IASB Releases "Example of Disclosure of Uncertainty in Financial Statements – Using Climate Change as an Example"
Due to climate change and the continuous introduction of related regulatory measures, many companies’ business models, cash flows, financial conditions, and operational performance will be affected. Certain companies or industries will be more significantly impacted. The effects of climate change on businesses have also become an increasingly important topic of concern for investors and other stakeholders. The International Financial Reporting Standards (IFRS) have not specifically provided guidance on the financial impact of climate change.
In recent years, stakeholders have provided feedback that because climate-related risks often involve long-term risks, they may not have been adequately considered in financial statements. Additionally, report users require more detailed qualitative and quantitative information to understand the impact of climate-related risks on the assets and liabilities in the financial statements.
The International Sustainability Standards Board (ISSB) issued the first two IFRS sustainability disclosure standards in June 2023, which came into effect on January 1, 2024:
- IFRS Standard S1 – General Requirements for Sustainability-related Financial Disclosures
- IFRS Standard S2 – Climate-related Disclosures
After the ISSB issued the relevant standards, in order to address the inconsistency and lack of connection between the climate-related risk content in financial statements prepared in accordance with IFRS accounting standards and the disclosures in sustainability reports prepared under the IFRS sustainability disclosure standards, as well as the inadequate climate-related risk disclosures, the International Accounting Standards Board (IASB) released an “Example of Disclosure of Uncertainty in Financial Statements – Using Climate Change as an Example” in November 2025. The IASB illustrates how the specific requirements for the disclosure of uncertainty in IFRS accounting standards should be applied in practice through six climate-related examples, providing guidance for companies in applying these standard provisions. Although the new examples focus on climate-related scenarios, the principles they reflect also apply to the disclosure of other uncertainty matters.
