Uncertainty in financial reporting

Investors and regulators are demanding clarity on uncertainty in financial reporting, so companies should expect increased scrutiny.

As part of its response, the International Accounting Standards Board (IASB) is introducing a set of six new illustrative examples to help companies target areas of known investor and regulator concern. Although they use climate-related scenarios, they aim to drive clarity on uncertainty in financial reporting more broadly.

The IASB is sharing a near-final draft before issuing the final examples in October 2025, allowing companies to start considering the impact on their financial reporting and identify any potential gaps. Remember, information is required if it could reasonably be expected to influence users' decisions.

Uncertainty in financial reporting, particularly on climate-related matters, is an ever-hotter topic. In response, the IASB has agreed to issue a set of six new examples illustrating disclosures in the financial statements.

Brian O'Donovan

Global IFRS and Corporate Reporting Leader

KPMG International

Specific disclosure requirements being illustrated

The illustrative examples highlight requirements in IFRS® Accounting Standards that may apply when a company is exposed to climate-related or other uncertainties. Companies may need to disclose information about: 

key assumptions related to future emissions allowance costs and the potential changes to emissions regulation used to calculate value in use;  
plant decommissioning and site restoration obligations, which may be material regardless of the size of provision; and
the effects of climate-related risks on the company’s credit risk exposures and related risk management practices.

Overarching disclosure requirements being illustrated

The illustrative examples also highlight overarching disclosure requirements in IFRS Accounting Standards that may apply:

whether and how announced climate-related strategies and commitments have affected the financial statements, specifically if a company determines that there is no impact on its financial position and performance at the reporting date;
the effect of an uncertainty on the company’s financial position and performance;
disaggregated information about types of property, plant and equipment that are exposed to dissimilar climate-related matters which does not affect other types; and
key assumptions and estimates – if there is a significant risk that changes could affect next year’s financial statements (even if the uncertainty is not expected to be resolved in the next year).

Impact on financial reporting

The illustrative examples will not have an effective date because they illustrate the existing disclosure requirements in IFRS Accounting Standards. However, the IASB expects that companies will be entitled to sufficient time to implement any changes to disclosures as a result of the illustrative examples – similar to agenda decisions published by the IFRS Interpretations Committee.

What’s next?

Consider the IASB’s illustrative examples and how they may impact your financial statements.
Identify any potential gaps to fill.
To enhance climate-related disclosures in your financial reports before the illustrative examples are finalised, use:
- our talkbook: Are you clear on climate reporting in the financial statements?; and
- our article: Have you disclosed the impacts of climate-related matters clearly?