Handbook: Climate risk in the financial statements
Handbooks | December 2025
Our in-depth guide includes questions, issues and examples relevant for companies thinking about how climate risk can affect their financial statements.
This December 2025 edition includes new illustrative examples on lease arrangements and updated guidance about accounting for insurance recoveries.
Applicability
- All entities
Relevant dates
- Effective immediately
Climate risk amid global uncertainty
Since the publication of the 2024 edition of this handbook, profound global economic and regulatory shifts have created heightened uncertainty. Climate-related risk is one area impacted. Companies that once made strategic and financial decisions based on assumptions about stable climate policies and predictable transition pathways now face a reality in which those assumptions may no longer hold.
Recent changes – such as delays and pullbacks regarding climate legislation and environmental protections in key jurisdictions – have added significant uncertainty to compliance requirements, carbon pricing and investment incentives. At the same time, physical climate risks remain, compounding operational and financial challenges for some companies.
These developments mean companies may need to reassess prior judgments and financial statement disclosures related to climate risk. Assumptions underpinning asset valuations, impairment testing and long-term investment strategies may need to be updated to reflect the current regulatory and economic context.
Management should approach this reassessment with rigor, recognizing that climate risk is no longer a static consideration but a dynamic factor shaped by policy volatility and market uncertainty.
Report Contents
- About climate risk
- Long-lived assets
- Leases
- Research and development
- Impairment of nonfinancial assets
- Financial instruments
- Power purchase agreements
- Contingencies and insurance
- Revenue and inventories
- Compensation and benefits
- Income taxes and related incentives
- Carbon credits
- Acquisitions and restructuring
- Fair value measurement and projections
- Presentation and disclosure
Download the document:
Climate risk in the financial statements
Download PDFExplore more
Sustainability reporting
KPMG guidance and articles for financial reporting professionals.
Service
KPMG Sustainability
Today’s evolving market dynamics reopen the door for tomorrow’s opportunities
Resource
Updated handbook: GHG emissions reporting
The measurement and reporting of GHG emissions under the GHG Protocol and IFRS® Sustainability Disclosure Standards.
Meet our team
