Current IFRS climate-related matters to look out for in your financial statements

Home » IFRS » Current IFRS climate-related matters to look out for in your financial statements

Current IFRS climate-related matters to look out for in your financial statements

Jan 29, 2024 | IFRS


The standards issued by the Institute of Sustainability Standards Board (ISSB) are not yet mandatory in South Africa. Consequently, many people are under the impression that sustainability and climate-related reporting is not a thing they need to worry about just yet. Right? Wrong!

The other body that is part of the IFRS Foundation, the International Accounting Standards Board (IASB), issued educational material that highlights some of the areas that are already impacted by climate related matters. Here is a summary of the areas cited:

  1. IAS 1 Presentation of Financial Statements – This standard requires disclosure of significant estimates and judgements which may include significant climate-related risk that may result in material adjustment of assets and liabilities. Furthermore, Going Concern may be impacted by climate-related physical and transition risks and this potential impact needs to be disclosed.
  2. IAS 2 Inventories – Stock may need to be written down to net realiseable value as a result of climate-related occurrences.
  3. IAS 12 Income Taxes – Deferred tax assets may not be recoverable as a consequence of climate related exposures having a negative effect on future taxable income.
  4. IAS 16 Property, plant and equipment – Estimates for both PPE and intangible assets for useful lives and residual values may need to be revised as a result of exposure to climate-related risks.
  5. IAS 36 Impairment of Assets – Assets may need to be impaired as a result of climate change impacts that have reduced the recoverable amount below the carrying amount. Furthermore, IAS 36 requires disclosure of events that have led to impairment.
  6. IAS 37 Provisions, contingent liabilities and contingent assets – An example is a mine with a 30-year provision for restoration which may need to be revised given expected rising temperatures in the next decade.
  7. Financial Instruments – For both IFRS 9 and IFRS 7 there are a number of potential impacts including the fact that expected credit losses would need to be revised for impacted industries and disclosure of all risks, including climate risks, that could impact financial instruments.
  8. IFRS 13 Fair Value – Climate related matters may result in changes in market participant’s views of the fair value of assets and liabilities.
  9. IFRS 17 Insurance – Increased occurrence of climate driven insured events may accelerate the timing of occurrence of losses.

Written by KC Rottok Chesaina, Chief IFRS Officer @ Financial Minds.For IFRS Training and Consulting services, email us on ask@fineminds.co.za.

You May Also Like
Financial Minds: LinkedIn
Latest
CFO Tinyiko Sihlangu explains the art of adaptive leadership

CFO Tinyiko Sihlangu explains the art of adaptive leadership

The demanding role of CFO at Royal Bafokeng Holdings (RBH) does not allow Tinyiko Sihlangu much time to read as broadly as she would like. Nowadays, she mostly indulges in topical articles that keep her updated and inspired. Reflecting on books that changed her mind set early in her career, she recalls the best-seller “The Leader Who Had No Title” by Robin Sharma.

CEO Rui Morais leads by listening

CEO Rui Morais leads by listening

Rui Morais had a significant role in this growth trajectory and in mid-2021 it was announced that he would be taking over as CEO when Ivan retired. Even though he was only 37 at the time, Rui says he wasn’t daunted by the task of being CEO of a listed entity with a turnover of R26 billion, because he felt he had the necessary support.

Kalnisha Naidoo appointed CFO of Lactalis South Africa

Kalnisha Naidoo appointed CFO of Lactalis South Africa

In an exciting development, Lactalis South Africa has announced the appointment of Kalnisha Naidoo as its new Chief Financial Officer (CFO), effective July 2024. Kalnisha brings over a decade of extensive experience in the fast-moving consumer goods (FMCG) industry to the role, highlighting her strong track record in financial leadership and strategic management.

CEO Ncumisa Mkunqwana’s journey from self-doubt to tenacity

CEO Ncumisa Mkunqwana’s journey from self-doubt to tenacity

When Ncumisa Saba-Mkunqwana fell pregnant in the second year of her articles at Deloitte in Gqeberha, she was determined not to let that halt her career. Committed to provide for her unborn child, she focused on crafting solutions rather than being fixated on the situation.

CA Leandra Matthews leads with empathy and excellence

CA Leandra Matthews leads with empathy and excellence

Among the lessons Leandra Matthews would give to her younger self is not to let your value be defined by someone else’s inability to see your worth; stand up for yourself more and trust your gut.

‘When I was younger, I really doubted myself and my sentiments would get muddled by ums and ahs when I was trying to express myself in meetings. In retrospect, if I prepared myself better, I would have been able to contribute quite positively to the discourse and not let my confidence drop,’ she explains.

Assurance Leader Stephen Ntsoane is passionate about touching lives

Assurance Leader Stephen Ntsoane is passionate about touching lives

Stephen Ntsoane was born and raised in Soweto, Johannesburg where he matriculated at Fonsluminis High School. He went on pursue a 3-year National Diploma in Cost and Management Accounting at Technikon Witwatersrand. Navigating his way to a Chartered Accountancy qualification, he did a 1-year bridging course at the University of Johannesburg (previously RAU) and completed CTA at the University of Kwa-Zulu- Natal through distance learning.