Do the TSRS Require an Entity to Consider the Time Value of Money (e.g. Using a Discounted Cash Flow Model) When Deciding Whether Information Is Material?

Do the TSRS require an entity to consider the time value of money (e.g. using a discounted cash flow model) when deciding whether information is material?

TSRS S1 does not explicitly state whether an entity must use discounting techniques or cash flow models to measure amounts when determining which information about sustainability-related risks and opportunities is material to disclose. Nor are entities prohibited from using a mechanism to analyse the financial effects expected to arise in the short term compared with the long term. However, the Standards contain no specific requirement to do so.

As explained in TSRS S1, an entity must consider both quantitative and qualitative factors in its materiality assessment. Information may be material "irrespective of the magnitude of the potential effects of the future event or the timing of that event". While the timing of cash flows is an important consideration, qualitative factors are just as important as other quantitative factors. Omitting such information solely on the basis of the time value of money could therefore cause primary users to miss material information.