FOCUS on self-study CPE
SEC’s Proposal for climate- change disclosures
By Josef Rashty, CPA, Ph.D. (candidate)
Josef Rashty, CPA, Ph.D. (candidate) has received his master’s in accounting from Oklahoma State University and provides consulting services in Silicon Valley, Calif. He can be reached at
j_rashty@yahoo.com.
concern for investors, consumers and management. Te consensus is that companies with a strong track record in ESG practices are more stable and perform better in the end. However, defective ESG policies and executions pose environmental, legal and reputational risks that may eventually harm the performance of companies and their bottom lines. In March 2022, the United States (U.S.)
T
Securities and Exchange Commission (SEC) (in a 3-1 vote) issued Release Nos. 33-11042; 34- 94478, Te Enhancement and Standardization of Climate-Related Disclosures for Investors (hereinafter Release, the Release, Proposal or the Proposal). Te Release proposes that public companies provide certain climate-related information in their registration statements and annual reports. Te Proposal enhances and standardizes certain climate-related disclosures to address the demands of investors and consumers for more consistent and comparable information about climate-related risks. Comments for the SEC Proposal are due within 30 days of publication in the Federal Register, or May 20, 2022 (60 days after publication on the SEC’s website, whichever is later). On May 9, 2002, the SEC announced that it extended the public comment period on the proposed rulemaking to enhance and standardize climate- related disclosures for investors until June 17, 2022.
Te September/October 2021 issue of
CPAFOCUS published “A Framework for Climate-Change Disclosures.” Tis article discusses the background that led to the initiation of the SEC’s public statement on climate-change disclosures. Tis article is the continuum of the previous article and
18 CPAFOCUS July/August 2022
he performance of corporations on environmental, social and governance (ESG) issues has become an increasing
expounds on the SEC’s Proposal for climate- change disclosures in the footnotes to financial statements.
Greenhouse Gas (GHG) emission disclosures
GHG emissions include the following three categories: Scope 1 (emissions from sources owned or controlled by companies); Scope 2 (emissions from the generation of electricity and other energy sources that companies have purchased); and Scope 3 (emissions from sources that exist in the supply chain, but companies do not control them directly). Te Release requires that registrants disclose their GHG emissions for Scopes 1 and 2 for the most recent fiscal year and the prior fiscal year(s) that they have included in their filings if they are reasonably available, but they do not need to disclose Scope 3 emissions if these emissions are not material and companies have not considered them as their goals and targets. Te Release requires that accelerated filers and large accelerated filers include an attestation report covering their Scopes 1 and 2 emission disclosures. However, it requires only limited assurance for the first fiscal year phase-in period, but for the second and the third fiscal years following the compliance with the GHG emissions disclosure requirement, accelerated filers and large accelerated filers should obtain an attestation report for their Scopes 1 and 2 emission disclosures. Limited assurance implies that the audit
firm expresses a conclusion that it is not aware of any material misstatement (similar to the assurance that auditors provide for an interim review for forms 10-Q), whereas in a full attestation, at a reasonable assurance level, the audit firm expresses an opinion that management presentations in all material
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