Cover paper (Agenda Paper 14)

The objective of this session was to explore targeted actions to improve the reporting of climate-related and other uncertainties in the financial statements. In September 2023, the IASB decided to explore a portfolio of actions to help achieve this objective.

This paper was not discussed as it was an overview paper.

Development of examples (Agenda Paper 14A)

The purpose of this paper was to explain the approach the staff has taken to develop examples illustrating how to apply requirements in IFRS Accounting Standards to report the effects of climate-related and other uncertainties in financial statements. This paper also explained the staff’s view on the best vehicle for these examples (that is, the best manner in which to communicate the examples to stakeholders). The staff did not ask the IASB to make any decisions at this meeting.

Staff draft examples (Agenda Paper 14B)

This paper contained the staff's draft examples to illustrate how to apply IFRS Accounting Standards to report the effects of climate-related and other uncertainties in the financial statements. Agenda Paper 14A explained the approach the staff took to develop the examples.

IASB discussion

IASB members were supportive of the direction and they believe that the examples are complementary to the previously published educational material on Nature and social aspects of climate-related risks and opportunities. In addition, IASB members said that real life examples will help preparers understand the link between IFRS Accounting Standards and the ISSB standards. However, some IASB members asked the staff to provide context as to why these examples are being developed. In relation to Example 5, some IASB members had concerns as to whether this example is realistic. Other IASB members would prefer to retain all the examples and allow for feedback before making any decisions. Some IASB members highlighted the issue that these examples are focused on climate-related risk and do not illustrate other uncertainties that entities may experience. IASB members asked the staff to include a caveat noting that the risks illustrated in the examples are not exhaustive and that preparers will need to consider the risks holistically. Some IASB members asked the staff to consider whether there are any other ‘less obvious’ examples that they could include as the examples proposed are not sufficient to address the investor’s expectation gap. Other IASB members suggested the staff explain the analysis rather than providing examples. However, some IASB members disagreed with this. Lastly, IASB members asked the staff to consider cross-referencing to appropriate IFRS Accounting Standards and also consider when the examples will be issued and confirm whether it is before or after the publication of IFRS 18 Presentation and Disclosure in Financial Statements.

Some IASB members believe that the vehicle for communicating these examples should be the illustrative examples because principles should not be communicated through educational material and the fact patterns illustrated in the examples are too narrow to be incorporated into IFRS Accounting Standards. In addition, those IASB members were not convinced that communicating these examples through educational material would be as impactful. Other IASB members were concerned with communicating these examples as illustrative examples are not endorsed by all jurisdictions. Some IASB members suggested presenting a webcast to explain how the examples were developed. IASB members also highlighted the importance of asking the right questions for the exposure draft. One IASB member raised the concern with using illustrative examples as the vehicle accompanied with an exposure draft because of the different target audiences. The target audience for illustrative examples are the preparers while the targeted audience for exposure drafts are the users of the financial statements. The staff clarified that the nature of the feedback is more aligned to a request for information rather than an exposure draft.

No decisions were made.