AICD submission on draft IFRS Guidance on Climate-related and other Uncertainties in the Financial Statements

The AICD welcomed the guidance as an important initial step in clarifying how financial statements should incorporate the impact of climate change.

In summary, our key points were as follows:

• Climate disclosure within the financial statements should not be viewed in isolation from other relevant disclosures, particularly mandatory climate disclosures required under the domestic climate reporting standard (AASB S2).
• Some of the mandated disclosures under AASB S2 require quantitative disclosures (albeit subject to a number of carve-outs1) that may lead to financial statement adjustments. We would encourage the issue of guidance or educational material which addresses how AASB S2 may intersect with financial statement disclosures.
• To improve the accessibility and usability of the Exposure Draft for directors, standard-setters could consider supplementing the illustrative examples with broader, more accessible guidance, providing more detail on how key threshold judgments within the illustrative examples are exercised, and ensuring that the illustrative examples cover a broad range of sectors.
• Given the current focus on climate disclosures (particularly in light of mandatory climate reporting), the Exposure Draft should be confined to that topic.
• Directors recognise the need for education and training for boards, finance teams, and internal control and audit staff on integrating climate considerations into financial statements. We would encourage the AASB to issue further accessible guidance and educational material tailored to the individual needs of the various roles involved in the financial reporting process, including directors.