent prepares financial reports under a partnership agreement, and there is no legal requirement for partnerships to prepare and lodge general-purpose financial reports or sustainability reports with ASIC.

We were not satisfied that compliance would impose unreasonable burdens because:

• allowing the partnership parent to prepare a consolidated sustainability report for the Australian corporate group would be inconsistent with the connected information requirements in AASB S2 because it would not correspond with each of the individual entities’ financial reports and the parent does not prepare Ch 2M financial reports
• The partnership is not a legal entity and cannot act as a parent for the purposes of consolidation under the Australian Accounting Standards.

We made an in-principle decision to refuse relief to an entity from the requirement to prepare a ‘standalone’ parent only sustainability report for the financial year ending 31 December 2025 (FY25). As permitted under s292A(2), the entity intended to lodge a ‘standalone’ parent-only rather than a consolidated sustainability report in FY25. The entity is the parent company of an Australian group that lodges consolidated financial reports under Ch 2M. It also had one subsidiary that is a Ch 2M reporting entity and is not required to prepare sustainability reports until the financial year ending 31 December 2026 (FY26).

The entity argued that because it would be the only entity required to report in FY25, and its subsidiary would not be required to lodge sustainability reports until FY26, the administrative burden of preparing a standalone parent-only sustainability report justified relief.

We were not satisfied that compliance with the relevant sustainability requirements would impose unreasonable burdens because:

• the entity could have avoided the administrative costs and complexity of a ‘standalone’ parent sustainability report by preparing a consolidated sustainability report for the group in FY25
• the burdens arise solely from the entity’s decision to defer consolidation for a year.

We made an in-principle decision to refuse relief to a parent entity and its two wholly owned subsidiaries from the requirement for each of them to prepare a consolidated sustainability report for the financial year ended 31 December 2025, where the applicants proposed that each entity instead lodge a standalone sustainability report.

The group comprises of a parent entity and two wholly owned subsidiaries, each of which prepares consolidated financial reports under Ch 2M and meets the ‘group 1’ threshold for sustainability reporting. The two wholly owned subsidiaries also hold wholly owned subsidiaries that meet the ‘group 3’ threshold for sustainability reporting.

The applicants each propose to prepare standalone sustainability reports rather than a consolidated sustainability report. This is on the basis that they each operate independently with distinct businesses, and that standalone sustainability reports would better reflect how sustainability is managed.

We made an in-principle decision to refuse relief on the basis that relief was not required. Paragraph 292A(2)(b) of the Corporations Act provides the parent entity of a consolidated group with the option to prepare a sustainability report for the consolidated group, or the parent entity alone. The applicants’ proposed approach reflects an election available under the Corporations Act, rather than a basis for relief.

We granted relief to allow a parent entity not to prepare a sustainability report for the financial years ended 31 December 2025 and 31 December 2026 on the basis that its wholly owned subsidiary would prepare a consolidated sustainability report as the primary operating entity within the group.

The parent entity is a non-trading holding company whose activities are limited to holding shares in its wholly owned subsidiary. All operations within the group are carried out by its wholly owned subsidiary.

Both the parent and its wholly owned subsidiary are unlisted public companies that prepare and lodge consolidated financial reports under Ch 2M. Also, both the parent entity and its wholly owned subsidiary meet the ‘group 1’ thresholds for sustainability reporting.

We granted relief because we were satisfied that compliance with the relevant sustainability requirements would impose unreasonable burdens on the parent entity where:

• the parent entity is a holding company whose activities are limited to administrative functions and does not conduct operational activities separate from those undertaken by its wholly owned subsidiary
• the wholly owned subsidiary will prepare a consolidated group sustainability report covering the operations of the consolidated group, and
• requiring a separate sustainability report at the parent entity level would largely duplicate those disclosures included in the consolidated group sustainability report of its wholly owned subsidiary and would be unlikely to provide material additional information about the parent entity’s climate-related risks and opportunities that is useful to primary users of the parent entity’s financial reports.

We granted relief to allow an entity that is a part of a stapled group not to prepare a sustainability report for the financial years ended 31 December 2025 and 31 December 2026.

The stapled group is listed on the ASX and comprises of the entity which is a company that is stapled to a trust, and their respective controlled entities. The responsible entity of the trust is a wholly owned subsidiary of the entity.

The entity is a public company and does not meet the ‘group 1’ corporate size threshold for sustainability reporting. However, the entity meets the ‘group 1’ emissions threshold for sustainability reporting because it is a registered corporation under the National Greenhouse and Energy Reporting Act 2007 and manages the assets owned by the registered scheme.

The registered scheme meets the ‘group 2’ value of assets threshold for sustainability reporting as an asset owner and therefore is not required to prepare a sustainability report until the financial year ended 31 December 2027

We granted relief to allow the entity not to prepare a sustainability report separate to the stapled group because we were satisfied that compliance would impose unreasonable burdens where:

• the entity will need to establish systems, processes and incur audit costs for only two reporting periods, before its operating activities are incorporated into the stapled group’s consolidated sustainability report in the financial year ended 31 December 2027, and
• the incremental benefit to primary users of the entity’s financial reports would be outweighed by the associated commercial costs of preparing the entity’s standalone sustainability reports for two reporting periods only.

We granted relief to allow a subsidiary to lodge its parent company’s global group consolidated sustainability reports instead of an individual stand-alone sustainability report for two financial years on the basis that those sustainability reports will be prepared in accordance with a sustainability standard equivalent to AASB S2 Climate-related disclosures, and be subject to assurance in accordance with an auditing standard equivalent to ASSA 5000 General Requirements for Sustainability Assurance Engagements (ASSA 5000).

The parent is a Canadian incorporated company listed on the Toronto Stock Exchange (TSX). The subsidiary is a wholly owned proprietary company that meets the threshold for sustainability reporting as part of ‘group 1’.

The subsidiary is also the holding company for unlisted wholly owned New Zealand incorporated entities with all of its material operations conducted in New Zealand.

We granted relief because we were satisfied that compliance with the relevant sustainability requirements would impose unreasonable burdens on the subsidiary where:  

• the parent will prepare a sustainability report for the global consolidated group in accordance with a standard equivalent to AASB S2 Climate-related disclosures and that report will be assured under an auditing standard equivalent to ASSA 5000
• the subsidiary’s climate-related risks and opportunities arise primarily from its New Zealand operations, which are material to the parent, and
• in these circumstances, a standalone report would be unlikely to provide material additional information about the subsidiary’s climate-related risks and opportunities that is useful to primary users of the subsidiary’s financial reports.

The subsidiary lodges with ASIC its parent’s global group consolidated sustainability report and that sustainability report:

• has been prepared in accordance with a sustainability standard that is equivalent to AASB S2 Climate-related disclosures
• has been subject to assurance in accordance with an auditing standard equivalent to ASSA 5000, and in accordance with the assurance phasing specified in ASSA 5010 Timeline for Audits and Reviews of Information in Sustainability Reports under the Corporations Act 2001,
• includes a declaration by the directors of the parent that has been made in accordance with s296A(7), and
• is publicly available on the parent’s website.

The financial report of the subsidiary contains a summary of the relief provided.

We made an in-principle decision to refuse relief from the requirement to prepare a sustainability report for the financial year ending 31 December 2025 (FY25) and onwards to a large proprietary company that prepares and lodges financial reports under Ch 2M.

Relief was sought on the basis that preparation of a sustainability report by the applicant would either:

• result in a misleading report because the applicant operates as a holding company with only an indirect ownership interest in the underlying operating companies and does not have operational control over those companies (a number of which are foreign-incorporated companies that operate overseas), or
• inappropriate in the circumstances and unreasonably burdensome because the disclosures would be partly duplicative of disclosures in the sustainability report that will be prepared under the Corporations Act by another Australian entity within its corporate group.

We were not satisfied that compliance with the relevant sustainability reporting requirements would make the sustainability report misleading, be inappropriate in the circumstances, or impose unreasonable burdens because:

• the financial reporting and sustainability reporting requirements in Ch 2M are intended to apply to entities that have reached a size of economic significance to the Australian economy, including holding companies that have no direct operations of their own
• AASB S2 requires the disclosure of material information about climate-related financial risks and opportunities that could reasonably be expected to affect the reporting entity’s prospects, regardless of where the underlying operations are located globally or the level of control that the entity has over those operations, and
• reporting entities are required to prepare financial and sustainability reports reflecting their own financial position, financial performance and cash flows, even where there are other reporting entities with similar financial interests or risk exposures. This may result in some duplication between different entities’ Ch 2M reports, but is not necessarily an unintended consequence of the legislation.