Background
The IFRS Foundation has issued 'Disclosures about Uncertainties in the Financial Statements,' addressing practical application of the disclosure requirements in IFRS Accounting Standards.
The illustrative examples were developed by International Accounting Standards Board (IASB) in collaboration with the International Sustainability Standards Board (ISSB) to address feedback from stakeholders about insufficient information around uncertainties – particularly climate-related uncertainties. The illustrative examples also address feedback regarding inconsistencies that may arise in the financial statements by complying with the disclosure requirements of the IFRS Accounting Standards and IFRS Sustainability Disclosure Standards.
Illustrative Examples on reporting uncertainties
The collection of examples illustrates how entities can improve the reporting of uncertainties in their financial statements to avoid creating inconsistencies within their annual report. The illustrative examples are mainly focused on climate-related fact patterns. However, the principles and requirements illustrated can be applied equally to all types of uncertainties.
The IASB had previously published a near-final staff draft of the illustrative examples in July 2025. Apart from minor editorial changes, the final examples issued also include the amendments made to the Basis for Conclusions for each relevant IFRS Accounting Standard.
A summary of each example as disclosed in the publication is indicated below:
1. Materiality judgements applying paragraph 31 of IAS 1 'Presentation of Financial Statements' [paragraph 20 of IFRS 18 ‘Presentation and Disclosure in Financial Statements’]
- Illustration of how an entity makes materiality judgements in the context of financial statements
- The illustrative example contains two scenarios: one scenario in which these judgements lead to additional disclosures beyond those specifically required by IFRS Accounting Standards and a second scenario in which they do not.
2. Disclosure of disaggregated information applying [IFRS 18]
- Illustration of how an entity might disaggregate the information it provides in the notes about a class of property, plant and equipment (PP&E) on the basis of dissimilar risk characteristics if necessary to provide material information.
3. Disclosure about credit risk applying IFRS7 ‘Financial Instruments; Disclosures’
- Illustration of how an entity might disclose information about the effects of particular risks on its credit risk exposures and credit risk management practices and how these practices relate to the recognition and measurement of expected credit losses.
4. Disclosure of assumptions: general requirements applying IAS 1 [IAS 8 ‘Basis of Preparation of Financial Statements’]
Illustration of how an entity:
- might be required to disclose information about assumptions it makes about the future, even if the specific disclosure requirements in other IFRS Accounting Standards require no such disclosure
- identifies the assumptions about which it is required to disclose information, and
- determines what information about these assumptions it is required to disclose
5. Disclosure of assumptions: specific requirements applying IAS 36 ‘Impairment of Assets’
- Illustration of how an entity discloses information about the key assumptions it uses to determine the recoverable amounts of assets.
6. Disclosure about decommissioning and restoration provisions applying IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’
- Illustration of how an entity might disclose information about plant decommissioning and site restoration obligations, even if their effect on the carrying amount of the entity’s plant decommissioning and site restoration provision is immaterial.
*IFRS Accounting Standards that are not yet effective as at the date of this publication are included in brackets.
Status of the illustrative examples
The illustrative examples have now been approved by the IASB and have been included as illustrative examples in the relevant IFRS Accounting Standard to which they relate. There is no effective date of the illustrative examples as they do not amend the IFRS Accounting Standards as they are currently written. In other words, they are effective immediately.
Our thoughts
We support the release of the illustrative examples, which should improve the overall quality of financial reporting and ensure consistency with sustainability reporting. All the illustrative examples are uncontroversial in nature, and our view is they increase clarity to the impacted IFRS Accounting Standards. We encourage entities to consider the application of the illustrative examples to their financial statements.
The publication can be accessed here.