IASB Proposes Enhancements to Climate Reporting Guidance

The International Accounting Standards Board (IASB) has announced two significant proposals aimed at improving financial reporting standards, particularly in relation to climate-related disclosures and reporting requirements for subsidiaries.

In response to growing investor demand, the IASB has published a consultation document proposing eight illustrative examples to guide companies in applying IFRS Accounting Standards when reporting on climate-related and other uncertainties in their financial statements. These examples aim to improve transparency and strengthen the connection between financial statements and other corporate reporting, such as sustainability disclosures.

Andreas Barckow, Chair of the IASB, emphasized the importance of this initiative, stating, "Our 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."

The examples cover areas including materiality judgments, disclosures about assumptions and estimation uncertainties, and information disaggregation. The IASB collaborated with the International Sustainability Standards Board (ISSB) to ensure alignment with sustainability-related disclosure requirements.

Amendments to IFRS 19 for Subsidiaries

Simultaneously, the IASB has released an Exposure Draft proposing amendments to IFRS 19 "Subsidiaries without Public Accountability: Disclosures," which was issued in May 2024. These amendments aim to reduce disclosure requirements stemming from new IFRS Accounting Standards and amendments issued between February 2021 and May 2024.

IFRS 19 simplifies financial reporting for eligible subsidiaries by allowing them to apply IFRS Accounting Standards with reduced disclosure requirements. The proposed amendments would affect disclosures related to:

1. Lack of exchangeability (amendments to IAS 21)
2. International tax reform—Pillar Two Model Rules (amendments to IAS 12)
3. Supplier finance arrangements (amendments to IAS 7 and IFRS 7)
4. Primary financial statements (IFRS 18)
5. Non-current liabilities with covenants (amendments to IAS 1)

The Exposure Draft also includes indicative disclosure requirements for the prospective Accounting Standard on Regulatory Assets and Regulatory Liabilities, seeking feedback on their practicality for eligible subsidiaries.

The IASB has opened consultation periods for both proposals. Stakeholders are invited to provide feedback on the climate-related reporting examples until November 28, 2024. The consultation period for the IFRS 19 amendments has also begun, though the specific deadline was not mentioned in the provided information.

These initiatives reflect the IASB's ongoing efforts to adapt accounting standards to evolving business needs and investor expectations, particularly in areas of climate risk and subsidiary reporting. The outcomes of these consultations are expected to significantly influence the future of financial reporting practices globally.

The GRC Report is your premier destination for the latest in governance, risk, and compliance news. As your reliable source for comprehensive coverage, we ensure you stay informed and ready to navigate the dynamic landscape of GRC. Beyond being a news source, the GRC Report represents a thriving community of professionals who, like you, are dedicated to GRC excellence. Explore our insightful articles and breaking news, and actively participate in the conversation to enhance your GRC journey.