Climate change presents an existential threat for individuals, societies and economies. Compounded by the economic losses that the COVID-19 pandemic presents, there is a need for financial reporting and information that provides a clear, forward-looking, long-term view of an organization’s finances and sustainability – particularly for governments and other public sector entities.

As principles-based standards, governments and public sector entities can apply existing IPSAS literature to report on sustainability issues, including climate change risks, and to communicate progress towards achieving goals such as the SDGs.

To help stakeholders understand how to apply the Board’s current guidance to provide clear, comparable, and relevant information on climate change, the IPSASB Staff have published a Questions & Answers (Q&A) document highlighting the relevant standards and guidance for the public sector. The Staff Q&A addresses key questions such as:

• Is there any existing IPSASB literature relevant to consider for climate change reporting?
• When governments or public sector entities have strategies and programs in place to manage climate change risks, how should these be treated?
• When governments or public sector entities adopt the UN’s Sustainable Development Goals (SDGs), what IPSAS financial reporting guidance should be considered?

The Staff Q&A on Climate Change is intended to help drive transparency and sustainability in reporting on public finances. Further guidance on the recognition, measurement, presentation and disclosure of natural resources is also being considered by the IPSASB as part of its project on Natural Resources.

About the IPSASB
The International Public Sector Accounting Standards Board (IPSASB) works to strengthen public financial management globally through developing and maintaining accrual-based International Public Sector Accounting Standards® (IPSAS®) and other high-quality financial reporting guidance for use by governments and other public sector entities. It also raises awareness of IPSAS and the benefits of accrual adoption. The Board receives support from the Asian Development Bank, the Chartered Professional Accountants of Canada, the New Zealand External Reporting Board, and the governments of Canada and New Zealand. The structures and processes that support the operations of the IPSASB are facilitated by the International Federation of Accountants (IFAC). For copyright, trademark, and permissions information, please go to permissions or contact permissions@ifac.org.

About the Public Interest Committee
The governance and standard-setting activities of the IPSASB are overseen by the Public Interest Committee (PIC), to ensure that they follow due process and reflect the public interest. The PIC is comprised of individuals with expertise in public sector or financial reporting, and professional engagement in organizations that have an interest in promoting high-quality and internationally comparable financial information.

The no tolerance stance (i.e., outright removal of the materiality threshold) proposed by IESBA for PIEs (and, for some services, also applies to the non-PIEs) is based on the argument that perception of independence in appearance is key, whereas the IESBA’s mechanism has been the application of the reasonable and informed third party test, which was designed for this purpose and is instead being overridden. A third-party test might not lead to the same outcome as a no stance approach in all cases as the former allows for flexibility.

This Questions and Answers (Q&A) publication is issued by the Staff of the IPSASB to discuss the relevance of International Public Sector Accounting Standards (IPSAS) and related Recommended Practice Guidelines (RPG) for reporting on both climate change and the United Nations’ Sustainable Development Goals (SDGs) in the general purpose financial reports of public sector entities. 

IFAC has responded to the European Commission’s Review of the Non-Financial Reporting Directive (NFRD). The NFRD marks another valuable step in the dialogue and evolution toward relevant, reliable, and comparable reporting of non-financial information.