The International Accounting Standards Board (IASB) has agreed to continue work on developing illustrative examples to clarify how companies should report uncertainties in financial statements – including those related to climate risk.

IASB member Ana Tarca was among those who supported the push, saying: “I believe that we can be on our way to getting the change in disclosure behaviour that we’re looking for.”

IASB staff will now carry out further outreach and develop recommendations to present to the IASB in June. The board is expected to finalise the examples in October 2025.

The push comes as sustainability reporting grows more important for investors and exposes supposed gaps in corporate financial statements.

Some investors complain that while companies discuss material climate risks in the narrative portion of their annual reports, they often fail to reflect these in the audited financial statements.

Experts say the gap stems from the different aims and time horizons across financial and sustainability reporting.

Sustainability reports often look ahead and assess long-term risks relevant to stakeholders. Financial reports, by contrast, typically focus on past performance and short-term financial effects.

IASB suggests illustrative examples

In a bid to improve the accounting, the IASB published eight illustrative examples for public comment in July last year.

With the comments now in, the main sticking point on the project concerns paragraph 31 of IAS 1 and its application in the context of uncertainties in the first two examples.

Stakeholders have expressed concerns that the illustrative examples provided by the IASB may be interpreted as going beyond its intended requirements. This has led to worries about potential over-disclosure and the imposition of new, burdensome processes for entities.

IAS 1, materiality assessment

Specifically, there is a lack of clarity about when additional disclosures are necessary under paragraph 31, particularly concerning the assessment of materiality and the consideration of information disclosed outside the financial statements.

In light of these comments, the staff has developed a plan, which they say opens the door to addressing the concerns and signing off on the project.

Alongside developing the illustrative examples, the IASB is also working with the International Sustainability Standards Board (ISSB) to strengthen “connectivity” between financial statements and sustainability-related disclosures.

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