EFRAG issues its Final Comment Letter on the IASB ED Climate-related and Other Uncertainties in the Financial Statements - Proposed illustrative examples

EFRAG has published its Final Comment Letter on the IASB's Exposure Draft IASB/ED/2024/6 Climate-related and Other Uncertainties in the Financial Statements - Proposed illustrative examples (the 'ED').

EFRAG’s support for the IASB’s proposed illustrative examples

In its Final Comment Letter, EFRAG considers the ED’s proposed examples will complement existing IASB educational material in helping to improve the reporting, auditing, supervision and enforcement of climate-related and other uncertainties in the financial statements. EFRAG also supports these examples being included as illustrative examples accompanying IFRS Accounting Standards.

EFRAG calls for quick finalisation of the Exposure Draft and proposes further steps to be undertaken

Overall, EFRAG considers the ED to be a pragmatic initial step towards addressing stakeholder expectations and we suggest the IASB finalise and issue the ED’s examples as soon as possible after taking into account our suggested targeted improvements and clarifying the interpretation of paragraph 125 of IAS 1 through standard setting. As a further step after issuing the ED’s examples, we suggest the IASB consider undertaking standard-setting activity under limited circumstances wherever justified. The IASB should also consider developing other examples including those related to non-climate-related uncertainties as well as recognition, measurement and presentation examples.

Recommendations for strengthening connectivity in reporting

We also suggest further steps to foster the connectivity of reported information and clarify the boundaries between the information within and outside the financial statements, i.e., within the Annual Report. Among other things, this could be done by the IASB-ISSB jointly developing connectivity-related illustrative examples.