TLDR:
- Global standard setter IASB clarified accounting standards for ESG-linked loans
- Feedback showed lack of consistency in accounting for sustainability-linked loans
Global rulemakers recently clarified accounting standards for loans linked to sustainability performance measures such as pollution reduction. The International Accounting Standards Board (IASB) published revised rules after a 2022 review of the implementation of IFRS 9 Financial Instruments. The review found a lack of consistency in accounting for sustainability-linked loans based on feedback from companies and investors.
The IASB standards, adopted by more than 140 countries including all major economies except the US, were updated to address this inconsistency. IASB chair Andreas Barckow highlighted the importance of providing clarity on accounting for ESG-linked loans, as these types of loans are becoming more common in the market.
It is crucial for companies and investors to follow these revised accounting standards to ensure transparency and consistency in reporting on ESG-linked loans. By adhering to the IASB rules, financial statements will accurately reflect the impact of sustainability performance measures on the company’s financial position.
Overall, the IASB’s clarification on accounting standards for ESG-linked loans aims to promote greater transparency and standardization in reporting on sustainability-linked financing, ultimately driving more informed decision-making in the business world.