ACCA welcomes the opportunity to provide views in response to the IASB’s exposure draft (ED) for Climate-related and Other Uncertainties in the Financial Statements. Our response has been developed with the assistance of ACCA’s Global Forum for Corporate Reporting.
Our general comments on the proposed illustrative examples are as follows:
We commend the IASB’s effort to develop illustrative examples (‘Examples’) to support consistent application of specific requirements in the IFRS Accounting Standards (‘Standards’) by all entities to provide sufficient and consistent information in the financial statements and other general purpose financial reports.
We believe illustrative examples that emulate responses to real events and illustrate the thought process behind those responses are useful. Examples that provide guidance on disclosing adverse effects on the entity’s financial position and/or financial performance as a result of uncertainties would also be useful, and such examples should be developed.
In addition, we appreciate examples that identify the circumstances requiring additional information and illustrating the said information. Therefore, Examples in this ED will be more helpful for preparers and users of their financial statements (‘users’) if they include illustrative disclosures rather than a reproduction of the requirements in the Standards. Further details are available in our comments to question 2.
All Examples in this ED are based on climate-related uncertainties. This is a good beginning, and preparers would benefit from more examples illustrating the effects of other uncertainties. For now, the approach to apply the guidance in these Examples to other uncertainties needs to be made clear.
Since the IASB has decided on producing stand-alone examples, all Examples in this ED should be truly stand-alone when placed into separate IFRS Accounting Standards. An entity may not benefit from the lessons in Examples 1 and 2 if it has missed them before reading Examples 3 – 8.
The collaboration between members and staff of the IASB and the ISSB is crucial to enhancing Examples 3 – 8 to demonstrate the connectivity between information in the financial statements and information in another report, such as the cause-and-effect relationship of the uncertainty and the entity’s financial position or performance.
We suggest the IASB consider developing high-quality educational materials with broader fact patterns which are more realistic and would be more helpful to preparers. We believe entities would benefit from comprehensive examples that illustrate interactions between Standards, and illustrating disclosures based on the requirements in several Standards. The principles-based nature of the Standards could result in many interactions between Standards as demonstrated in Examples 4 and 5. More examples of such interactions would be useful to help preparers and users provide better information in the financial statements. On a related note, we suggest the IASB consider adding examples, in the future, that demonstrate the recognition and measurement of assets and/or liabilities, and changes in estimates, such as changes to the useful lives or residual value of assets, that arise from climate-related or other uncertainties.
To read the response in full, please download the consultation document found on this page.