aspects are free from any material misstatement (similar to assurance that they provide in an annual audit for forms 10-K). In certain cases, the Proposal requires


reporting of Scope 3 emissions, or those emanating along the supply chain and from product use, such as emissions from mining the materials used in manufacturing cars, which are the source of Scopes 1 and 2 emissions. Te proposal provides an exemption from the Scope 3 emissions disclosure requirement for a registrant that meets the definition of a “smaller reporting company.”


A smaller reporting company is an issuer that is not an investment firm, or a majority-owned subsidiary of a parent that is not a smaller reporting company and has a public float of less than $250 million or annual revenues of less than $100 million. If the threshold is total annual revenues, the company should have either: (i) no public float, or (ii) a public float of less than $700 million [CFR 229.10(f)(1), 230.405, and 17 CFR 240.12b-2] (see page 47 of the Proposal).1


TABLE 1 Type of


Registrants


Table 1 summarizes the Proposal’s


requirements if it becomes effective in December 2022 for a calendar year registrant.


Metric disclosure requirements Te Proposal, under Regulation S-K,


requires that a registrant include certain metric disclosures in its most recent fiscal year and its prior years' filings. Furthermore, it requires that under Regulation S-X, the registrant discloses in a note to its financial statements disaggregated climate-related financial statement metrics, which it derives mainly from its existing financial statements line items.


Te Proposal’s metric disclosures fall


into three broad categories: financial impact metrics, expenditure metrics and financial estimates and assumptions. Generally, if the aggregate impact of the events and activities is equal to or exceeds 1% of the total line item, to which it relates, disclosures would be required. Te SEC favors the


1% threshold, arguing that a bright-line standard provides consistency in reporting. Registrants should evaluate the metrics that they adopt to ensure that they can measure and track the progress in achieving their GHG emissions goals. Table 2 provides examples of such metric disclosures. Te SEC’s proposed quantitative


disclosures promote consistency and comparability among a registrant’s filings over time and between different registrants’ filings in the same period. Te SEC does not provide a bright-line quantitative threshold for materiality determination. Tus, registrants use judgment to determine the materiality of their disclosures. Te SEC’s proposed guidance concerns that companies should report their greenhouse-gas emissions promptly and accurately. Te underlying belief is that the public may view it unfavorably if companies do not quantify and disclose their carbon footprint accurately and on time. Tere are fortune 500 technology companies and start-ups that have





Scope 1 and 2 Scope 3 GHG Limited Assurance S Attestation on GHG Disclosures Disclosures


Large accelerated 2023 (filed in 2024) 2024 (filed in 2025) 2024 (filed in 2025)


filer Accelerated filer 2024 (filed in 2025) 2025 (filed in 2026) 2025 (filed in 2026) Nonaccelerated


2024 (filed in 2025) 2025 (filed in 2026) Exempt


filer Small reporting


company


TABLE 2 Disclosure Metrics Financial impact


Expenditure related Estimate


2025 (filed in 2006) Exempt Exempt


Scope 1 and 2 GHG Scope 1 and 2 GHG 2026 (filed in 2027)


2027 (filed in 2028) Exempt


Exempt


Climate-Change Impact


Line items impacted due to severe weather events and other natural conditions (e.g., impairment charges)


Line items expenditures related to mitigating the risk of severe weather conditions Cost estimates and assumptions related to climate-change events


July/August 2022 CPAFOCUS 19


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