Mandatory ESG Reporting and XBRL Taxonomies Combination: ESG Ratings and Income Statement, a Sustainable Value-Added Disclosure

Alessio Faccia, Francesco Manni and Fabian Capitanio
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Alessio Faccia: School of Business and Law, Coventry University, Coventry CV15FB, UK
Francesco Manni: Dipartimento di Economia Aziendale, Università Roma TRE, 00145 Rome, Italy
Fabian Capitanio: Dipartimento di Medicina Veterinaria, Università di Napoli Federico II, 80137 Napoli, Italy

Sustainability, 2021, vol. 13, issue 16, 1-17

Abstract: Corporate financial statements address multiple stakeholders’ needs. International Financial Reporting Standards (IFRSs), among others, allow two different classifications, “by function of expense” and “by nature of expense”, for the statement of profit and loss and other comprehensive income for the period (from now on, also identified in short as “Income Statement”, or “IS”). XBRL standards ensure compliance and consistency in financial statements’ drafting and filing. XBRL taxonomies reflect the Income Statement IFRS disclosure requirement in the {310000} and {320000} codifications, respectively. Given the recent EU enhanced regulations that proposed extend mandatory ESG reporting to SMEs, this study aims to design and recommend an additional Income Statement to embed structured Environmental, Social, and Governance (ESG) disclosure. A restatement of the IS is organised following an adjusted Value-Added perspective to fit the purpose of sustainability disclosure. The above-mentioned Income Statement should be suitable and adaptable for entities of any size and operating in any industry. This goal can be achieved through customised input weighting. Therefore, this applied research can fill a current financial ESG disclosure gap, ensuring financial statements’ comparability and encouraging additional mandatory disclosures through standardisation. Two more items in the XBRL (IFRS-based) structure are suggested, leading to the introduction of one fully structured statement “{330000}— Statement of comprehensive income, profit or loss, by Added Value, ESG based ” and a semi-structured “{814000}— Notes—ESG Ratings and Reporting ” to better discuss and disclose the assumptions and results of the ESG Statement.

Keywords: XBRL; ESG reporting; value-added; sustainable financial disclosure; IFRS; sustainability; income statement; statement of comprehensive income; EU Taxonomy Climate Delegated Act; Non-Financial Reporting Directive (NFRD) (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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