The IASB’s recent publication, Disclosures about Uncertainties in the Financial Statements (November 2025), introduces enhanced illustrative guidance across IFRS 7, IFRS 18, IAS 1, IAS 8, IAS 36 and IAS 37. Its purpose is clear: to support entities in presenting transparent, decision‑useful disclosures about uncertainties—particularly when external conditions are volatile.
While the IASB’s examples focus largely on climate‑related risks, the principles apply equally to geopolitical events. In particular, the ongoing uncertainty arising from the conflict in the Middle East has the potential to influence financial reporting judgements and disclosure requirements across several IFRS standards.
This article summarises the key themes emerging from the IASB’s guidance and considers how the current geopolitical environment could influence disclosures in UK IFRS preparers’ 2025/26 financial statements.
Understanding the IASB’s intent: Enhanced transparency on uncertainty
The IASB’s illustrative examples clarify how entities should apply existing IFRS requirements when uncertainty materially affects recognition, measurement, or disclosure. The guidance emphasises the following.
- Judgement in determining materiality, including qualitative considerations (IFRS 18 / IAS 1).
- Disclosure of assumptions when significant estimation uncertainty exists (IAS 8, IAS 1, IAS 36).
- Industry‑specific and entity‑specific sensitivity to risk, and when disaggregation is appropriate (IFRS 18).
- The effect of particular risks on financial instruments, especially credit risk (IFRS 7).
- The need to disclose uncertainties in provisions, even when valuation impacts are immaterial (IAS 37).
These principles provide a structured lens through which geopolitical risks must now be assessed.
How the Middle East conflict creates Financial Reporting uncertainty
Although the IASB examples do not explicitly address geopolitical risk, the underlying concepts closely align with the types of uncertainty triggered by international conflict. Entities with direct or indirect exposure may need to evaluate whether disclosures are required in the following areas.
Materiality Judgements (IFRS 18/IAS 1)
The Middle East conflict may introduce uncertainties such as:
- supply chain disruption
- energy price volatility
- restrictions on the movement of goods
- heightened operational, regulatory or security risk in affected jurisdictions.
Even where the numerical effect on current‑period financial statements is limited, qualitative factors—such as strategic importance of the region or public statements made in investor communications may trigger the need for disclosure.
Key assumptions and estimation uncertainty (IAS 1, IAS 8, IAS 36)
Entities may need to reassess:
- cash flow projections for impairment testing (IAS 36)
- discount rates, risk premiums, or commodity price assumptions
- forecast margins where input costs depend on regional stability
- judgements about the recoverability of assets or the continued viability of operations in sensitive areas.
If these assumptions pose a significant risk of material adjustment within the next financial year, disclosure is required.
Financial instruments and credit risk (IFRS 7)
The conflict could affect:
- creditworthiness of counterparties operating in or reliant on the region
- default rates in exposed sectors (e.g., shipping, commodities, construction)
- valuation of collateral dependent on regional stability.
IFRS 7 requires entities to disclose:
- the nature and extent of exposures
- how risk management processes incorporate geopolitical uncertainty
- assumptions and inputs used in expected credit loss (ECL) calculations.
Provisions and contingent liabilities (IAS 37)
Uncertainties may arise around:
- onerous contracts impacted by delayed fulfilment
- potential penalties, legal claims or insurance disputes
- decommissioning or restoration obligations where operations may be curtailed earlier than expected.
Even where measurement impacts are immaterial, disclosure may still be required if the uncertainty itself is material to users’ decision‑making.
Disaggregation of information (IFRS 18)
The IASB highlights that entities must avoid obscuring material information through aggregation. Where the Middle East conflict creates differing levels of risk across assets, regions or business lines, disaggregated disclosures may be necessary, for example:
- separate impairment disclosures for exposed vs non‑exposed CGUs
- geographic disaggregation of receivables or inventory risk
- clear breakdown of supply chain or operational dependencies.
Practical steps for UK companies preparing 2025/26 IFRS accounts
To comply with the strengthened expectations illustrated by the IASB, entities should consider the following points.
- Reassess materiality using both quantitative and qualitative factors: Boards should consider whether users would reasonably expect visibility of uncertainties given the geopolitical environment.
- Document key assumptions and sensitivities comprehensively: Impairment models, cash flow forecasts, and ECL models may require enhanced scenario analysis reflecting geopolitical risk.
- Review consistency across corporate reporting: Disclosures in the annual report must not contradict or omit material risks mentioned in sustainability reports, board statements, or market updates.
- Strengthen internal controls over narrative and estimation disclosures: Given heightened regulatory scrutiny, clear documentation of judgements will be critical.
Conclusion
The IASB’s 2025 illustrative examples underscore a continued shift toward greater transparency, robustness of judgement and alignment across reporting disciplines. While climate‑related uncertainties drove the initial development of the guidance, the same principles now provide a valuable framework for assessing the financial reporting implications of geopolitical unrest.
For entities with operations, supply chains, financing arrangements, or customers linked to the Middle East, the current conflict creates uncertainty across strategy, cash flows and risk exposure. The key question becomes: Would additional disclosure support users in understanding how these uncertainties affect the entity’s financial position and performance?
If the answer is yes—even qualitatively—then enhanced disclosure is likely required.
As companies prepare for the 2025/26 reporting cycle, applying these principles proactively will be essential to ensuring transparent, high‑quality IFRS reporting in an increasingly uncertain global environment.
For more information, please get in touch with your usual Crowe contact.
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