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2025 is the year financial reporting moves from primarily monetary measurements to integrated, decision-useful disclosure — especially on sustainability. Australian large businesses must now comply with mandatory climate disclosures (AASB S2) for periods starting 1 Jan 2025, and the international baseline (IFRS S1/S2) is in active implementation. Expect tighter assurance focus, new data-collection needs and stronger governance. Australian Accounting Standards Board
Introduction — why 2025 is a watershed for financial reporting
The shorthand: “financial reporting” no longer means only profit-and-loss, balance sheet and notes. Regulators worldwide have fast-tracked sustainability disclosure standards that sit alongside traditional accounting standards. Those disclosures are now investor-focused, data-heavy and often legally enforceable in some jurisdictions. IFRS Foundation
For Australian businesses the change is immediate: the Australian Accounting Standards Board published AASB S1 (general sustainability requirements) and AASB S2 (climate disclosures) and AASB S2 is mandatory for in-scope entities from annual reporting periods beginning on or after 1 January 2025. That makes 2025 a compliance year, not just a preparatory year. Australian Accounting Standards Board
Beyond sustainability there are continuing IFRS and IASB updates and practice statements that affect revenue, leases, insurance contract reporting and management commentary — meaning many finance teams will need to update policies, controls and system flows to keep financial reporting accurate and auditable. EY
Bottom line: board and finance leaders must treat these changes as an operational programme — data, governance and assurance are the new priorities of good financial reporting in 2025.
What changed for 2025 — the practical shifts that matter
Sustainability becomes part of the official reporting perimeter.
The ISSB’s IFRS S1 and IFRS S2 set a global baseline for sustainability-related disclosures; many jurisdictions (including Australia) have translated those into local standards. The focus is investor decision-usefulness and linking sustainability impacts to financial outcomes. IFRS Foundation
Australia’s approach is ‘climate first’ and mandatory for many.
The AASB’s AASB S2 climate-related disclosures are mandatory for entities meeting prescribed thresholds for annual reporting periods beginning on or after 1 January 2025. That creates a legal obligation for covered entities to disclose climate-related financial information alongside the standard financial statements. Australian Accounting Standards Board
Assurance and audit attention increases.
Auditing and assurance standards and regulators are signalling a greater expectation that sustainability disclosures will be subject to independent assurance. Preparers must be able to evidence data provenance, methodologies and controls in the same way they do for monetary figures. Auditing and Assurance Standards Board
IFRS technical updates continue to land.
The IASB and IFRS Foundation continue to issue guidance and supporting materials (management commentary, illustrative examples and other practice statements) that will affect presentation and disclosure expectations. Finance teams must track and assess these updates. IFRS Foundation
Key standards and rules every business should prioritise (and why)
AASB S2 / IFRS S2 — Climate-related Disclosures.
These standards require entities to disclose governance, strategy, risk management and metrics/targets related to climate risk — and crucially to connect climate outcomes to financial impacts and prospects. For Australian reporting entities that cross the thresholds, AASB S2 is mandatory from 1 Jan 2025. Australian Accounting Standards Board
AASB S1 / IFRS S1 — General sustainability disclosure requirements.
S1 sets the overall objective, materiality considerations and presentation requirements for sustainability-related financial information. Even where S1 is voluntary, it provides the structure auditors and users will expect. IFRS Foundation
IFRS technical pronouncements and practice statements.
IASB/IFRS guidance on management commentary and other practice materials clarifies how to link strategy, risk and forecasts to numbers in the accounts — essential reading for preparers. EY
Industry-specific standards (e.g., IFRS 17 for insurers).
Some sectors face major measurement or disclosure change. If you operate in these sectors, confirm whether new amendments require restated comparatives, changed measurement bases or enhanced disclosures. KPMG
Practical steps to get your financial reporting ready in 2025
Map scope and materiality first.
Identify whether your entity falls inside mandatory thresholds (e.g., Corporations Act Chapter 2M reporting thresholds) and run a materiality assessment that explicitly considers sustainability matters alongside financial ones. KPMG
Data pipeline & controls.
Build or augment data collection processes to capture the inputs required by S1/S2 (GHG emissions, scenario outputs, climate targets and metrics). Apply the same control rigour you use for revenue and costs: data lineage, ownership, reconciliations and change logs. Assurance depends on demonstrable controls. Australian Accounting Standards Board
Governance and cross-functional teams.
Put finance, sustainability/ESG, risk and legal on a single operating cadence. The standards expect board and management governance descriptions — so involve non-financial teams early (operations, procurement, facilities) to ensure disclosures reflect reality and can be validated. IFRS Foundation
Revise your financial statements narrative.
Management commentary should explicitly link strategy, risks and prospects to financial reporting. Use scenario analysis where required (e.g., climate scenarios) but present the quantitative and qualitative links investors need to assess value and risk. EY
Technology, assurance and resourcing — what to budget for
Systems investment.
Expect to budget for data warehousing or ESG modules that integrate with accounting systems — manual spreadsheets won’t scale for sustainability disclosures that require consistent, auditable metrics across multiple entities and periods.
External support & training. M
any finance teams will need external advisory (technical accounting, climate specialists, assurance firms) to interpret requirements and design controls. Plan for third-party costs and internal training budgets to upskill reporting owners.
Assurance readiness.
Even where assurance is not immediately mandatory, design disclosures with assurance in mind: documented methodologies, independent data checks and traceable evidence. Assurance firms have published checklists and illustrative examples to help preparers. EY
Ongoing maintenance.
Treat these changes as the start of a new reporting regime: expect further updates to S1/S2 implementation guidance, IFRS amendments and national reporting rules. Allocate a living budget for process improvement, system maintenance and regulatory monitoring. IFRS Foundation
Timeline, who’s in scope, and quick compliance checklist
Timeline (Australia): AASB S2 climate disclosures — mandatory for specified large entities for annual periods beginning on or after 1 Jan 2025. S1 and other implementation guidance rolled out in 2024–2025; ISSB/IFRS supporting material continues to be refined into 2025 and beyond. Australian Accounting Standards Board
Who’s in scope: Large reporting entities (Corporations Act Chapter 2M reporters meeting thresholds), financial institutions and entities with public accountability are the early population for mandatory adoption. Smaller entities should still assess voluntary alignment because investor expectations and supply-chain requirements increasingly demand sustainability information. KPMG
Quick compliance checklist (90-day sprint):
- Run threshold & materiality assessment.
- Inventory ESG/climate data sources and owners.
- Build reconciliations to financial ledgers.
- Draft required governance and strategy disclosures.
- Engage external advisors and auditors for assurance scoping.
Use the checklist as a rolling tool — update it after your first filing under the new standards and gather lessons learned for faster next-year reporting.
Conclusion — treat 2025 as a reporting transformation, not a one-off
Financial reporting in 2025 is broader, more integrated and more evidence-driven than in prior years. Sustainability disclosures are now a required part of the reporting conversation for many Australian businesses, and IFRS/ISSB developments worldwide are raising the bar for decision-useful information. IFRS Foundation
Finance leaders should approach this as a program: scope, data, governance, assurance and systems — in that order. Start with small wins (mapping data owners, drafting the top-level narrative) and progress to the heavier work (system changes, assurance evidence). IFAC
If your organisation needs help building a practicable reporting plan, consider engaging cross-disciplinary teams and external advisors early — that reduces rework and improves auditability. WA Business Valuations can assist with valuation linkage and disclosure framing for reporting.
FAQ — concise answers for common questions about financial reporting in 2025
Q: Is AASB S2 mandatory for all Australian companies in 2025?
A: No — AASB S2 is mandatory for entities meeting prescribed thresholds (large reporting entities, financial institutions). Smaller entities may be encouraged or required by stakeholders but should check the AASB guidance for thresholds. Australian Accounting Standards Board
Q: When did IFRS S1 and S2 become effective internationally?
A: The ISSB issued IFRS S1 and IFRS S2 in 2023 and they were effective for annual reporting periods beginning on or after 1 January 2024; jurisdictional adoption timing can vary. IFRS Foundation
Q: Will auditors require assurance on sustainability disclosures?
A: Assurance expectations are increasing. Some jurisdictions plan phased assurance requirements; in practice, preparers should design disclosures with assurance in mind because auditors will require evidence for material items. Auditing and Assurance Standards Board
Q: Do these changes affect small businesses?
A: Direct mandatory requirements target larger reporting entities, but small businesses may be affected indirectly via supply-chain requirements, investor expectations or voluntary reporting. KPMG
Q: How should financial reporting teams start?
A: Run a scoping/materiality exercise, identify data owners, build reconciliations to the ledger, and prepare governance disclosures. Then engage auditors or advisers for assurance scoping. Australian Accounting Standards Board
If you have any more questions, reach out to one of our expert team members.
