The International Accounting Standards Board (IASB) has in public consultationThe report, which will run until November 28, provides a set of eight illustrative examples for companies to improve the reporting of the effects of climate-related uncertainties in their financial statements.

A publication in the Portuguese newspaper Business says that the IASB has developed these illustrative examples in response to the call from stakeholders, particularly investors, for more transparency in the way companies apply international accounting standards (IFRS) when reporting the effects of climate-related and other uncertainties in their financial statements.

According to the same publication, they expressed concern that the information on climate-related uncertainties in the financial statements is sometimes insufficient or appears inconsistent with the information provided outside the financial statements.

To address these concerns, the examples proposed by the IASB aim to improve the transparency of information in financial statements and strengthen the link between financial statements and other parts of a company's reporting, such as sustainability disclosures.

"Investors have clearly communicated that they take climate-related risks into account in their decision-making process. Although our accounting standards already address these risks, we have identified the need for illustrative examples to improve the application of these requirements," said Andreas Barckow, chairman of the IASB, in a statement quoted by the newspaper.

However, the eight illustrative examples focus on areas such as materiality judgments, disclosures about assumptions and estimation uncertainties, and disaggregation of information. The principles and requirements illustrated in these examples also apply to other types of uncertainties in addition to climate-related uncertainties.

Andreas Barckow stresses that "the proposed examples aim to provide clarity, helping companies to better communicate in their financial statements how weather-related and other uncertainties affect their financial position and performance."

The IASB ensures that the illustrative examples do not add to or change the requirements of IFRS accounting standards. Instead, they provide guidance on how the requirements of the standards should be applied to provide investors with better information about climate-related risks and other uncertainties.

The IASB invites all interested parties to submit their comments on the proposed illustrative examples by November 28, 2024. It will then decide whether to proceed with the proposed illustrative examples to accompany IFRS accounting standards.

(Photo DR)