Impacts of climate-related matters on financial reporting under IFRS

The IASB has issued educational material that contains examples of how companies might consider climate-related matters and risks in their financial reporting under IFRS.

Download the IASB educational material

What is the issue?

Climate-related risks are an important topic which might have an impact on an entity’s operations and financial performance. IFRS does not explicitly address climate risk, but the principles that underlie various judgements and estimates made in the preparation of the financial statements will often incorporate climate risk factors.

It is also important to note that IAS 1 has an overarching disclosure requirement; to disclose information if that information is needed to enable investors to understand the impact of particular transactions, other events and conditions on the company’s financial position and financial performance. Therefore in light of the current focus on, and impact of, climate change, entities should ensure that they have undertaken a rigorous assessment to ensure that all of the material information affecting the financial statements in this respect is provided.

What topics are covered by the educational material?

The educational material contains a non-exhaustive list of examples regarding how climate risk might affect the measurement and disclosure requirements of various standards and the various paragraphs of those standards that might be referenced in determining how to incorporate such risks. The following is a list of standards covered and the main topics for the standard discussed:

Does the educational material discuss materiality?

Yes, the educational material notes that companies must consider climate-related matters in applying IFRS where the effect of those matters is material in the context of the financial statements taken as a whole. It is also noted that information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that primary users of financial statements make on the basis of those financial statements, which provide information about a specific company. Primary users of financial statements are referred to as investors throughout the document.

What is the nature of educational material and does it contain an effective date?

The educational material is issued by the IASB to support the consistent application of existing requirements in IFRS. The educational material does not form part of IFRS, and it cannot add to or change the requirements in the standards. However, it is still useful material that IFRS users might benefit from when considering IFRS.

This educational material supplements an article published in November 2019 by an IASB board member on the subject of climate-related disclosures.
Because the educational material does not modify any existing standards, it does not have an effective date or transition provisions.