This site uses cookies to provide you with a more responsive and personalised service. By using this site you agree to our use of cookies. Please read our cookie notice for more information on the cookies we use and how to delete or block them.
The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox.

FRC publishes a staff factsheet on climate-related matters for FRS 102 reporters

  • FRC Image

16 Nov 2021

The Financial Reporting Council (FRC) has published a staff factsheet to inform preparers of annual reports under FRS 102 of climate-related matters they may need to consider when preparing financial statements and associated narrative reporting.

In November 2020, the FRC issued a thematic review of climate-related considerations for a sample of financial statements for large groups prepared under IFRS.  In the thematic, the FRC stated that future work in this area may include ‘highlighting areas of the financial statements of UK GAAP reporters where climate change could be a consideration’.  The ESG Statement of Intent, published by the FRC in July 2021, stated that the FRC would ‘develop guidance on the consideration by UK GAAP reporters of the impact of climate-related issues on the company’s financial statements’.  FRS 102 Factsheet 8: Climate-related matters (‘the factsheet’) is designed to address these public commitments.

Financial Reporting

The FRC emphasises that there is increasing legislation and guidance on the content of the narrative sections of the annual report; however, less attention has been paid to the financial statements themselves.

The factsheet outlines the ways in which climate-related matters may impact a set of financial statements prepared under FRS 102, including:

  • How the general requirements of FRS 102 should be applied in the context of climate-related matters – in particular, in the context of the risks, uncertainties, judgements and estimations that need to be considered when preparing financial statements.
  • How climate-related matters could impact the recognition and measurement of items in the financial statements.
  • How climate-related matters could impact the disclosures in the financial statements and what additional disclosures may be required.

The FRC discusses examples of climate change impacts that FRS 102 reporters should be considering (under different sections of FRS 102):

  • Appendix Fair value measurement to Section 2 Concepts and Pervasive Principles
  • Section 3 Financial Statement Presentation
  • Section 8 Notes to the Financial Statements
  • Section 11 Basic Financial Instruments
  • Section 12 Other Financial Instruments Issues
  • Section 13 Inventories
  • Section 17 Property, Plant and Equipment
  • Section 18 Intangible Assets other than Goodwill
  • Section 19 Business Combinations and Goodwill
  • Section 21 Provisions and Contingencies
  • Section 24 Government Grants
  • Section 26 Share-based Payment
  • Section 27 Impairment of Assets
  • Section 28 Employee Benefits
  • Section 29 Income Tax

The factsheet also documents examples of items that may need to be presented in the financial statements that are primarily related to or driven by climate-related matters, but that may not sit clearly within one of the sections of FRS 102.  These include: green bonds; carbon offsetting; and emission trading schemes.

Narrative Reporting

The second part of the factsheet summarises current and proposed legal and regulatory narrative reporting requirements applicable to companies in the UK in relation to climate and associated matters.  This has been included to support entities in considering how to achieve the required linkage between their financial and narrative reporting.

The FRC notes that as well as providing the required climate-related disclosures as part of their narrative reporting, and considering whether applying the requirements of FRS 102 means that climate-related matters impact the financial statements, entities must also ensure consistency between the matters disclosed in the financial statements and those presented within narrative reporting.  Ultimately the narrative reporting and the financial statements should show a coherent linkage and entities may consider disclosing whether, and why, apparently significant matters presented within narrative reporting have, or have not, had a material impact on the financial statements.

The FRC also highlights that the draft legislation for the inclusion of Task Force on Climate-related Financial Disclosures (TCFD)-aligned disclosures in the annual reports of all publicly quoted companies, public interest entities and large private companies (‘’Large’’ in this context refers to companies or LLPs with more than 500 employees and turnover exceeding £500m.) for periods beginning on or after 6 April 2022 (with equivalent legislation for large LLPs expected to follow) will apply to many entities applying FRS 102.

Please click to access the press release and FRS 102 Factsheet 8: Climate-related matters on the FRC website.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.