• About
    • About Accru
    • The Accru Advantage
    • Testimonials
    • Our People
    • Our Services
    • International Affiliations
    • Corporate Social Responsibility
    • Join the Accru Network
    • Careers
  • Locations
    • Accru Felsers Sydney
    • Accru Melbourne
    • Accru Rawsons Brisbane
    • Accru Perth
    • Accru Harris Orchard Adelaide
    • Accru Hobart
  • News & Tools
    • News
    • Publications
    • Accru Tax Guide 2017/18 App
    • Fact Sheets
    • Online Portfolio Links
    • Useful Business Websites
  • Careers
    • Working with Accru
    • Culture & Values
    • Accru in the Community
    • Current Vacancies
  • Contact Us
Client Login
Accru Logo Skip to content
  • Accounting
    • Cloud Accounting
    • Outsourced Accounting
    • CFO Services
    • Corporate Compliance
    • Find an Expert
    • Testimonials
  • Audit
    • External Audit
    • Internal Audits
    • SMSF Audits
    • Due Diligence
    • Data Analytics
    • Payroll Data Analytics
    • Find an Expert
    • Testimonials
  • Business Advisory
    • Business Management
    • M&A and Business Sales
    • Valuations
    • Restructures
    • Succession Planning
    • Business Turnaround
    • Management Consulting
    • Find an Expert
    • Testimonials
  • Taxation
    • Tax Compliance
    • Tax Advisory
    • FBT & Salary Packaging
    • GST & Indirect Tax
    • International Tax
    • Find an Expert
    • Testimonials
  • Wealth Management
    • Wealth Creation
    • Superannuation & Retirement Planning
    • Self Managed Super Funds
    • Estate Planning
    • Find an Expert
    • Testimonials
  • Finance & Insurance
    • Mortgage Broking
    • Commercial Finance
    • Risk Insurance
    • Find an Expert
    • Testimonials
  • International Business
    • Services for German-speaking companies
    • Services for Chinese-speaking companies
    • Starting a business in Australia
    • Expanding overseas
    • Transfer Pricing
    • Find an Expert
  • Industries
    • Pharmacies
    • Medical Practitioners
    • Not-for-Profit
    • Education
    • Property & Construction
    • Professional Services
    • Manufacturing & Distribution
    • Finance & Investment
    • Retail
    • Digital, Media, Emerging Technologies
Client Login
  • Accru Acccountants | Audit | Tax | Business Advisory
  • Services
  • About
    • About Accru
    • The Accru advantage: quality, innovation and value
    • Testimonials
    • Our People
    • International Affiliations
    • Corporate Social Responsibility
    • Join the Accru Network
    • Careers
  • Locations
    • All Locations
    • Accru Felsers Sydney
    • Accru Melbourne
    • Accru Rawsons Brisbane
    • Accru Perth
    • Accru Harris Orchard Adelaide
    • Accru Hobart
  • News & Tools
    • News
    • Publications
    • Accru Tax Guide 2017/18 App
    • Fact Sheets
    • Online Portfolio Links
    • Useful Business Websites
  • Careers
    • Careers
    • Working with Accru
    • Culture & Values
    • Accru in the Community
    • Current Vacancies
  • Contact Us
Facebook LinkedIn Twitter Youtube
Accru logo

Climate risk disclosures & financial reporting

By Steven Zabeti / February 12, 2019

Investors are publicly stating that climate-related risks are influencing their investment decisions, yet these risks are not being adequately addressed in annual reports.  It’s time for entities to consider climate-related risk disclosures in the context of their financial reporting.

Climate risk disclosure

Businesses tend to fully address emerging technology risks such as data breach and cyber-security in their financial reports. However, far less consideration is given to climate-related risks, even when an industry is vulnerable to significant impact from climate change.

Entities in Australia are already being subject to law suits regarding lack of disclosure, so businesses need to be aware of their climate risk disclosure obligations.

Australian bank taken to court for inadequate disclosure of climate risk

In August 2017, advocacy group Environmental Justice Australia filed a legal claim against Commonwealth Bank of Australia (CBA). The case argued that climate-related risks create material financial risks to the bank, its business and customers. It claimed that the bank breached the Corporations Act 2001 by failing to give a true and fair view of its financial position and performance. Subsequently, when CBA included several pages of discussions in their annual report the case was withdrawn.

AASB Bulletin on climate-related and other emerging risks

With the increase in environmental awareness, the Australian Accounting Standards Board and Auditing & Assurance Standards Board issued a bulletin on climate-related and other emerging risks disclosures.

The bulletin, Assessing financial statement materiality using AASB Practice Statement 2, guides directors, preparers and auditors when preparing and auditing financial statements for their next half and full year ends. Even though following the guidance is not mandatory, it represents the International Accounting Standards Board’s best practice interpretation relating to materiality.

Potential financial damage from climate risks

The potential financial implications arising from climate-related and other emerging risks include:

  • Asset impairment
  • Changes in the useful lives of assets
  • Changes in the fair valuation of assets due to climate-related and emerging risks
  • Increased costs and/or reduced demand for products and services affecting impairment calculations and/or requiring recognition of provisions for onerous contracts
  • Potential provisions and contingent liabilities arising from fines and penalties
  • Changes in expected credit losses for loans and other financial assets

What does AASB Practice Statement 2 mean for your business?

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. This is essentially the impact of the materiality definition and AASB Practice Statement 2 Making Materiality Judgements.

Using the decision tree below, entities preparing financial statements in accordance with Australian Accounting Standards should consider including relevant disclosures after determining whether climate risks are likely to influence investor’s decisions.

Decision tree for assessing the need for climate risk disclosures

Climate risk disclosures - Financial Reporting

We encourage preparers of financial statements to become better informed when considering the impact of climate-related risks. If you require further clarification or additional guidance regarding climate risk disclosures, please contact your local Accru audit & assurance advisor.

 

The Australian Accounting Standards Board (the Board) is responsible for developing and issuing Accounting Standards applicable to Australian entities and the ‘care and maintenance’ of the body of Standards. The Board’s functions and powers are set out in the Australian Securities and Investments Commission Act 2001.

About the Author

Steven Zabeti, Accru Felsers Sydney

Steven specialises in external auditing, due diligence, initial public offerings, stock exchange listings and financial reporting. He has close links with the Chinese and German business communities and assists many overseas organisations with accounting, taxation and auditing when they expand into Australia. His clients include public companies, foreign subsidiaries, universities and schools, financial services licensees and not-for-profit organisations. Read more.

Leave a Reply

Your email address will not be published

Cancel

News & Tools

  • All News
  • All
    • Business Growth
    • Digital Business
    • Financial Management
    • International Business
    • Risk & Assurance
    • Tax Essentials
    • Wealth & Superannuation
    • Accru News
  • Publications
  • Accru Tax Guide 2017/18 App
  • Fact Sheets
  • Online Portfolio Links
  • Useful Business Websites

Subscribe to our Newsletter

Subscribe to the Accru Newsletter Subscribe

Latest News

Why your company needs an audit
Read article

Accru Top
Services
  • Accounting
  • Audit
  • Business Advisory
  • Taxation
  • Wealth Management
  • Finance & Insurance
  • International Business
  • Industry Sectors
About Us
  • About Accru
  • The Accru advantage: quality, innovation and value
    • Starting a Business
    • Expanding a Business
    • Reaping the Rewards
  • Testimonials
  • Our People
  • Our Services
  • International Affiliations
  • Corporate Social Responsibility
  • Join the Accru Network
  • Careers
Locations
  • Sydney
  • Melbourne
  • Brisbane
  • Perth
  • Adelaide
  • Hobart
News & Tools
  • News
    • Business Growth
    • Finance & Insurance
    • International Business
    • Risk & Assurance
    • Tax & Accounting
    • Wealth & Superannuation
    • Publications
  • Accru Tax Guide 2017/18 App
  • Fact Sheets
  • Online Portfolio Links
  • Useful Business Websites

Follow Accru Australia

Facebook LinkedIn Twitter Youtube
Subscribe to Accru's e-news

Accru's e-news updates are designed to keep you up to-to-date on essential business topics.

Subscribe

© 2019 Accru

Terms of Use | Privacy Policy

Site by Click2It

×