FSA Credential - Level 1 Examination /
Newest Version with Well-Detailed
Questions and Reliable Answers from
Verified Study Resources / Already Graded
A+
Why are investors demanding quality sustainability information?
- to meet their investment goals:
1. improve their ability to achieve above-market returns
2. reduce risk
3. improve environmental and social investment outcomes
What factors drive demand for quality sustainability information
within companies?
- identify and mitigate risks
- reduce costs
- optimize efficiencies
- increase market share and revenue growth through new products
and services
Besides companies and their investors, what other institutions
influence demand for sustainability information across capital
markets?
- policy-based initiatives
- security exchanges
- industry associations
,Why was disclosure the basis of regulatory reform in the wake of the
1930's stock market crash?
- the crash was due to lack of transparency in capital markets
- disclosure is a means to promote transparency
What two materiality concepts are relevant to sustainability
disclosure frameworks and standards (double materiality)?
**sustainability information can lend insight into traditional financial
drivers
1. materiality in the context of enterprise value creation
2. materiality in the context of significant impacts on the economy,
environment, and people
what is the role of regulated corporate disclosure
- protect investors
- positively influence corporate behavior
- enable informed investor decisions
What is the relevance of "materiality" in the context of disclosure?
"materiality" dictates what companies are (and aren't) obligated to
disclose
How has the concept of materiality historically been interpreted?
focuses on information that impacts financial
performance and investor decision-making
How has the purpose of accounting changed since the 1930s?
from accurate recordkeeping (historical cost accounting) to reporting
information that would inform economic decisions
Why did financial reporting move toward standardization?
- firms used the methodology that served their own unique goals,
reducing comparability => standardization (IFRS & GAAP)
,What does the rise of intangible assets mean for corporate
disclosure?
The increasing proportion of intangible
assets as a percent of total S&P market value
highlights that a very significant amount
of information regarding corporate performance and value drivers is
not captured
in financial statements
What factors contribute to increasing investor interest in non-
financial information? (4)
- intangibles gap
- endorsements by key organizations in the financial reporting
community
- growth of responsible investment practices
- recognition that long-term value generation falls within fiduciary
duties of care
What challenges exist in sustainability disclosure that do not
necessarily exist in financial disclosure? (3)
- wider audience than just investors
- relies on expertise of professionals across disciplines
(environmental sciences, HR, etc) instead of just the one of financial
accounting
- high variability in ESG metrics and methodologies that limit
comparability
what is "climate first" disclosure?
focusing guidance on disclosure related to climate change over other
environmental and social issues
What does "climate first" disclosure guidance tell us about regulators'
approach to sustainability disclosure globally?
, means to overcome political obstacles => increase sustainability
disclosure while also providing companies with a focused topic with
which to ease into new reporting expectations
What are the four main characteristics of sustainability disclosure
guidance?
1. interpretive guidance
2. principles-based guiance
3. comply-or-explain guidance
4. line-item guidance
interpretive guidance
Rather than creating new disclosure, interpretive guidance
interprets/clarifies existing reporting rules and procedures to apply to
sustainability information
principles-based guidance
provides a list of principles that companies use to guide their
reporting process (compare with rules-based guidance)
comply-or-explain guidance
companies must comply with reporting guidance or explain why they
have not
line-item guidance
disclosure of sustainability information using specified metrics and
methodologies to produce specific line items
What two considerations must sustainability disclosure guidance
balance?
flexibility & usability
- flexibility increases disclosure but makes it less comparable &
useful
How do disclosure standards help achieve the balance between
flexibility & usability?
Newest Version with Well-Detailed
Questions and Reliable Answers from
Verified Study Resources / Already Graded
A+
Why are investors demanding quality sustainability information?
- to meet their investment goals:
1. improve their ability to achieve above-market returns
2. reduce risk
3. improve environmental and social investment outcomes
What factors drive demand for quality sustainability information
within companies?
- identify and mitigate risks
- reduce costs
- optimize efficiencies
- increase market share and revenue growth through new products
and services
Besides companies and their investors, what other institutions
influence demand for sustainability information across capital
markets?
- policy-based initiatives
- security exchanges
- industry associations
,Why was disclosure the basis of regulatory reform in the wake of the
1930's stock market crash?
- the crash was due to lack of transparency in capital markets
- disclosure is a means to promote transparency
What two materiality concepts are relevant to sustainability
disclosure frameworks and standards (double materiality)?
**sustainability information can lend insight into traditional financial
drivers
1. materiality in the context of enterprise value creation
2. materiality in the context of significant impacts on the economy,
environment, and people
what is the role of regulated corporate disclosure
- protect investors
- positively influence corporate behavior
- enable informed investor decisions
What is the relevance of "materiality" in the context of disclosure?
"materiality" dictates what companies are (and aren't) obligated to
disclose
How has the concept of materiality historically been interpreted?
focuses on information that impacts financial
performance and investor decision-making
How has the purpose of accounting changed since the 1930s?
from accurate recordkeeping (historical cost accounting) to reporting
information that would inform economic decisions
Why did financial reporting move toward standardization?
- firms used the methodology that served their own unique goals,
reducing comparability => standardization (IFRS & GAAP)
,What does the rise of intangible assets mean for corporate
disclosure?
The increasing proportion of intangible
assets as a percent of total S&P market value
highlights that a very significant amount
of information regarding corporate performance and value drivers is
not captured
in financial statements
What factors contribute to increasing investor interest in non-
financial information? (4)
- intangibles gap
- endorsements by key organizations in the financial reporting
community
- growth of responsible investment practices
- recognition that long-term value generation falls within fiduciary
duties of care
What challenges exist in sustainability disclosure that do not
necessarily exist in financial disclosure? (3)
- wider audience than just investors
- relies on expertise of professionals across disciplines
(environmental sciences, HR, etc) instead of just the one of financial
accounting
- high variability in ESG metrics and methodologies that limit
comparability
what is "climate first" disclosure?
focusing guidance on disclosure related to climate change over other
environmental and social issues
What does "climate first" disclosure guidance tell us about regulators'
approach to sustainability disclosure globally?
, means to overcome political obstacles => increase sustainability
disclosure while also providing companies with a focused topic with
which to ease into new reporting expectations
What are the four main characteristics of sustainability disclosure
guidance?
1. interpretive guidance
2. principles-based guiance
3. comply-or-explain guidance
4. line-item guidance
interpretive guidance
Rather than creating new disclosure, interpretive guidance
interprets/clarifies existing reporting rules and procedures to apply to
sustainability information
principles-based guidance
provides a list of principles that companies use to guide their
reporting process (compare with rules-based guidance)
comply-or-explain guidance
companies must comply with reporting guidance or explain why they
have not
line-item guidance
disclosure of sustainability information using specified metrics and
methodologies to produce specific line items
What two considerations must sustainability disclosure guidance
balance?
flexibility & usability
- flexibility increases disclosure but makes it less comparable &
useful
How do disclosure standards help achieve the balance between
flexibility & usability?
