FSA LEVEL 1 EXAM Q&A
Quality of Disclosure (my name for it) - Answer- Is something boilerplate, company
tailored, or a metric. Does information apply specific to the company or could it be
applied broadly.
SASB Scope (amount of standards) - Answer- 79 industries across 11 sectors
SASB Standards designed to - Answer- 1. Focus on the U.S. capital markets;
2. Surface sustainability information likely to be material; 3. Yield decision-useful data;
4. Be cost-effective for corporate issuers;
5. Identify industry-specific disclosure topics
SICS - Answer- Sustainable Industry Classification System
SICS use methodology focused on which impacts (4) - Answer- Business Model
Resource Intensity
Sustainability Impacts
Sustainability Innovation Potential
SASB materiality - Answer- SASB compatible with US Securities law and follows the
US courts definition of materiality (Buy, Hold, Sell)
What is the best way to consider metrics such as emissions and safety? - Answer- In
an industry context
SASB's 5 sustainability dimensions - Answer- Environment
Social Capital
Human Capital
Governance and Leadership
Business Model & Innovation
pg 80
SASB Research Methodology - Answer- 1. Surfacing Issues
2. Materiality Assessment
3. Characterizing Nature of Financial Impact
4. Vetting
5. Verification
6. Validation
Five-Factor Test SASB - Answer- 1. Financial impacts and risk
2. Legal, regulatory, and policy drivers
3. Industry norm and competitive drivers
4. Investor/Stakeholder concerns and social trends
5. Opportunities for innovation
, pg 81
Types of Financial Impacts - Answer- 1. Revenues/Costs
2. Assets/Liabilities
3. Cost of Capital
Financial Accounting Standards Board (FASB) creation - Answer- 1973
1975-2015 Intangible Assets - Answer- 17-84%
Relation between Sustainability criteria and corporate financial performance - Answer-
90% non-negative
Amount of institutional investors using sustainability information in decisions - Answer-
82% - 2014 PwC
PRI 2017 - Answer- 2500 signatories, $60 trillion
PCAOB (Public Company Accounting Oversight Board) - Answer- The PCAOB protects
investors and the public interest by working toward useful independent audit reports and
by establishing standards for audits and auditors. The PCAOB has oversight over the
external audit profession. The SEC regularly communicates with and provides feedback
to the PCAOB, the FASB, the International Accounting Standards Board ("IASB"), and
the American Institute of Certified Public Accountants ("AICPA") regarding accounting
standards
Trueblood Committee - Answer- to propose the objectives of financial reporting, based
on the underlying belief that identifying objectives would help improve financial
reporting. The Trueblood Committee's report seconded the decision-usefulness
objective that ASOBAT had articulated, with a strong emphasis on future cash flows to
investors. The Trueblood Committee stated that the economic and social goals of
business are equally important. 44 The committee pointed to pollution as an example of
"enterprise activities which require sacrifices from those who do not benefit."45 In other
words, some corporate activities impose externalities on the rest of society. Therefore,
one objective of financial statements is "to report on those activities of the report
affecting society which can be determined and described and measured and which are
important to the role of the enterprise in its social environment."46
Wheat Committee - Answer- charged with identifying ways to improve the establishment
of accounting standards. In 1972, it proposed the formation of the Financial Accounting
Standards Board ("FASB"). The FASB was to be an independent organization
dedicated to the development of financial accounting standards, unlike the APB, which
was made up of individuals serving part-time. The AICPA adopted the Wheat
Committee's recommendation, and in July 1973, the FASB began operations and
replaced the APB with the SEC's approve
Quality of Disclosure (my name for it) - Answer- Is something boilerplate, company
tailored, or a metric. Does information apply specific to the company or could it be
applied broadly.
SASB Scope (amount of standards) - Answer- 79 industries across 11 sectors
SASB Standards designed to - Answer- 1. Focus on the U.S. capital markets;
2. Surface sustainability information likely to be material; 3. Yield decision-useful data;
4. Be cost-effective for corporate issuers;
5. Identify industry-specific disclosure topics
SICS - Answer- Sustainable Industry Classification System
SICS use methodology focused on which impacts (4) - Answer- Business Model
Resource Intensity
Sustainability Impacts
Sustainability Innovation Potential
SASB materiality - Answer- SASB compatible with US Securities law and follows the
US courts definition of materiality (Buy, Hold, Sell)
What is the best way to consider metrics such as emissions and safety? - Answer- In
an industry context
SASB's 5 sustainability dimensions - Answer- Environment
Social Capital
Human Capital
Governance and Leadership
Business Model & Innovation
pg 80
SASB Research Methodology - Answer- 1. Surfacing Issues
2. Materiality Assessment
3. Characterizing Nature of Financial Impact
4. Vetting
5. Verification
6. Validation
Five-Factor Test SASB - Answer- 1. Financial impacts and risk
2. Legal, regulatory, and policy drivers
3. Industry norm and competitive drivers
4. Investor/Stakeholder concerns and social trends
5. Opportunities for innovation
, pg 81
Types of Financial Impacts - Answer- 1. Revenues/Costs
2. Assets/Liabilities
3. Cost of Capital
Financial Accounting Standards Board (FASB) creation - Answer- 1973
1975-2015 Intangible Assets - Answer- 17-84%
Relation between Sustainability criteria and corporate financial performance - Answer-
90% non-negative
Amount of institutional investors using sustainability information in decisions - Answer-
82% - 2014 PwC
PRI 2017 - Answer- 2500 signatories, $60 trillion
PCAOB (Public Company Accounting Oversight Board) - Answer- The PCAOB protects
investors and the public interest by working toward useful independent audit reports and
by establishing standards for audits and auditors. The PCAOB has oversight over the
external audit profession. The SEC regularly communicates with and provides feedback
to the PCAOB, the FASB, the International Accounting Standards Board ("IASB"), and
the American Institute of Certified Public Accountants ("AICPA") regarding accounting
standards
Trueblood Committee - Answer- to propose the objectives of financial reporting, based
on the underlying belief that identifying objectives would help improve financial
reporting. The Trueblood Committee's report seconded the decision-usefulness
objective that ASOBAT had articulated, with a strong emphasis on future cash flows to
investors. The Trueblood Committee stated that the economic and social goals of
business are equally important. 44 The committee pointed to pollution as an example of
"enterprise activities which require sacrifices from those who do not benefit."45 In other
words, some corporate activities impose externalities on the rest of society. Therefore,
one objective of financial statements is "to report on those activities of the report
affecting society which can be determined and described and measured and which are
important to the role of the enterprise in its social environment."46
Wheat Committee - Answer- charged with identifying ways to improve the establishment
of accounting standards. In 1972, it proposed the formation of the Financial Accounting
Standards Board ("FASB"). The FASB was to be an independent organization
dedicated to the development of financial accounting standards, unlike the APB, which
was made up of individuals serving part-time. The AICPA adopted the Wheat
Committee's recommendation, and in July 1973, the FASB began operations and
replaced the APB with the SEC's approve
