Current and anticipated financial effects

What are current and anticipated financial effects?

Current financial effects are those already reflected in the period: costs incurred, revenue earned, impairments recognised, assets acquired. Anticipated financial effects are those a company expects in future periods, given its strategy, such as rising carbon costs, revenue from new products, or capital spending on adaptation. Both are disclosed within strategy, alongside the risks and opportunities they relate to. See IFRS S2 and financial materiality.

What do IFRS S1 and S2 require?

• How risks and opportunities have affected financial position, performance and cash flows for the period.
• Those for which there is a significant risk of a material adjustment to the carrying amounts of assets and liabilities within the next annual period.
• How financial position is expected to change over the short, medium and long term, given the strategy, including planned investment and disposals and the planned sources of funding.
• How financial performance and cash flows are expected to change over the same horizons.

The company defines its own time horizons and explains them. The data and assumptions should be consistent with the financial statements as far as possible. See connected information.

When can a company give only qualitative information?

A company need not give quantitative information about a current or anticipated effect if it is not separately identifiable, or if measurement uncertainty is so high that the result would not be useful. For anticipated effects only, it also need not if it lacks the skills, capabilities or resources to provide it. The IFRS Foundation's August 2025 educational material expects that last relief to matter mainly in early years, and says a company with the resources to build the skills cannot rely on it. In each case the company explains why, gives qualitative information identifying the line items, totals and subtotals likely to be affected, and gives quantitative information on the combined effect with other risks or opportunities unless that would not be useful.

Anticipated financial effects in practice: a manufacturer's carbon costs

A manufacturer emits 40,000 tonnes of scope 1 emissions a year and expects carbon prices to apply to them. In 2026 it already paid US$ 0.9 million, recognised in cost of sales. Its strategy includes a US$ 15 million investment in electric furnaces in 2028 and 2029, funded by a green loan, which would cut emissions to 35,000 tonnes by 2030 and 25,000 by 2035.

The company discloses the anticipated carbon costs by horizon, the investment and its funding, and the effect on cost of sales and capital expenditure. It also discloses its revenue from low-carbon products as a range of US$ 20 million to US$ 40 million by 2030, because demand is uncertain, and only qualitatively for 2035, where uncertainty is too high. Its current effects include the carbon costs paid and the US$ 120 million carrying amount of plant in a flood zone, the subject of a key assumption in its impairment test. See climate scenario analysis.

How should estimates be presented?

As single amounts or ranges, with the assumptions that matter, such as carbon prices or demand, and the time horizon. A range is often more honest where uncertainty is high. Companies use reasonable and supportable information available at the reporting date without undue cost or effort, which does not require an exhaustive search, and an approach that matches their skills and resources. Examples in the IFRS Foundation material include insurance premiums rising with flood risk, combined with other factors because they cannot be separated, and an e-waste opportunity described only qualitatively. See climate transition plans.

How do the revised ESRS treat anticipated financial effects?

The revised ESRS give similar reliefs: no quantitative information is needed where effects are not separately identifiable, where uncertainty is so high that the information would not be useful, or where the company lacks the skills, capabilities or resources, with an explanation and qualitative information instead. They allow non-monetary information, ranges and single amounts, and say that revising an estimate does not by itself indicate an error. Phase-ins let wave one companies omit qualitative information until financial year 2027 and quantitative information until 2029, and other companies omit them for two and four years. The carrying amounts of assets at material physical or transition risk, and the share covered by actions, are not phased in. See ESRS E1.

This guide is general information. It is not tax or legal advice for your situation.