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Sunday, May 28, 2023

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International Accounting Standards Board adds climate-related risks project to work plan

The International Accounting Standards Board (IASB) under the International Federation for Systems Research (IFRS), which issues the standards that Islamic banks comply with, has added a project to its work plan in March 2023 to explore whether companies can provide better information about climate-related risks in their financial statements.

“The IASB introduced educational materials to help companies consider climate-related risks when preparing their financial statements. Feedback from our agenda consultation indicates a desire for us to go further. Therefore, we are initiating this project, informed by the ongoing work of our colleagues on the ISSB [International Sustainability Standards Board],’ Andreas Barckow, the chairperson of IASB, commented.

The project will research the extent to which the educational material titled ‘Effects of climate-related matters on financial statements’ published in November 2020 by the IASB is helping companies reflect the effects of climate-related risks in their financial statements. It also directly relates to the ‘IFRS Standards and climate-related disclosures’ article published in late 2019.

The project is a response to feedback from IASB’s third agenda consultation suggesting that climate-related risks are often perceived as remote long-term risks which may not be appropriately considered in their financial statements.

The feedback also indicated that investors need better qualitative and quantitative information about the effect of climate-related risks in their financial statements on the carrying amounts of assets and liabilities.

The undertaking of the project will ensure that any proposals as a result of the project will work well with IASB’s sister board ISSB’s sustainability disclosure standards, the first two of which are expected to be issued by the end of Q2 this year.

Notably, the IFRS clarified that it will not seek to develop an IASB standard on climate-related risks or extensive application guidance on how to consider the effects of such risks when applying IASB standards as doing so would risk undermining its approach to developing principles-based standards.

Due to the overarching theme of the project, ISSB staff have been appointed to take part and define the scope of the project, considering whether it should cover opportunities as well as risks, if it can be done as a narrow-scope project and whether the project should cover sustainability-related risks and opportunities beyond those related to climate, among others.

As yet, there is no timeline for the newly established project.

  • Companies in the Article
  • IASB

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