IASB Briefing Explains How IFRS Standards Address Climate Change Risks
IASB published a briefing that explains how existing requirements within IFRS standards relate to climate change risks and other emerging risks. The briefing shows how the principle-based approach of IFRS standards means that climate change and other emerging risks are addressed by the existing requirements, although such risks are not explicitly referenced. It also outlines the current work of IASB on its Management Commentary project—a narrative report that gives context for the financial statements and additional insight into the long-term prospects of a company. The Board is also updating its non-mandatory guidance on management commentary, where it would expect companies to address material environmental and societal issues, complementing the information in financial statements.
IASB is often asked why IFRS standards do not mention climate change. While the phrase "climate-change" does not feature in its requirements, IFRS standards do address issues that relate to climate-change risks and other emerging risks. Thus, IASB has prepared this publication to help analysts and investors better understand its requirements and guidance on the application of materiality. The article addresses:
- Board guidance on how to make materiality judgments
- Applying IFRS Practice Statement 2 Making Materiality Judgments to climate-related and emerging risks
- Financial reporting considerations when applying IFRS standards
- Disclosing climate-related and other emerging risks in the financial statements
- Management commentary: providing context to the financial statements
- Summary: materiality judgments should serve information needs of investors
Keywords: International, Accounting, Banking, Insurance, Securities, Climate Change Risks, ESG, IFRS Standards, Reporting, Disclosures, Materiality Judgements, IASB
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