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IFRS Foundation offers examples of reporting climate uncertainties in financial statements

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1 year ago

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The International Financial Reporting Standards Foundation has published a set of near-final examples showing how companies can improve the reporting of uncertainties in their financial statements using climate-related examples as practical illustrations. 

The early publication aims to support timely, informed application of such reporting. While the examples use climate-related fact patterns, they offer guidance that can apply broadly to all kinds of other uncertainties. The examples demonstrate how companies can apply IFRS Accounting Standards to enhance disclosure of uncertainties in the financial statements.

The International Accounting Standards Board developed the examples in response to stakeholder feedback about insufficient information about uncertainties, particularly climate-related uncertainties, and apparent inconsistencies in the information a company provides. The IASB worked alongside the International Sustainability Standards Board to ensure the examples would work well with the ISSB’s sustainability-related disclosure requirements.

“By publishing the examples in near-final form, we are providing companies with earlier visibility of our work,” said IASB chair Andreas Barckow in a statement Thursday.

The project has been underway for several years, even before the formation of the ISSB, the IASB’s sister board. 

“Investors were telling us that they would read about sustainability-related matters, sometimes transition plans or other things that the company was thinking about, perhaps in the MD&A/management commentary or in other documents outside the financial statements, but then they wouldn’t see any disclosures at all, or any mention of the same topic, in the actual financial statements,” said IASB vice-chair Linda Mezon-Hutter. “They had a hard time understanding if there was any actual financial effect in the current period about those plans, and they didn’t like the fact that there was a disconnect between what was outside the financial statements and what was inside the financial statements.”

One of the things the IASB started trying to do was to explore such uncertainties. Similar disclosures could be used for tariffs as well. “You could generalize the thinking to other types of uncertainties, like what’s the effect of tariffs now that we’re in a big world of tariffs,” said Mezon-Hunter.

When the IASB staff started looking at its existing literature, they found there actually was enough guidance available in the standards. “We determined it was more of an application problem than something missing from the standards,” said Mezon-Hutter. “That was what led us to thinking about the illustrative examples. The other reason we went to illustrative examples is we could do those much faster than a traditional standard-setting project where we had to open up standards, re-look at the language, do our research, come back with an exposure draft, expose the exposure draft, get those comments and make the changes to the standards, etc. Investors told us that they wanted as timely a solution as we could give to them. That’s what led us to do the illustrative examples.”

The examples can inform investors about the current period. “We hope that these illustrative examples will help preparers and auditors work their way through what should be done in terms of financial disclosures,” said Mezon-Hutter. “What we’re interested in is the impact, if any, of these items within the financial statements for the current period. We’re not really talking about projecting to the future, which is more in the realm of the ISSB. But what we’re talking about is, is there any impact in that in the current period? If there is, and it’s material, you need to disclose it. If there isn’t, sometimes what investors told us is they see certain entities in an industry doing these types of disclosures, but then this company over here might not be doing the disclosures, and that makes the investors wonder if there should be disclosure. And in that case, the entity could assume that the information is qualitatively material, if not quantitatively material, and the entity could make a statement to say there is no current financial impact in these financial statements for this particular uncertainty. At the end of the day, that’s what we’re trying to clarify with the illustrative examples.” 

She believes the guidance could be useful in the U.S. as well, even though most U.S. companies report in U.S. GAAP rather than IFRS, and in recent years there has been a backlash against ESG, particularly now under the Trump administration when clean energy companies are losing their tax credits under the new tax legislation.

“It’s fair to say that the U.S. environment is a bit more difficult when it comes to sustainability matters,” said Mezon-Hutter. “But we know that there’s quite a number of large global multinationals that actually use IFRS and are also listed in the U.S., so they use IFRS to file their statements with the SEC, and the SEC reviews their statements. We know that the SEC will be looking at IFRS-prepared statements and hopefully see an improvement in these types of disclosures. We also know — because we still have dialogue with the SEC on a regular basis — the SEC is very supportive of the fact that if this type of information is material to the current financial statements, it should be in the financial statements. They clearly agree that anything related to climate, if it’s material information, it belongs in the financial statements, and it should be disclosed in a transparent way. So we know that the SEC will be accepting of this type of disclosure in terms of how it relates to the particular entity. While the U.S. itself is not high on sustainability, and while the SEC has withdrawn its climate guidance, you still have pockets within the U.S. — California as an example — where they’re very big on this type of information, and they’re moving that ahead. And we know that because foreign private issuers use IFRS, that the SEC will be receiving this type of disclosure. We’ll be very interested in hearing from them what they think of the disclosures and how useful they are.”

The IASB regularly consults with the U.S. Financial Accounting Standards Board, which has avoided working on sustainability standards, but did propose a standard on environmental credits last year.

“We meet on a regular basis with representatives from the FASB, and in the last discussion that I was involved in with them, they were very interested to see how we landed on our examples and what the result of us putting the examples out would be,” said Mezon-Hutter. “They’re going to be monitoring our project, and they’re going to be monitoring the output when companies start actually reporting, and these are effective, so it’s going to be very interesting to see how it evolves.”

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Embedded AI and Automated Anomaly Detection Reshape Modern Corporate Accounting Frameworks

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2 days ago

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September 13, 2026

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Embedded AI and Automated Anomaly Detection Reshape Modern Corporate Accounting Frameworks

The accounting and audit landscape in 2026

The accounting and audit landscape in 2026 is defined by the full integration of artificial intelligence directly into core enterprise software platforms. Rather than operating as standalone third-party tools, generative AI, automated reconciliation, and continuous anomaly detection are now natively embedded within major ERP engines including SAP, Oracle, Microsoft Dynamics, QuickBooks, and Sage. This technology integration is transforming daily financial operations, internal reporting controls, and external audit workflows.

Recent industry benchmark surveys reveal a widening performance gap

Recent industry benchmark surveys reveal a widening performance gap between finance teams utilizing integrated AI automation and those relying on legacy manual processes. Organizations actively leveraging embedded AI report up to 37% higher revenue per employee, driven by automated invoice matching, instant ledger entries, and predictive cash flow modeling. Routine, high-volume transactional tasks that once required manual intervention are now executed in real time with continuous digital audit trails.

AI introduces new governance and control responsibilities

However, the widespread deployment of embedded AI introduces new governance and control responsibilities for accounting professionals. Auditing standards now mandate strict verification protocols for algorithmically generated journal entries and financial commentary. External auditors are evaluating enterprise AI governance frameworks, reviewing automated rule sets, testing data ingestion pipelines, and ensuring that financial controllers maintain human-in-the-loop oversight over automated system outputs.

Furthermore, cloud governance and data security have become core operational skills for modern CPAs and controllers. As financial ledgers and client data stream through interconnected cloud ecosystem APIs, accounting teams must implement multi-factor access controls, continuous data encryption, and strict data privacy compliance to protect sensitive financial records from cyber vulnerabilities.

The embedding of AI into enterprise accounting software redefines internal financial controls and career requirements for accounting professionals. Business owners and finance leaders must update governance protocols, invest in staff digital literacy, and ensure accounting systems maintain rigorous audit compliance to capture productivity gains safely.

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Accounting

Mandatory ESG Reporting Standards Demand Standardized Non-Financial Audit Trails

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1 week ago

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September 5, 2026

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Mandatory ESG Reporting Standards Demand Standardized Non-Financial Audit Trails

Corporate accounting departments face an expanded regulatory mandate as mandatory sustainability and Environmental, Social, and Governance (ESG) reporting frameworks take full effect internationally. Governed by the European Union’s Corporate Sustainability Reporting Directive (CSRD) and the International Sustainability Standards Board (ISSB) IFRS S1 and S2 standards, enterprise financial controllers are now legally required to track, verify, and report non-financial data with the same internal controls and auditability as traditional financial statements.

The expansion shifts ESG compliance

This regulatory expansion shifts ESG compliance from marketing departments to corporate accounting offices. Financial managers are now responsible for gathering, consolidating, and verifying carbon emissions metrics, supply chain labor conditions, water usage, and climate risk exposures across multi-tiered corporate structures. These non-financial metrics must be integrated into standardized general ledgers to withstand rigorous third-party audit assurance processes.

To comply with these rigorous reporting mandates, accounting software providers have added dedicated ESG modules designed to aggregate data from IoT sensors, utility platforms, and vendor management systems. Controllers are implementing internal control frameworks—modeled after traditional COSO frameworks—to ensure the completeness, accuracy, and consistency of sustainability disclosures, protecting organizations against greenwashing penalties and litigation risks.

The transition requires significant cross-functional collaboration between accounting teams, legal counsel, and operational directors. Accounting professionals are expanding their technical expertise beyond financial ledgers to master carbon accounting methodologies, lifecycle assessment standards, and non-financial data governance protocols, fundamentally expanding the role of the modern corporate accountant.

Why This Information Matters
Mandatory ESG disclosures require companies to treat environmental and social metrics as audited financial records. Executives, accountants, and board members must institute formal tracking and assurance processes to satisfy legal mandates, maintain investor confidence, and mitigate regulatory non-compliance risks.

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Accounting

SEC’s Semiannual Reporting Proposal Faces Investor Pushback: What CFOs Need to Know

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3 weeks ago

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August 25, 2026

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U.S. Securities and Exchange Commission (SEC)

A proposal from the U.S. Securities and Exchange Commission to potentially shift some public companies away from quarterly financial reporting toward a semiannual model is drawing significant pushback from investors, even as it continues moving through the regulatory process. The debate has direct implications for corporate finance teams, auditors, and the broader transparency of U.S. capital markets.

What the SEC Proposed

According to a summary published by accounting advisory firm Cohen & Co., the SEC issued a proposed rule on May 19, 2026, aimed at simplifying financial reporting requirements for many U.S. public companies. The proposal would potentially reduce the frequency of certain mandatory disclosures from quarterly to semiannual, a structural change that has not been made to core U.S. reporting requirements in decades.

The proposal follows an extended debate within U.S. policy circles, with proponents arguing that reduced reporting frequency could lower compliance costs and free up management time for longer-term strategic planning rather than quarter-to-quarter results management.

Why Investors Are Pushing Back

Comment letters submitted in response to the proposal have been extensive, and according to Cohen & Co.’s review of the public record, investors “appear to be largely opposed” to the shift, viewing frequent interim reporting as a core benefit of U.S. capital markets relative to other jurisdictions.

Accounting and law firms have taken a more measured position, generally urging any changes to remain aligned with the Financial Accounting Standards Board (FASB), whose existing disclosure requirements and guidance are built around a quarterly reporting cadence. A shift to semiannual reporting without corresponding changes to FASB guidance could create friction between SEC filing requirements and GAAP-based disclosure expectations.

Lessons From the U.K. Experience

The debate is not without precedent. The United Kingdom moved away from mandatory quarterly reporting for listed companies in 2014, returning to a semiannual disclosure requirement. According to Cohen & Co.’s analysis, that experience offers a cautionary data point: there was no measurable increase in capital expenditure or R&D investment following the change, while analyst coverage of affected companies declined as reliable interim information became less available — a particular risk for smaller and newly public companies that rely on analyst coverage to maintain investor visibility.

Practical Implications for Finance Teams

Beyond the debate over disclosure philosophy, the proposal carries practical complications. Many companies have debt covenants and credit agreements structured around quarterly financial delivery; a shift to semiannual reporting could require renegotiating those terms. Reduced reporting frequency would also extend the “window of market silence” between disclosures, a factor that governance and investor-relations teams would need to manage carefully to avoid information asymmetry.

Separately, and unrelated to the reporting-frequency debate, the SEC and FASB have continued finalizing more routine updates this year. New Accounting Standards Updates are taking effect for December 31, 2026, fiscal year-ends covering income tax disclosures, credit loss measurement, induced debt conversions, and stock compensation, according to Eide Bailly’s review of 2026 ASU activity. Additional guidance on paid-in-kind dividends and environmental credits is also on the near-term horizon.

What to Watch Next

The semiannual reporting proposal remains in the comment and review phase, and no final rule has been adopted as of this writing. Finance leaders should monitor the SEC’s regulatory agenda for further movement, while treating the current quarterly reporting requirement as the operative standard until any final rule is issued and an effective date is set.

Given the extent of investor opposition documented in the comment file, a full shift to mandatory semiannual reporting appears more likely to result in either a scaled-back compromise or continued study rather than swift adoption — though the SEC’s ultimate direction remains uncertain.

 

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