IFRS Foundation Publishes Pre-Final Guidance on Climate Reporting to Address Uncertainty Issues
Improving Climate-Related Uncertainty Reporting with New IFRS Examples
The International Financial Reporting Standards (IFRS) Foundation has released six near-final examples that demonstrate how companies can disclose uncertainties in their financial statements, using climate-related scenarios as practical illustrations. These examples, scheduled for formal issuance with accompanying bases for conclusions in October 2025, aim to improve the consistency, clarity, and completeness of uncertainty reporting, particularly for material climate risks and their financial impacts.
The examples focus on real-world situations and key themes such as materiality judgments and assumptions in the face of climate-related transition plans. Some of the aspects they illustrate include:
- Materiality Judgments and Assumptions: These relate to climate-related transition plans and how they affect financial statement presentation under IAS 1 (Presentation of Financial Statements).
- Impairment Disclosure Requirements under IAS 36: These show how assumptions related to climate risks, such as emission allowance costs, may influence asset valuations and trigger impairment considerations.
- Decommissioning and Restoration Provisions under IAS 37: These reflect uncertainties due to long-term climate policies and regulatory changes affecting the estimated costs and timing of these obligations.
- Credit Risk Disclosures under IFRS 7: These demonstrate how entities should consider climate-related risks in reporting credit risk exposures and the related risk management approaches.
- Disaggregation and Classification of Property, Plant and Equipment (PP&E): This reflects varying degrees of climate vulnerability, influencing asset measurement and disclosure requirements.
- Adaptation under IFRS 18: This provides improved information about financial performance linked to uncertainties from climate-related factors, highlighting evolving reporting expectations.
These examples are not limited to climate-related uncertainty but provide guidance broadly applicable to various types of uncertainties. They underline the importance of detailed, transparent disclosures about assumptions, models, and qualitative factors—including external environmental, regulatory, and legal developments—that affect users’ decision-making.
The IASB developed these examples collaboratively with the International Sustainability Standards Board (ISSB) to ensure alignment with sustainability-related disclosure standards. This collaboration supports preparers and users by providing earlier visibility ahead of the expected final publication in October 2025.
In addition, the IFRS Foundation has launched free e-learning modules to support the adoption of ISSB Standards. These modules aim to help companies prepare for the new standards and improve their climate-related disclosures.
These examples serve as practical illustrations that enhance the transparency and reliability of uncertainty reporting in line with existing IFRS standards, helping to close gaps and inconsistencies previously noted by stakeholders about climate-related disclosures. No significant changes are expected before the final issuance in October 2025, ensuring preparers can begin to apply this guidance with confidence.
| IFRS Standard | Focus in Illustrative Examples | Climate-Related Uncertainty Reporting Aspect | |---------------|-----------------------------------------------------------------|-------------------------------------------------------------------| | IAS 1 | Materiality judgments, presentation adjustment due to climate | Reflecting transition plan assumptions and their impacts | | IFRS 18 | Enhanced financial performance reporting under uncertainties | Reporting financial performance with climate factor considerations| | IAS 36 | Impairment testing and assumptions related to emission costs | Disclosures on asset value risks from climate and regulation | | IAS 37 | Provisions including decommissioning in climate context | Uncertainty in long-term obligations affected by climate policy | | IFRS 7 | Credit risk exposure and management | Disclosures on credit risk affected by climate-related factors | | Others (e.g., IFRS 9 referenced) | Modeling expected credit losses, collateral disclosures | Integration of climate risks in credit risks and collateral info |
- The new IFRS examples in climate-related uncertainty reporting demonstrate the significance of detailed, transparent disclosures about assumptions, models, and qualitative factors, crucial for making informed business decisions, particularly in the realm of finance and technology.
- In the context of these examples, the focus on aspects like materiality judgments and impairment disclosure requirements under IAS 1, IAS 36, IAS 37, and IFRS 7 highlights the interconnectedness of business, finance, and technology in managing and reporting climate-related risks effectively.
