On the horizon - More disclosure in financial statements about climate-related and other uncertainties

Stakeholders have raised concerns that information about climate-related uncertainties in financial statements is sometimes insufficient or appears to be inconsistent with information provided outside the financial statements, such as in a climate-related transition plan.

Some IFRS® Accounting Standards require disclosure of detailed assumptions used in accounting estimates. An example of this is when an impairment test is conducted using a ‘value in use’ approach on a cash-generating unit that contains goodwill and other indefinite-lived intangible assets. Outside of this, specific requirements to quantity assumptions used in accounting estimates and sensitivity analyses are few and far between, particularly when it comes to the impact of climate-related uncertainties.

The International Accounting Standards Board (IASB) is therefore proposing to add eight illustrative examples to existing IFRS Accounting Standards to improve the reporting in the financial statements of climate-related risks and other uncertainties as follows:

  • IAS 1 Presentation of Financial Statements (relates to materiality judgements that do and don’t lead to additional disclosures assumptions, other sources of estimation uncertainty, and when to disclose additional information that is not required by an IFRS Accounting Standard)
  • IAS 36 Impairment of Assets (value in use calculations and disclosures)
  • IAS 37 Provisions, Contingent Liabilities and Contingent Assets (decommissioning and restoration provisions)
  • IFRS 7 Financial Instruments: Disclosures (credit risk disclosures)
  • IFRS 18 Presentation and Disclosure in Financial Statements (disaggregated information).

The examples are contained in Exposure Draft Climate-related and Other Uncertainties in the Financial Statements (ED 331 in Australia).

More information

Please read our publication for more on these amendments.

Comments due

Comments are due to the Australian Accounting Standards Board by 4 October 2024 and the IASB by 28 November 2024.