Glossary›Connection to the financial statements›Contingent liability from climate disclosure
Glossary term
Cluster F · F6
Tier 1
Contingent liability from climate disclosure
Definition
A contingent liability is a possible obligation whose existence depends on a future event, or a present obligation that is not recognised because it cannot be measured reliably or an outflow is not probable. Climate matters can create one, for example through site remediation, regulatory exposure or a contractual commitment made in a transition plan.
AASB 137 Provisions, Contingent Liabilities and Contingent Assets
· recognition and disclosure of contingent liabilities ·
In force
On this page
In practice
This is the point where a climate disclosure becomes an accounting entry, and it is the connection a CFO should look for first, because it moves between the two reports without anyone deciding that it should.
The recurring cases are a site with a climate-driven remediation or closure obligation, a contractual emissions commitment to a customer with a financial consequence for non-performance, a regulatory exposure such as a Safeguard Mechanism baseline shortfall, and a transition plan commitment that creates a constructive obligation.
A climate disclosure describing a commitment the entity has publicly made, with no corresponding assessment in the financial statements, is exactly the kind of inconsistency the connected information and consistency requirements are designed to surface.
What the assurer does with it
The assurer reads the climate disclosures for commitments and exposures that have a financial consequence, and asks whether each has been assessed under AASB 137 in the financial statements. Where the climate statements describe an obligation and the accounts contain no provision, no contingent liability note and no evidence of an assessment, that is an inconsistency and it goes to the audit committee and the financial statement auditor. What they accept is a documented assessment reaching a supported conclusion, including a conclusion that nothing is recognised. What they reject is silence, because silence does not evidence that the question was asked.
Sources
1
AASB 137 Provisions, Contingent Liabilities and Contingent Assets (compiled January 2026)
AASB
2
3
4
ASSA 5000 General Requirements for Sustainability Assurance Engagements
AUASB
5
Review status
Review required
Last reviewed
15 September 2026
Editorial pass, unsigned
Reviewer required
Registered company auditor with financial reporting expertise
Next scheduled review
1 July 2027
Part of
Cluster F, Connection to the financial statements
6 terms on where the sustainability report meets the audited accounts. Small cluster, high consequence: this is where both assurers cross-check each other’s work.
Related terms
The AASB S2 disclosure that usually surfaces the obligation first
The requirement that makes an unassessed climate commitment a finding
Where a public commitment that can create a constructive obligation is stated
Related questions
How do we tie our emissions data back to the general ledger?
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You reconcile the spend or volume behind each emissions source to the ledger accounts that record it, and you document the differences. It is not a perfect tie and it is not meant to be. The point is completeness: the ledger is the only population in the business already complete and already audited, so it is the natural control total for showing nothing has been left out.
What is the materiality threshold for climate disclosures?
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There is no prescribed number. Under AASB S2, information is material if omitting or misstating it could reasonably be expected to influence users’ decisions. Separately, your assurance practitioner sets a quantitative materiality for testing, and the two are related but different.
What will our auditor actually ask for?
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In year one they ask for evidence behind the disclosures that are actually assured: Scope 1 and Scope 2 emissions, your governance disclosures, and the specified strategy paragraphs on climate risks and opportunities. In practice that means source documents, a calculation they can rebuild from those documents, and minutes showing the governance you described actually happened.
Other terms in this cluster
Contingent liability from climate disclosure