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13 Dec. 2018

Climate-related and other emerging risks disclosures: assessing financial statement materiality using AASB Practice Statement 2

If you are in an industry impacted by climate-related risks your financial reporting considerations have now changed as a result of your investors publicly stating that their decisions are being impacted by climate-related risks.

The AASB and AUASB has issued a bulletin on Climate-related and other emerging risks disclosures: assessing financial statement materiality using AASB Practice Statement 2  which guides directors, preparers and auditors when preparing and auditing financial statements for their next half and full year ends. Even though the guidance is not mandatory, it represents the IASB’s best practice interpretation of materiality and entities in Australia are already being subject to law suits regarding lack of disclosure.

Given investor statements on the importance of climate-related risks to their decision making, the impact of the materiality definition and AASB Practice Statement 2 Making Materiality Judgements is that entities can no longer treat climate-related risks as merely a matter of corporate social responsibility and should consider them also in the context of their financial statements.