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Accounting for climate under FRS 102

Merrik Bousfield explains how the Financial Reporting Council is helping to drive improved reporting in ESG matters.

Demand from stakeholders continues to increase the focus on how environmental, Accounting for climate under FRS 102social and governance (ESG) matters can affect companies’ financial position and performance, and the associated risks that they face. 

This increased focus has led to legislation and guidance on the content of the narrative sections of the annual report, such as requiring disclosure of greenhouse gas emissions or providing information about emissions reduction strategies. But less attention has been paid to the financial statements themselves. The Financial Reporting Council (FRC) has helped drive improved reporting in this area with recent publications including the Climate Thematic and the Statement of Intent on Environmental, Social and Governance challenges. These publications emphasised that preparers need to consider the impact of climate-related matters on the financial statements as well as on the narrative reporting. This is reinforced by a new FRC staff factsheet, Climate-related matters, part of a series that accompanies FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. The factsheet has a similar aim to educational material previously issued by the IASB for IFRS preparers.