We are pleased to respond to the IFRS Interpretations Committee’s publication in the November 2023 IFRIC Update of the tentative agenda decision not to take onto the Committee’s agenda the request about an entity’s commitment to reduce or offset its greenhouse gas emissions.

We agree with the analysis of the issue presented in the tentative agenda decision and with the Committee’s decision not to add this item onto its agenda for the reasons set out in the tentative agenda decision.

We support the efforts of the Committee to set out the analysis required to assess whether an entity’s “net zero” commitment gives rise to a provision that should be recognised in the entity’s financial statements, noting that this is an area that has caught the attention of a broad group of stakeholders, beyond traditional users of financial statements. We believe that this heightens the need for a clear and comprehensive explanation of the relevant principles and specific guidance of IAS 37 and, to that end, have suggested amendments to the agenda decision in the Appendix to this letter. 

This issue highlights the need for connectivity between broader corporate reporting (including sustainability reporting) and information in the financial statements to, in this case, provide clarity for the broad range of interested stakeholders on whether statements made as part of a sustainability report do, or validly do not, affect the recognition and measurement of items in the financial statements. We urge the International Accounting Standards Board (the IASB) to accelerate its project on climate-related and other uncertainties in financial statements and, in collaboration with the International Sustainability Standards Board, to focus on the interaction between those disclosures and the information provided by sustainability reporting. 

We also take this opportunity to reiterate the view expressed in our response to response to the IASB’s request for information Third Agenda Consultation that a project should be undertaken to address issues related to pollutant pricing mechanisms together with cryptocurrencies and commodity transactions. We regret that the IASB’s project on pollutant pricing mechanisms has been relegated to the reserve list and observe that a lack of clarity on how to account for carbon credits and similar instruments has resulted in diversity in practice. This diversity is likely to increase as more and more entities participate in carbon credit programs as part of their net zero commitments. We strongly believe that the IASB should reconsider the level of priority afforded to this project.

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