On 16th May, the IASB published guidance regarding the effects of climate related matters on financial statements prepared in accordance with the IFRS for SMEs financial statements. Full guidance can be found here.
The guidance contains examples of areas where preparation of financial statements for SMEs should consider the impact of climate related matters. These areas include:
- Going concern
- Sources of estimation uncertainty and significant judgement
- Financial instruments
- Fair value measurement
- Property, plant and equipment and intangible assets
- Provisions and contingent liabilities
- Impairment of inventories
- Impairment of other assets
- Deferred tax assets
This guidance was published in response to feedback from the SME Implementation Group which summarised how climate change can effect a businesses performance, financial position, cash flow and model.
Following feedback from a 2022 Exposure Draft, climate-related risks were often not considered in financial statements because climate change was perceived as a remote or long-term issue. Therefore, in this guidance, the IASB evaluated companies’ failure to communicate information regarding client-related matters in financial statements and whether the requirements in the accounting standards are ‘sufficiently’ clear.
Although published by the IASD for financial statements prepared in accordance with the IFRS for SMEs, this guidance is useful for companies preparing their financial statements in accordance with FRS102 in the UK. Including SMEs who are exposed to the risks of climate change through third parties, suppliers and customers.
Craig Burton
Partner, Sheffield
Free initial meeting
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