The Effects of ESG Activities on Financial Reporting under IFRS 18 and the Role of KSSB Sustainability Disclosures

Unofficial AI-generated summary based on the public title and abstract. Not an official translation.

🔬研究者:Provides a formal model linking ESG, financial reporting discretion, and sustainability disclosure, offering testable hypotheses for empirical research.

🏢実務担当者:Suggests that robust ESG activities and sustainability disclosures can reduce reliance on discretionary performance adjustments, simplifying reporting strategies under IFRS 18.

🏛政策担当者:Shows that sustainability disclosure standards (like KSSB/SSBJ) complement IFRS 18, supporting their simultaneous implementation to enhance financial report transparency.

[Purpose] This study examines how ESG activities affect financial reporting under IFRS 18 by distinguishing performance classification discretion from MPM adjustment discretion. It further analyzes the role of KSSB sustainability disclosures as a complementary information mechanism in financial reporting. [Methodology] This study adopts a theoretical approach that combines a review of prior literature with economic modeling. It first examines the background and key features of IFRS 18, along with prior studies on operating profit and MPM disclosures. An analytical model is then developed in which ESG activity levels and KSSB disclosure intensity influence performance classification and MPM adjustment decisions. An extended model incorporates KSSB disclosures as a substitute for discretionary performance explanations and derives comparative statics results. [Findings] The model shows that higher levels of ESG activities increase the justification costs of discretionary financial reporting, thereby reducing both performance classification and MPM adjustment discretion. The constraining effect is stronger for MPM adjustments than for performance classification. Furthermore, when KSSB disclosures are introduced, the marginal benefits of discretionary reporting decrease as disclosure intensity increases. This result indicates that KSSB disclosures can serve as a non－discretionary channel for explaining variations in financial performance. [Implications] This study provides an integrated interpretation of IFRS 18 and KSSB disclosures as complementary elements of a performance communication framework. Sustainability disclosures are shown to function not as regulatory burdens but as mechanisms that reduce reliance on discretionary performance reporting. The findings suggest that IFRS 18 financial reporting can achieve higher transparency and understandability when combined with robust KSSB disclosures. The study also offers theoretical insights for policymakers and firms in designing disclosure requirements and reporting strategies.

• openalex https://doi.org/10.29189/kaiajfai.26.2.4first seen 2026-07-28 05:04:43