SASB LEVEL 1 EXAM Q&A
MD&A - Answer- Item 202 of Regulation S-K: A company is expected to discuss
management's view of known trends and uncertainties that are reasonably likely to have
a material effect on results of operations and financial condition
4 main points of MD&A - Answer- 1) Focus on material info 2) Include KPI's 3) Disclose
known trends/uncertainties 4) Analyze info that is disclosed
10-Q report - Answer- A required quarterly report filed with the SEC by publicly held
firms / unaudited financial statements
8-K - Answer- A report filed with the SEC by a public company to update investors of
any material event.
Sarbanes-Oxley Act of 2002 - Answer- Enacted in the wake of several highly publicized
corporate and accounting scandals - requiring that the CEO and CFO certify the content
of the issuer's periodic reports as well as procedures used to prepare financial
statements and its other disclosures
Disclosure Effectiveness Initiative 2013 - Answer- MD&A disclosure made to be more
about principles-based requirements than about long-term rules-based requirements
"Sustainability Accounting" as defined by SASB - Answer- The measurement,
management, and reporting of corporate activities that maintain or enhances the ability
of the company to create value of the long term / can help capture the value the
differences between market value and book value
GRI's "Materiality Principle" - Answer- The report should cover aspects that reflect the
org's significant economic, environmental and social impacts; or substantively influence
the assessments and decisions of stakeholders
Supreme Court definition of materiality - Answer- Information is material if there is a
substantial likelihood that the omitted or misstated item would have been viewed by a
reasonable resource providers as having significantly altered the total mix of information
SASB #'s - Answer- 79 industries in 11 sectors
SICS - Answer- Sustainable Industry Classification System - uses methodology focused
on impacts which can have implications for demand-side or supply-side
SASB Methodology - Answer- 1) Surfacing issues 2) Materiality Assessment 3)
Characterizing Nature of Financial Impact 4) Vetting 5) Verification 6) Validation
, 5 Factor Evidence of Interest Test (Determining Disclosure Topics) - Answer- 1)
Financial impacts and risk 2) Legal, regulatory, and policy drivers 3) Industry norms and
competitive drivers 4) Investor/Stakeholder concerns and social trends 5) Opportunities
for innovation
SASB's 3 drivers (potential to affect corporate value) - Answer- 1) Revenues and costs
2) Assets and liabilities 3) Cost of capital
2 main parts of a Provisional SASB Standards - Answer- 1) SASB provides disclosure
guidance, including a brief overview of the types of companies in the industry and an
overview of how to include info about those topics in SEC filings 2) Standards present
the list of the disclosure topics, along with associated accounting metrics and
explanations
5 sustainability principles to help guide SASB's determination of topics for disclsosure -
Answer- 1) Of interest to investors (5 factor test) 2) Relevant across industry 3)
Potential to affects corporate value (drivers) 4) Actionable by companies 5) Reflective of
stakeholder consensus
Each disclosure topic is associated with - Answer- 1-6 accounting metrics
How many SASB metrics are quantitative - Answer- 80% and they can be incorporated
into discounted cash flow analyses because they are tied to specific value impacts
SASB "Interpretations" - Answer- Documents to address clarifying questions related to
sustainability standards that have been ratified
Climate Change issues are likely to have material impacts on how much of the market?
- Answer- 72/79 industries or 93% of US equity market
80/20 rule - Answer- The most cost-effective climate change data addresses the largest
sources of emissions (80% of effects come from 20% of sources)
Dual purpose of SASB Standards for companies - Answer- 1) Prepare disclosure for
external financial reporting 2) Establish and/or improve their approach to managing the
sustainability topics most likely to impact long-term value creation
4 Stages of Value Creation - Answer- 1) Minimizing costs 2) Optimizing efficiency 3)
New products and/or technologies 4) New business models and differentiated value
proposition
US Securities Act of the 1930s - Answer- First step of corporate disclosure
SEC was established in - Answer- 1934
MD&A - Answer- Item 202 of Regulation S-K: A company is expected to discuss
management's view of known trends and uncertainties that are reasonably likely to have
a material effect on results of operations and financial condition
4 main points of MD&A - Answer- 1) Focus on material info 2) Include KPI's 3) Disclose
known trends/uncertainties 4) Analyze info that is disclosed
10-Q report - Answer- A required quarterly report filed with the SEC by publicly held
firms / unaudited financial statements
8-K - Answer- A report filed with the SEC by a public company to update investors of
any material event.
Sarbanes-Oxley Act of 2002 - Answer- Enacted in the wake of several highly publicized
corporate and accounting scandals - requiring that the CEO and CFO certify the content
of the issuer's periodic reports as well as procedures used to prepare financial
statements and its other disclosures
Disclosure Effectiveness Initiative 2013 - Answer- MD&A disclosure made to be more
about principles-based requirements than about long-term rules-based requirements
"Sustainability Accounting" as defined by SASB - Answer- The measurement,
management, and reporting of corporate activities that maintain or enhances the ability
of the company to create value of the long term / can help capture the value the
differences between market value and book value
GRI's "Materiality Principle" - Answer- The report should cover aspects that reflect the
org's significant economic, environmental and social impacts; or substantively influence
the assessments and decisions of stakeholders
Supreme Court definition of materiality - Answer- Information is material if there is a
substantial likelihood that the omitted or misstated item would have been viewed by a
reasonable resource providers as having significantly altered the total mix of information
SASB #'s - Answer- 79 industries in 11 sectors
SICS - Answer- Sustainable Industry Classification System - uses methodology focused
on impacts which can have implications for demand-side or supply-side
SASB Methodology - Answer- 1) Surfacing issues 2) Materiality Assessment 3)
Characterizing Nature of Financial Impact 4) Vetting 5) Verification 6) Validation
, 5 Factor Evidence of Interest Test (Determining Disclosure Topics) - Answer- 1)
Financial impacts and risk 2) Legal, regulatory, and policy drivers 3) Industry norms and
competitive drivers 4) Investor/Stakeholder concerns and social trends 5) Opportunities
for innovation
SASB's 3 drivers (potential to affect corporate value) - Answer- 1) Revenues and costs
2) Assets and liabilities 3) Cost of capital
2 main parts of a Provisional SASB Standards - Answer- 1) SASB provides disclosure
guidance, including a brief overview of the types of companies in the industry and an
overview of how to include info about those topics in SEC filings 2) Standards present
the list of the disclosure topics, along with associated accounting metrics and
explanations
5 sustainability principles to help guide SASB's determination of topics for disclsosure -
Answer- 1) Of interest to investors (5 factor test) 2) Relevant across industry 3)
Potential to affects corporate value (drivers) 4) Actionable by companies 5) Reflective of
stakeholder consensus
Each disclosure topic is associated with - Answer- 1-6 accounting metrics
How many SASB metrics are quantitative - Answer- 80% and they can be incorporated
into discounted cash flow analyses because they are tied to specific value impacts
SASB "Interpretations" - Answer- Documents to address clarifying questions related to
sustainability standards that have been ratified
Climate Change issues are likely to have material impacts on how much of the market?
- Answer- 72/79 industries or 93% of US equity market
80/20 rule - Answer- The most cost-effective climate change data addresses the largest
sources of emissions (80% of effects come from 20% of sources)
Dual purpose of SASB Standards for companies - Answer- 1) Prepare disclosure for
external financial reporting 2) Establish and/or improve their approach to managing the
sustainability topics most likely to impact long-term value creation
4 Stages of Value Creation - Answer- 1) Minimizing costs 2) Optimizing efficiency 3)
New products and/or technologies 4) New business models and differentiated value
proposition
US Securities Act of the 1930s - Answer- First step of corporate disclosure
SEC was established in - Answer- 1934
