The Singapore Accounting Standards Committee (ASC), operating under the Accounting and Corporate Regulatory Authority (ACRA), has formally responded to the International Accounting Standards Board’s (IASB) proposed guidance on disclosing climate-related and other uncertainties in financial statements.
In its feedback on the IASB’s July 2024 Exposure Draft (ED/2024/6), Climate-related and Other Uncertainties in the Financial Statements—Proposed Illustrative Examples, the ASC expressed strong support for the IASB’s initiative to develop practical examples aiding entities in applying IFRS Standards to present climate and uncertainty impacts.
Key Recommendations from the ASC:
- Support for Illustrative Examples: The ASC endorsed the IASB’s provision of eight draft illustrations, viewing them as a “fair measure” to assist entities in enhancing disclosures and improving linkages within financial reports. While acknowledging calls from some stakeholders for mandatory requirements, the ASC backed incorporating these examples directly into IFRS Standards and recommended they undergo periodic review and updates.
- Focus on Principles, Not Checklists: The ASC emphasized that the examples should be clearly presented as non-exhaustive guidance, not mandatory checklists. It urged the IASB to prioritize clarifying the underlying disclosure principles for specific circumstances and to strengthen collaboration with the International Sustainability Standards Board (ISSB) to better integrate sustainability targets (like those in ISSB standards) with their financial statement impacts. The ASC also advocated for expanding the examples to include both focused and integrated illustrations, particularly in high-judgement areas.
- Enhanced Materiality Convergence: The ASC recommended direct discussion between the IASB and ISSB regarding ISSB’s General Requirements Standard (IFRS S1, often referred to as “PS2” in development phases) to foster greater alignment on materiality assessments between financial and sustainability reporting.
- Adaptation for SMEs: A significant recommendation called for incorporating adapted versions of these illustrative examples into the IFRS for SMEs Accounting Standard. The ASC stressed the need to balance the provision of relevant information with the reporting cost burden for smaller entities.
The IASB’s proposed examples aim to address growing market demand for clarity on how existing IFRS requirements apply to disclosing the financial effects of climate-related risks and other uncertainties. The ASC’s feedback underscores Singapore’s commitment to practical implementation guidance while advocating for proportionality, especially for smaller businesses, and closer integration between financial and sustainability reporting frameworks.
Source: ACRA, 15 November 2024.