IASB Publishes Proposed Guidance to Help Companies Report on Climate Risk
IASB Publishes Proposed Guidance to Help Companies Report on Climate Risk
The International Accounting Standards Board (IASB), the accounting standards-setting body of the IFRS Foundation, published a consultation document with a series of illustrative examples aimed at enabling companies to provide investors with better information about climate-related risks and other uncertainties.
The illustrative examples are non-mandatory guidance accompanying IFRS Accounting Standards. However, these examples have a purpose of illustrating how the requirements in the Standards apply to particular fact patterns. The new examples were developed in response to stakeholder demand, particularly from investors, who expressed concern about climate-related information provided in financial statements that was insufficient or appeared inconsistent with information reported outside of financial statements.
The eight proposed examples focus on materiality judgements, disclosures about assumptions and estimation uncertainties, and disaggregation of information, aimed at improving transparency and strengthening the connection between financial statements and other parts of company reporting, such as sustainability disclosures. This consultation process marks the latest in a series of initiatives by the IASB aimed at helping companies report on climate issues, particularly following the launch last year of a project exploring potential changes to the requirements by companies to disclose climate-related risks in financial statements.
The consultation aims to address investors clear communications that they factor climate-related risks into their decision-making process. Although the Accounting Standards already address such risks, the IASB has identified a need for illustrative examples to improve the application of these requirements. The proposed examples aim to provide clarity, helping companies better communicate in their financial statements how climate-related and other uncertainties affect their financial position and performance.