The Financial Accounting Standards Board Staff recently released an Educational Paper to provide investors and other interested parties with an overview of the intersection of environmental, social and governance (ESG) matters with financial accounting standards. The paper also provides overviews of ESG reporting and the FASB’s role in setting financial accounting standards.
Further, the paper provides illustrative examples of how an entity may consider the effects of material ESG matters when applying current accounting standards, including those related to:
- The evaluation of whether there is substantial doubt about an entity’s ability to continue as a going concern
- The disclosure of risks and uncertainties
- Valuing inventory at the lower of cost and net realizable value
- Impairment of goodwill and indefinite-lived intangible assets
- Estimating the useful life of a finite-lived intangible asset
- Impairment indicators requiring the testing of a long-lived asset that is held and used for recoverability
- Determining when an accrual is required for a loss contingency
- Estimates of future taxable income for the recognition of deferred tax assets
- Fair value measurements
